Income Taxes (Tables)

12 Months Ended

Dec. 31, 2011

Schedule of Components of Income Tax Expense (Benefit)

The provision for income taxes consists of the following (in millions):

	Year Ended December 31,
	2009			2010			2011
Current:
Federal	$	1,531		$	1,657		$	1,724
State		450			458			274
Foreign		148			167			248
Total		2,129			2,282			2,246
Deferred:
Federal		(273	)		(25	)		452
State		13			47			(109	)
Foreign		(8	)		(13	)		(0	)
Total		(268	)		9			343
Provision for income taxes	$	1,861		$	2,291		$	2,589

Schedule of Effective Income Tax Rate Reconciliation

The reconciliation of federal statutory income tax rate to our effective income tax rate is as follows (in millions):

	Year ended December 31,
	2009			2010			2011
Expected provision at federal statutory tax rate (35%)	$	2,933		$	3,779		$	4,314
State taxes, net of federal benefit		302			322			122
Stock-based compensation expense		63			79			105
Change in valuation allowance		(41	)		(34	)		27
Foreign rate differential		(1,339	)		(1,769	)		(2,001	)
Federal research credit		(56	)		(84	)		(140	)
Tax exempt interest		(15	)		(12	)		(10	)
Non-deductible legal settlement		0			0			175
Other permanent differences		14			10			(3	)
Provision for income taxes	$	1,861		$	2,291		$	2,589

Schedule of Deferred Tax Assets and Liabilities

Significant components of our deferred tax assets and liabilities are as follows (in millions):

	As of December 31,
	2010			2011
Deferred tax assets:
Stock-based compensation expense	$	299		$	288
State taxes		207			138
Capital loss from impairment of equity investments		292			285
Settlement with the Authors Guild and AAP		39			35
Depreciation and amortization		20			0
Vacation accruals		35			52
Deferred rent		34			43
Accruals and reserves not currently deductible		244			268
Acquired net operating losses		132			156
State tax credit		0			55
Other		0			11
Total deferred tax assets		1,302			1,331
Valuation allowance		(292	)		(333	)
Total deferred tax assets net of valuation allowance		1,010			998
Deferred tax liabilities:
Depreciation and amortization		0			(479	)
Identified intangibles		(308	)		(398	)
Unrealized gains on investments and other		(56	)		(90	)
Other prepaids		(95	)		(70	)
Other		(27	)		(33	)
Total deferred tax liabilities		(486	)		(1,070	)
Net deferred tax assets (liabilities)	$	524		$	(72	)

Summary of Income Tax Contingencies

The following table summarizes the activity related to our gross unrecognized tax benefits from January 1, 2009 to December 31, 2011 (in millions):

Balance as of January 1, 2009	$	721
Increases related to prior year tax positions		222
Decreases related to prior year tax positions		(1	)
Increases related to current year tax positions		246
Balance as of December 31, 2009		1,188
Increases related to prior year tax positions		37
Decreases related to prior year tax positions		(197	)
Decreases related to settlement with tax authorities		(47	)
Decreases as a result of a lapse of applicable statute of limitation		(97	)
Increases related to current year tax positions		256
Balance as of December 31, 2010		1,140
Increases related to prior year tax positions		77
Decreases related to prior year tax positions		(9	)
Increases related to current year tax positions		361
Decreases related to settlement with tax authorities		(5	)
Balance as of December 31, 2011	$	1,564