Yahoo 2015 Annual Report Download - page 154

approximately $168 million and it can be carried forward indefinitely. Tax credit carryforwards that
result from the exercise of employee stock options are not recorded on the Company’s consolidated
balance sheets and are accounted for as a credit to additional paid-in capital if and when realized
through a reduction in income taxes payable.
The income tax receivable as of December 31, 2015 increased from December 31, 2014 primarily due
to a loss incurred in 2015 that can be carried back to earlier years for a cash tax refund for U.S.
federal income tax purposes.
The Company has a valuation allowance of approximately $24 million and $29 million as of
December 31, 2014 and 2015 against certain deferred income tax assets that are not more likely than
not to be realized in future periods. In evaluating the Company’s ability to realize its deferred income
tax assets, the Company considers all available positive and negative evidence, including operating
results, ongoing tax planning, and forecasts of future taxable income on a jurisdiction by jurisdiction
basis. The valuation allowance as of December 31, 2015 relates to certain foreign and some U.S. states
deferred tax assets that are not more likely than not to be realized. The Company continues to
monitor its business strategies, weighing positive and negative evidences in assessing its realization
of deferred tax assets.
In 2012, the Company made a one-time distribution of foreign earnings resulting in an overall net
benefit of $117 million. During 2013, the Company recorded an additional net benefit of $36 million
related to this distribution. In 2014, the Company recorded a detriment of $8 million to account for
the corresponding adjustments from the IRS on foreign earnings available at the time of the 2012
repatriation. As of December 31, 2015, the Company does not anticipate a repatriation of its
undistributed foreign earnings of approximately $3.3 billion. Those earnings are principally related to
its equity method investment in Yahoo Japan. If these earnings were to be repatriated in the future,
the Company may be subject to additional U.S. income taxes. It is not practicable to determine the
income tax liability that might be incurred if these earnings were to be repatriated.
The total amount of gross unrecognized tax benefits was $1.1 billion as of December 31, 2015, of which
up to $0.7 billion would affect the Company’s effective tax rate if realized. A reconciliation of the
beginning and ending amount of unrecognized tax benefits in 2013, 2014, and 2015 is as follows (in
thousands):
2013 2014 2015
Unrecognized tax benefits balance at January 1 $727,367 $ 695,285 $1,023,626
Gross increase for tax positions of prior years 69,188 65,606 27,583
Gross decrease for tax positions of prior years (40,298) (9,954) (17,748)
Gross increase for tax positions of current year 34,556 358,434 41,428
Settlements (94,640) (84,942) (4,700)
Lapse of statute of limitations (888) (803) (3,080)
Unrecognized tax benefits balance at December 31 $695,285 $1,023,626 $1,067,109
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