This excerpt taken from the NDAQ 8-K filed Feb 20, 2008.
Note LIncome taxes
The components of the provision for income taxes are:
The 2006 and 2005 provisions for income taxes are different from the amount which would be provided by applying the statutory Federal income tax rate to the income (loss) from continuing operations before income taxes, primarily as a result of permanent book tax differences and tax credits.
Deferred taxes result from federal and state net operating losses, recording depreciation, pension costs, deferred compensation, retiree medical benefits, unrealized gains/losses on investments, the reserve for possible losses on aged items in different periods for financial accounting and income tax reporting purposes, research and development credits and valuation allowance.
The components of the net deferred tax asset/liability recognized in the accompanying consolidated balance sheets are as follows:
During 2006, the Exchange performed a study regarding available Research and Development (R&D) tax credits relating to their internally development software. Based upon this study, there are $5,037,000 of R&D credits available to the Exchange that were generated between 1998 and 2006. As of December 31, 2006, the Exchange had net deferred tax assets relating to research and development credits of $4,104,000. These credits expire in 2018 through 2026. Additionally, alternative minimum tax credits are available of approximately $549,000 for 2006 and 2005. A valuation allowance has been recorded to reduce deferred tax assets to the amount that is more likely than not to be realized. The Exchange has approximately $7,064,000, expiring through 2024, of net operating loss carryforwards available to reduce future federal taxable income. These net operating losses are subject to an annual limitation under Internal Revenue Code Section 382 of approximately $2,100,000.
The Exchange files a consolidated federal income tax return. It is the Exchanges policy to calculate all taxes on a separate company basis. Any tax calculated at the subsidiary level is paid to the parent for subsequent payment to the federal government.