Sprint - Nextel 2008 Annual Report Download - page 132

CLEARWIRE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
temporary differences reverse or when the net operating loss, capital loss or tax credit carryforwards are utilized.
Prior to the Transactions, the legal entities representing the Sprint WiMAX Business were included in the
filing of Sprint’s consolidated federal and certain state income tax returns. Income tax expense and related
income tax balances were accounted for and presented in the financial statements, as if we were filing stand-
alone separate returns using an estimated combined federal and state marginal tax rate of 39% up to and
including the date of the Transactions. We recorded deferred tax assets related to the pre-closing net operating
loss and tax credit carryforwards and recorded a valuation allowance against our deferred tax assets, net of
certain schedulable deferred tax liabilities. The net deferred tax liabilities reported in these financial statements
prior to the Closing are related to FCC licenses recorded as indefinite-lived spectrum intangibles, which are not
amortized for book purposes. The change to the deferred tax position as a result of the Closing was reflected as
part of the accounting for the acquisition of Old Clearwire and was recorded in equity. The net operating loss and
tax credit carryforwards associated with the Sprint WiMAX Business prior to the Closing were not transferred to
either Clearwire Communications or Clearwire, but instead were retained by Sprint.
The income tax provision consists of the following for the years ended December 31, 2009, 2008 and 2007
(in thousands):
Year Ended December 31,
2009 2008 2007
Current taxes:
International .............................................. $(389) $ 325 $ —
Federal .................................................. — — —
State .................................................... 148 — —
Total current taxes ....................................... (241) 325 —
Deferred taxes:
International .............................................. 953 (87) —
Federal .................................................. — 51,686 13,745
State .................................................... — 9,683 2,617
Total deferred taxes ...................................... 953 61,282 16,362
Income tax provision ..................................... $712 $61,607 $16,362
The Sprint WiMAX Business incurred significant deferred tax liabilities related to the indefinite-lived
spectrum licenses. Since certain of these spectrum licenses acquired were recorded as indefinite-lived intangible
assets for book purposes, they are not subject to amortization and therefore we could not estimate the amount of
future period reversals, if any, of the deferred tax liabilities related to those spectrum licenses. As a result, the
valuation allowance was increased accordingly and we continued to amortize acquired spectrum licenses for
federal income tax purpose. The difference between book and tax amortization resulted in a deferred income tax
provision prior to the Closing.
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