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Table of Contents
CLEARWIRE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Components of deferred tax assets and liabilities as of December 31, 2011 and 2010 were as follows (in thousands):
We determine deferred income taxes based on the estimated future tax effects of differences between the financial statement and tax bases of assets and liabilities
using the tax rates expected to be in effect when any temporary differences reverse or when the net operating loss, which we refer to as NOL, capital loss or tax credit
carry-forwards are utilized.
As of December 31, 2011, we had United States federal tax NOL carry-forwards of approximately $2.87 billion of which $2.83 billion is subject to certain annual
limitations imposed under Section 382 of the Internal Revenue Code of 1986. The NOL carry-forwards begin to expire in 2021. We had $521.0 million of tax NOL carry-
forwards in foreign jurisdictions; $324.8 million have no statutory expiration date, and $196.2 million begins to expire in 2015.
The Company is subject to a change in control test under Section 382 of the Internal Revenue Code, that if met, would limit the annual utilization of pre-change in
control NOL carry-forwards as well as the ability to use certain unrealized built-in losses as tax deductions (as determined by Section 382 testing). As a result of the
underwritten public offering of 201,250,000 shares of Class A Common Stock for $402.5 million on December 13, 2011, a change in control under Section 382 was
deemed to have occurred. We believe that, as a result of the annual Section 382 limitation that resulted from the change in control that occurred on December 13, 2011,
we permanently will be unable to use a significant portion of our NOL carry-forwards that arose before the change in control to offset our future table income.
We have recorded a valuation allowance against our deferred tax assets to the extent that we determined that it is more likely than not that these items will eithe
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expire before we are able to realize their benefits or that future deductibility is uncertain. As it relates to the United States tax jurisdiction, we determined that ou
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temporary taxable difference associated with our investment in Clearwire Communications LLC, which we refer to as Clearwire Communications, will not fully reverse
within the carry-forward period of the NOLs and accordingly does not represents relevant future taxable income.
We file income tax returns for Clearwire and our subsidiaries in the United States Federal jurisdiction and various state and foreign jurisdictions. As o
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December 31, 2011, the tax returns for Clearwire for the years 2003 through 2010 remain open to examination by the Internal Revenue Service and various state tax
authorities. In addition, legacy Clearwire Corporation, which we refer to as Old Clearwire, acquired United States and foreign entities which operated prior to 2003. Mos
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of the acquired entities generated losses for income tax purposes and certain tax returns remain open to examination by United States and foreign tax authorities for tax
years as far back as 1998.
As a result of our plans to sell our operations in Spain, Belgium and Germany, we believe that if certain intercompany loans related to our international operations
were considered uncollectible for federal income tax purposes, there would be an increase to the deferred tax liability of our discontinued operations of up to
approximately $155.0 million along with a corresponding deferred tax expense for our discontinued operations.
F-58
December 31,
2011 2010
Noncurrent deferred tax assets:
Net operating loss carryforward $ 1,157,983 $ 849,755
Capital loss carryforward 5,818 6,620
Other assets 2,381 1,883
Total deferred tax assets 1,166,182 858,258
Valuation allowance (1,003,633) (620,537)
Net deferred tax assets 162,549 237,721
Noncurrent deferred tax liabilities:
Investment in Clearwire Communications 314,609 238,286
Other 122 273
Total deferred tax liabilities 314,731 238,559
Net deferred tax liabilities $ 152,182 $838