Yahoo 2010 Annual Report Download - page 88

The provision (benefit) for income taxes is composed of the following (in thousands):
Years Ended December 31,
2008 2009 2010
Current:
United States federal ................................................... $228,209 $191,845 $ 26,342
State ................................................................ 16,603 51,662 39,258
Foreign ............................................................. 53,229 66,376 43,341
Total current provision for income taxes ............................... 298,041 309,883 108,941
Deferred:
United States federal ................................................... 8,987 (32,385) 67,621
State ................................................................ (35,064) (58,660) 37,438
Foreign ............................................................. (12,958) 483 7,523
Total deferred provision (benefit) for income taxes ....................... (39,035) (90,562) 112,582
Provision for income taxes .............................................. $259,006 $219,321 $221,523
The provision for income taxes differs from the amount computed by applying the federal statutory income tax
rate to income before provision for income taxes and earnings in equity interests as follows (in thousands):
Years Ended December 31,
2008 2009 2010
Income tax at the U.S. federal statutory rate of 35 percent ......................... $ 30,349 $200,976 $ 374,638
State income taxes, net of federal benefit ...................................... (8,925) (4,549) 54,268
Change in valuation allowance .............................................. 25,674 13,521 (1,315)
Stock-based compensation expense ........................................... 44,938 28,322 4,404
Research tax credits ....................................................... (13,954) (11,046) (10,345)
Effect of non-U.S. operations ............................................... 18,403 20,126 (17,344)
Resolution with tax authorities .............................................. (5,245) — (159,168)
Tax gain in excess of book gain from sales of Zimbra, Inc. and HotJobs due to basis
differences ............................................................ — — 23,184
Nondeductible goodwill .................................................... 170,644 — —
Tax restructuring ......................................................... — (25,583) (43,361)
Other .................................................................. (2,878) (2,446) (3,438)
Provision for income taxes .............................................. $259,006 $219,321 $ 221,523
The 2010 differences above are further explained as follows:
• State taxes are higher in 2010 than in prior years due to a reduction of deferred tax assets associated with an
effective tax rate reduction in California starting in 2011.
• Stock-based compensation increases the Company’s effective tax rate to the extent that stock-based
compensation expense recorded in the Company’s financial statements is non-deductible for tax purposes. This
primarily occurs with regard to options granted outside the U.S. The 2010 effective tax rate increase is lower
than in prior years due to recently granted stock-based compensation awards having a lower grant date fair
value than stock-based compensation awards from prior years. That effect results in a lower non-deductible
expense for financial statement purposes and a lower increase to the Company’s effective tax rate.
Additionally, in 2010 there is a lower effective tax rate impact associated with non-deductible stock-based
compensation awards related to prior year acquisitions to the extent such awards became vested or forfeited in
2010.
• The Company’s effective tax rate in all periods is the result of the mix of income earned in various tax
jurisdictions that apply a broad range of income tax rates. Operating losses in some non-U.S. jurisdictions
cannot be used to offset profits and thus increase the overall effective tax rate. The impact of those losses in
2010 was lower than in prior years. Additionally, in 2010, the Company benefited from increased profit in
lower tax jurisdictions, primarily in Asia.
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