Yahoo 2011 Annual Report Download - page 95

The provision (benefit) for income taxes is composed of the following (in thousands):
Years Ended December 31,
2009 2010 2011
Current:
United States federal ......................................... $191,845 $ 26,342 $141,922
State ...................................................... 51,662 39,258 (11,037)
Foreign .................................................... 66,376 43,341 40,490
Total current provision for income taxes ...................... 309,883 108,941 171,375
Deferred:
United States federal ......................................... (32,385) 67,621 77,012
State ...................................................... (58,660) 37,438 (4,437)
Foreign .................................................... 483 7,523 (2,183)
Total deferred (benefit) provision for income taxes ............. (90,562) 112,582 70,392
Provision for income taxes ..................................... $219,321 $221,523 $241,767
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,
2009 2010 2011
Income tax at the U.S. federal statutory rate of 35 percent ............... $200,976 $ 374,638 $289,630
State income taxes, net of federal benefit ............................. (4,549) 54,268 4,627
Change in valuation allowance ..................................... 13,521 (1,315) (5,975)
Stock-based compensation expense ................................. 28,322 4,404 18,213
Research tax credits ............................................. (11,046) (10,345) (10,499)
Effect of non-U.S. operations ...................................... 20,126 (17,344) (42,806)
Resolution with tax authorities ..................................... — (159,168) (14,685)
Tax gain in excess of book gain from sales of Zimbra, Inc. and HotJobs due
to basis differences ............................................ — 23,184 —
Tax restructuring ................................................ (25,583) (43,361) —
Other ......................................................... (2,446) (3,438) 3,262
Provision for income taxes .................................... $219,321 $ 221,523 $241,767
The 2011 differences above are further explained as follows:
• State taxes were higher in 2010 due to a reduction of deferred tax assets associated with an effective tax rate
reduction in California that started in 2011.
• Stock-based compensation increases the Company’s effective tax rate to the extent that stock-based
compensation expense is 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 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. In 2011, the Company received tax rulings in foreign
jurisdictions that provided favorable tax treatments.
• In 2010, the Company had a favorable resolution of certain issues in an IRS examination of its 2005 and 2006
U.S. federal income tax returns resulting in a reduction of reserves for tax uncertainties and the availability of
capital loss carryforwards to offset the tax on the gain from the sales of Zimbra, Inc. and HotJobs. In 2011, the
Company reached agreements with certain state tax authorities in connection with adjustments to income tax
returns for years prior to 2009.
93