Microsoft 2012 Annual Report Download - page 65

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NOTE 13 — INCOME TAXES
The components of the provision for income taxes were as follows:
(In millions)
Year Ended June 30,
2012
2011
2010
Current Taxes
U.S. federal
$
2,235
$
3,108
$
4,415
U.S. state and local
153
209
357
International
1,947
1,602
1,701
Current taxes
4,335
4,919
6,473
Deferred Taxes
Deferred taxes
954
2
(220
)
Provision for income taxes
$
5,289
$
4,921
$
6,253
U.S. and international components of income before income taxes were as follows:
(In millions)
Year Ended June 30,
2012
2011
2010
U.S.
$
1,600
$
8,862
$
9,575
International
20,667
19,209
15,438
Income before income taxes
$
22,267
$
28,071
$
25,013
The items accounting for the difference between income taxes computed at the U.S. federal statutory rate and our
effective rate were as follows:
Year Ended June 30,
2012
2011
2010
Federal statutory rate
35.0%
35.0%
35.0%
Effect of:
Foreign earnings taxed at lower rates
(21.1)%
(15.6)%
(12.1)%
Goodwill impairment
9.7%
0%
0%
I.R.S. settlement
0%
(1.7)%
0%
Other reconciling items, net
0.2%
(0.2)%
2.1%
Effective rate
23.8%
17.5%
25.0%
The reduction from the federal statutory rate from foreign earnings taxed at lower rates results from producing and
distributing our products and services through our foreign regional operations centers in Ireland, Singapore, and Puerto
Rico, which have lower income tax rates. In general, other reconciling items consist of interest, U.S. state income taxes,
domestic production deductions, and credits. In fiscal years 2012, 2011, and 2010, there were no individually significant
other reconciling items. The I.R.S. settlement is discussed below.