Facebook 2014 Annual Report Download - page 84

Our deferred tax assets (liabilities) are as follows (in millions):
The valuation allowance was approximately $101 million and $82 million as of December 31, 2014 and 2013
, respectively, related to state tax
credits that we do not believe will ultimately be realized.
As of December 31, 2014 , the U.S. federal and state net operating loss carryforwards were approximately $4.53 billion and $4.46 billion
, which
will begin to expire in 2028 and 2021
, respectively, if not utilized. If realized, the impact of the net operating loss carryforwards will be recognized as a
benefit of approximately $1.47 billion through additional paid in capital. We have federal and state tax credit carryforwards of $800 million and
$753
million , respectively, which will begin to expire in 2032 .
Utilization of our net operating loss and tax credit carryforwards may be subject to substantial annual limitations due to the ownership change
limitations provided by the Internal Revenue Code and similar state provisions. Such annual limitations could result in the expiration of the net operating
loss and tax credit carryforwards before their utilization. The events that may cause ownership changes include, but are not limited to, a cumulative
stock ownership change of greater than 50% over a three -year period.
Our net foreign pretax losses include jurisdictions with both pretax earnings and pretax losses. Our consolidated financial statements provide
taxes for all related tax liabilities that would arise upon repatriation of earnings in the foreign jurisdictions where we do not intend to indefinitely
reinvest those earnings outside the United States, and the amount of taxes provided for has been insignificant.
The following table reflects changes in the gross unrecognized tax benefits (in millions):
During all years presented, we recognized interest and penalties related to unrecognized tax benefits within the provision for income taxes on the
consolidated statements of income. The amount of interest and penalties accrued as of December 31, 2014 and 2013 was not material.
If the balance of gross unrecognized tax benefits of $1.68 billion as of December 31, 2014
was realized in a future period, this would result in a
tax benefit of $1.16 billion within our provision of income taxes at such time.
80
December 31,
2014 2013
Deferred tax assets:
Net operating loss carryforward
$
130
$
6
Tax credit carryforward
190
164
Share-based compensation
225
120
Accrued expenses and other liabilities
136
141
Other
21
5
Total deferred tax assets
702
436
Less: valuation allowance
(101
)
(82
)
Deferred tax assets, net of valuation allowance
601
354
Deferred tax liabilities:
Depreciation and amortization
(101
)
(68
)
Purchased intangible assets
(1,190
)
(90
)
Deferred foreign taxes —
(
43
)
Total deferred tax liabilities
(1,291
)
(201
)
Net deferred tax (liabilities) assets
$
(690
)
$
153
Year Ended December 31,
2014 2013 2012
Gross unrecognized tax benefits-beginning of period
$
1,316
$
164
$
63
Increases related to prior year tax positions
24
425
13
Decreases related to prior year tax positions — (
13
)
(16
)
Increases related to current year tax positions
346
740
104
Decreases related to settlements of prior year tax positions
(4
) — —
Gross unrecognized tax benefits-end of period
$
1,682
$
1,316
$
164