American Airlines 2009 Annual Report Download - page 71

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68
8. Income Taxes (Continued)
The Company estimates that the unrecognized tax benefit will not significantly change within the next twelve
months.
The Company files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. The
Company’s 2004 through 2008 tax years are still subject to examination by the Internal Revenue Service.
Various state and foreign jurisdiction tax years remain open to examination as well, though the Company believes
that the effect of any additional assessment(s) will be immaterial to its consolidated financial statements.
The significant components of the income tax provision (benefit) were (in millions);
Year Ended December 31,
2009
2008
2007
Current
$ (36)
$ 0
$ 0
Deferred
(248)
0
0
Income tax benefit
$ (284)
$ -
$ -
The income tax expense (benefit) differed from amounts computed at the statutory federal income tax rate as
follows (in millions):
Year Ended December 31,
2009
2008
2007
Statutory income tax provision expense/(benefit)
$ (613)
$ (741)
$ 160
State income tax expense/(benefit),
net of federal tax effect
(41)
(49)
10
Meal expense
7
8
9
Change in valuation allowance
597
807
(164)
Tax benefit resulting from OCI allocation
(248)
-
-
Other, net
14
(25)
(15)
Income tax benefit
$ (284)
$ -
$ -
In addition to the changes in the valuation allowance from operations described in the table above, the valuation
allowance was also impacted by the changes in the components of Accumulated other comprehensive income
(loss), described in Note 12 to the consolidated financial statements. The total increase (decrease) in the
valuation allowance was $135 million, $2,127 million, and ($678) million in 2009, 2008, and 2007, respectively.
The Company provides a valuation allowance for deferred tax assets when it is more likely than not that some
portion, or all of its deferred tax assets, will not be realized. In assessing the realizability of the deferred tax
assets, management considers whether it is more likely than not that some portion, or all of the deferred tax
assets, will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future
taxable income (including reversals of deferred tax liabilities) during the periods in which those temporary
differences will become deductible.