America Online Inc, which surprised Wall Street with strong earnings for its recently-reported second quarter (CI No 3,345), looks like it will get a financial shot in the arm during its third quarter. A change in the way the company accounts for its tax benefits could significantly boost its bottom line, according to Bloomberg. The tax benefits are stored up from previous quarters when the company incurred net losses and a change in the way they are accounted for – beginning in the current quarter – will have the effect of all but eliminating the provision for income tax. The change, known as a carryforward, allows for the application of previous losses to future quarterly results. The practice effectively reduces the income reported to the IRS, thus reducing or eliminating tax burdens. AOL currently has $970m in stored-up tax benefits.
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