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Note 5 – Income Taxes
The provision for income taxes for 2012, 2011, and 2010, consisted of the following (in millions):
2012 2011 2010
Federal:
Current ....................................................... $ 7,240 $ 3,884 $ 2,150
Deferred ...................................................... 5,018 2,998 1,676
12,258 6,882 3,826
State:
Current ....................................................... 1,182 762 655
Deferred ...................................................... (123) 37 (115)
1,059 799 540
Foreign:
Current ....................................................... 1,203 769 282
Deferred ...................................................... (490) (167) (121)
713 602 161
Provision for income taxes ............................................ $14,030 $ 8,283 $ 4,527
The foreign provision for income taxes is based on foreign pretax earnings of $36.8 billion, $24.0 billion and
$13.0 billion in 2012, 2011 and 2010, respectively. The Company’s consolidated financial statements provide for
any related tax liability on amounts that may be repatriated, aside from undistributed earnings of certain of the
Company’s foreign subsidiaries that are intended to be indefinitely reinvested in operations outside the U.S. As
of September 29, 2012, U.S. income taxes have not been provided on a cumulative total of $40.4 billion of such
earnings. The amount of unrecognized deferred tax liability related to these temporary differences is estimated to
be approximately $13.8 billion.
As of September 29, 2012 and September 24, 2011, $82.6 billion and $54.3 billion, respectively, of the
Company’s cash, cash equivalents and marketable securities were held by foreign subsidiaries and are generally
based in U.S. dollar-denominated holdings. Amounts held by foreign subsidiaries are generally subject to
U.S. income taxation on repatriation to the U.S.
A reconciliation of the provision for income taxes, with the amount computed by applying the statutory federal
income tax rate (35% in 2012, 2011 and 2010) to income before provision for income taxes for 2012, 2011, and
2010, is as follows (in millions):
2012 2011 2010
Computed expected tax ............................................... $19,517 $11,973 $ 6,489
State taxes, net of federal effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 677 552 351
Indefinitely invested earnings of foreign subsidiaries ....................... (5,895) (3,898) (2,125)
Research and development credit, net ................................... (103) (167) (23)
Domestic production activities deduction ................................. (328) (168) (48)
Other ............................................................. 162 (9) (117)
Provision for income taxes ........................................ $14,030 $ 8,283 $ 4,527
Effective tax rate ................................................ 25.2% 24.2% 24.4%
The Company’s income taxes payable have been reduced by the tax benefits from employee stock plan awards.
For stock options, the Company receives an income tax benefit calculated as the tax effect of the difference
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