America Online 2011 Annual Report Download - page 90

Table of Contents
AOL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AOL had net operating losses from various foreign jurisdictions of $4,187.8 million and $4,094.0 million as of December 31, 2011 and 2010,
respectively. Many of these foreign losses are attributable to specific operations and may not be utilized to offset taxable income of other operations of AOL.
The expiration period of the foreign net operating losses ranges from 2013 to indefinite. The valuation allowance outstanding at December 31, 2011 and 2010
is primarily attributable to the foreign net operating loss carryforwards.
AOL had $566.9 million and $456.9 million of U.S. federal net operating loss carryforwards as of December 31, 2011 and 2010, respectively. Certain
of these federal net operating loss carryforwards are subject to statutory annual use limitations. AOL had approximately $1,018.0 million and $1,057.4 million
of net operating loss carryforwards in various state and local jurisdictions as of December 31, 2011 and 2010, respectively. Certain of these state tax losses are
subject to a valuation allowance because they are attributable to specific operations and may not be utilized against taxable income of other operations of
AOL. These federal, state and local net operating loss carryforwards will expire between 2012 and 2031.
AOL has a capital loss carryforward of $111.3 million as of December 31, 2011, of which the majority will expire at the end of 2015. Significant
uncertainty exists regarding the future realization of the $44.2 million deferred tax asset related to this capital loss carryforward and as a result, AOL has
recorded a full valuation allowance on this deferred tax asset.
During the year ended December 31, 2011, AOL decreased its valuation allowance by $9.4 million primarily related to foreign deferred tax assets.
As of December 31, 2011, the total valuation allowance of $1,160.2 million included $1,095.1 million of deferred tax assets on net operating loss
carryforwards and $44.2 million of deferred tax assets on capital loss carryforwards. The total valuation allowance was established based on management's
determination that the deferred tax assets are not more likely than not to be realized. Management believes that the remaining deferred tax assets are more
likely than not to be realized based upon consideration of all positive and negative evidence, including AOL's operating results and forecast of future taxable
income, on a jurisdiction by jurisdiction basis.
U.S. federal income taxes are provided on the portion of AOL's income from certain foreign subsidiaries that is expected to be remitted to the United
States. We have recorded deferred income taxes and foreign withholding taxes on unremitted earnings from foreign subsidiaries in the amount of $7.4 million
and $8.9 million, as of December 31, 2011 and 2010, respectively. For AOL's other foreign subsidiaries, we have not provided for U.S. income and foreign
withholding taxes on approximately $22.7 million of certain foreign subsidiaries' undistributed earnings, because such earnings have been retained and are
intended to be indefinitely reinvested outside of the United States. It is not practical to estimate the amount of taxes that would be payable upon remittance of
these earnings because such tax, if any, is dependent on circumstances existing if and when remittance occurs.
Accounting for Uncertainty in Income Taxes
Changes in unrecognized tax benefits, excluding the related accrual for interest, from January 1 to December 31 are set forth below (in millions):
Years Ended December 31,
2011 2010 2009
Beginning balance $ 150.6 $ 154.7 $ 657.6
Additions for current year tax positions 1.3 6.1 11.1
Reductions for prior year tax positions (0.2) (3.0) —
Unrecognized tax benefits retained by Time Warner following spin-off — — (512.5)
Reductions as a result of expiration of statute of limitations — (7.2) (1.5)
Total $ 151.7 $ 150.6 $ 154.7
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