eBay 2015 Annual Report Download - page 118

eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
As of December 31, 2015, our federal, state and foreign net operating loss carryforwards for income tax
purposes were approximately $29 million, $64 million and $116 million, respectively. The federal and state net
operating loss carryforwards are subject to various limitations under Section 382 of the Internal Revenue Code
and applicable state tax laws. If not utilized, the federal and state net operating loss carryforwards will both begin
to expire in 2018. The carryforward periods on our foreign net operating loss carryforwards are as follows: $38
million do not expire and $78 million are subject to valuation allowance and begin to expire in 2017. As of
December 31, 2015, state tax credit carryforwards for income tax purposes were approximately $58 million.
Most of the state tax credits carry forward indefinitely.
As of December 31, 2015 and 2014, our federal capital loss carryover amounted to $336 million and $45
million, respectively. The increase in the capital loss carryover of $291 million is due to the sale of Enterprise in
2015 and will expire in 2021. The remaining capital loss carryover of $45 million will expire in 2018.
At December 31, 2015 and 2014, we maintained a valuation allowance with respect to certain of our
deferred tax assets relating primarily to operating losses in certain states and various non-U.S. jurisdictions that
we believe are not likely to be realized.
During the first quarter of 2014, we altered our capital allocation strategy. As a result, we provided for U.S.
income and applicable foreign withholding taxes on $9.0 billion of undistributed foreign earnings for 2013 and
prior years, and recorded a deferred tax liability of approximately $3.0 billion. This deferred tax liability included
PayPal related balances presented in discontinued operations as of December 31, 2014. Based on December 31,
2014 foreign exchange rates and excluding PayPal balances, the deferred tax liability for unremitted foreign
earnings amounted to $2.1 billion and was included in accrued expenses and other current liabilities on our
consolidated balance sheet as of December 31, 2014. The deferred tax liability for unremitted foreign earnings
was $1.7 billion as of December 31, 2015 and was included in deferred and other tax liabilities, net due to the
adoption of FASB guidance discussed in “Note 1 — The Company and Summary of Significant Accounting
Policies” to the consolidated financial statements included in this report.
We have not provided for U.S. federal or foreign income taxes, including withholding taxes on $6.0 billion
of our non-U.S. subsidiaries’ undistributed earnings as of December 31, 2015. We intend to indefinitely reinvest
the $6.0 billion of our non-U.S. subsidiaries’ undistributed earnings in our international operations. Accordingly,
we currently have no plans to repatriate those funds. As such, we do not know the time or manner in which we
would repatriate those funds. Because the time or manner of repatriation is uncertain, we cannot determine the
impact of local taxes, withholding taxes and foreign tax credits associated with the future repatriation of such
earnings and therefore cannot quantify the tax liability. In cases where we intend to repatriate a portion of our
foreign subsidiaries’ undistributed earnings, we provide U.S. and applicable foreign taxes on such earnings and
such taxes are included in our deferred taxes or tax payable liabilities depending upon the planned timing and
manner of such repatriation.
On a regular basis, we develop cash forecasts to estimate our cash needs internationally and domestically.
We consider projected cash needs for, among other things, investments in our existing businesses, potential
acquisitions and capital transactions, including repurchases of our common stock and debt repayments. We
estimate the amount of cash available or needed in the jurisdictions where these investments are expected, as well
as our ability to generate cash in those jurisdictions and our access to capital markets. This analysis enables us to
conclude whether or not we will indefinitely reinvest the current period’s foreign earnings.
We benefit from tax rulings concluded in several different jurisdictions, most significantly Switzerland and
Luxembourg. These rulings provide for significantly lower rates of taxation on certain classes of income and
require various thresholds of investment and employment in those jurisdictions. These rulings resulted in a tax
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