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This excerpt taken from the MRVL 10-K filed Jul 2, 2007. Income Tax — Section 162(m) and
utilization of deferred tax assets: The Company has accrued for the current and deferred
tax impact of $104.5 million of non-deductible officer compensation
related to Internal Revenue Section 162(m) (“Section 162(m)”) in fiscal 2006. Section 162(m)
limits the deductibility of compensation in excess of one million dollars, but
exempts stock option compensation where the option was issued at fair market
value on the date of grant. The Company has determined that $104.5 million
of executive compensation in fiscal 2006 does not meet the exclusion
criteria under Section 162(m), under existing IRS interpretations, and
have therefore accrued $21.8 million of current tax expense and $5.4 million
of deferred tax expense associated with the utilization of net operating
losses. The Company has accrued the penalty and interest totaling $4.9 million
associated with this liability in fiscal 2007.
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