Microsoft 2009 Annual Report Download - page 62

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PAGE 62
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 13 INCOME TAXES
The components of the provision for income taxes were as follows:
(In millions)
Y
ear Ended June 30, 2009
2008 2007
Current taxes:
U.S. Federal $3,159
$4,357 $4,593
U.S. State and Local 192
256 154
International 1,139
1,007 957
Current taxes 4,490
5,620 5,704
Deferred taxes 762
513 332
Provision for income taxes $5,252
$6,133 $6,036
U.S. and international components of income before income taxes were as follows:
(In millions)
Y
ear Ended June 30, 2009
2008 2007
U.S. $ 5,529
$12,682 $12,902
International 14,292
11,132 7,199
Income before income taxes $19,821
$23,814 $20,101
The items accounting for the difference between income taxes computed at the federal statutory rate and the
provision for income taxes were as follows:
Y
ear Ended June 30, 2009
2008 2007
Federal statutory rate 35.0 %
35.0 % 35.0 %
Effect of:
Foreign earnings taxed at lower rates (9.3)%
(7.0)% (5.1)%
Internal Revenue Service settlement – %
(5.8)% – %
European Commission fine – %
2.1 % – %
Other reconciling items, net 0.8 %
1.5 % 0.1 %
Effective rate 26.5 %
25.8 % 30.0 %
In general, other reconciling items consist of interest, U.S. state income taxes, domestic production deductions, and
research credits. In fiscal years 2009 and 2008, there were no individually significant other reconciling items. Other
reconciling items in fiscal year 2007 included the impact of a $195 million reduction resulting from various changes in
tax positions taken in prior periods, related primarily to favorable developments in an IRS position and multiple
foreign audit assessments.