Coca Cola 2007 Annual Report Download - page 117

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THE COCA-COLA COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17: INCOME TAXES (Continued)
Undistributed earnings of the Company’s foreign subsidiaries amounted to approximately $11.9 billion at
December 31, 2007. Those earnings are considered to be indefinitely reinvested and, accordingly, no U.S. federal and
state income taxes have been provided thereon. Upon distribution of those earnings in the form of dividends or
otherwise, the Company would be subject to both U.S. income taxes (subject to an adjustment for foreign tax credits)
and withholding taxes payable to the various foreign countries. Determination of the amount of unrecognized deferred
U.S. income tax liability is not practical because of the complexities associated with its hypothetical calculation;
however, unrecognized foreign tax credits would be available to reduce a portion of the U.S. tax liability.
As discussed in Note 1, the Jobs Creation Act was enacted in October 2004. One of the provisions provides a
one-time benefit related to foreign tax credits generated by equity investments in prior years. The Company recorded
an income tax benefit of approximately $50 million as a result of this law change in 2004. The Jobs Creation Act also
included a temporary incentive for U.S. multinationals to repatriate foreign earnings at an approximate 5.25 percent
effective tax rate. During the first quarter of 2005, the Company decided to repatriate approximately $2.5 billion in
previously unremitted foreign earnings. Therefore, the Company recorded a provision for taxes on such previously
unremitted foreign earnings of approximately $152 million in the first quarter of 2005. During 2005, the United States
Internal Revenue Service and the United States Department of Treasury issued additional guidance related to the Jobs
Creation Act. As a result of this guidance, the Company reduced the accrued taxes previously provided on such
unremitted earnings by $25 million in the second quarter of 2005. During the fourth quarter of 2005, the Company
repatriated an additional $3.6 billion, with an associated tax liability of approximately $188 million. Therefore, the total
previously unremitted earnings that were repatriated during the full year of 2005 was $6.1 billion with an associated tax
liability of approximately $315 million. This liability was recorded in 2005 as federal and state and local tax expenses
in the amount of $301 million and $14 million, respectively.
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