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PART II
The provision for income taxes is as follows:
Year Ended May 31,
(In millions) 2016 2015 2014
Current:
United States
Federal $ 304 $ 596 $ 259
State 71 80 104
Foreign 568 369 499
Total 943 1,045 862
Deferred:
United States
Federal (57) (66) 19
State (16) (11) (3)
Foreign (7) (36) (27)
Total (80) (113) (11)
TOTAL INCOME TAX EXPENSE $ 863 $ 932 $ 851
A reconciliation from the U.S. statutory federal income tax rate to the effective income tax rate is as follows:
Year Ended May 31,
2016 2015 2014
Federal income tax rate 35.0% 35.0% 35.0%
State taxes, net of federal benefit 1.1% 0.9% 1.8%
Foreign earnings -18.6% -15.7% 2.2%
Deferred charge 0.4% 0.9% -14.6%
Other, net 0.8% 1.1% -0.4%
EFFECTIVE INCOME TAX RATE 18.7% 22.2% 24.0%
The effective tax rate for the year ended May 31, 2016 was 350 basis points
lower than the effective tax rate for the year ended May 31, 2015 primarily due
to an increase in the proportion of earnings from operations outside of the
United States, which are generally subject to a lower tax rate.
The effective tax rate for the year ended May 31, 2015 was 180 basis points
lower than the effective tax rate for the year ended May 31, 2014 primarily due
to the favorable resolution of audits in several jurisdictions.
Deferred tax assets and liabilities comprise the following:
As of May 31,
(In millions) 2016 2015
Deferred tax assets:
Allowance for doubtful accounts $5$11
Inventories 88 59
Sales return reserves 182 143
Deferred compensation 274 258
Stock-based compensation 206 179
Reserves and accrued liabilities 78 92
Net operating loss carry-forwards 44 10
Undistributed earnings of foreign subsidiaries 179 149
Other 72 76
Total deferred tax assets 1,128 977
Valuation allowance (52) (9)
Total deferred tax assets after valuation allowance 1,076 968
Deferred tax liabilities:
Property, plant and equipment (268) (220)
Intangibles (92) (93)
Other (4) (38)
Total deferred tax liability (364) (351)
NET DEFERRED TAX ASSET $ 712 $ 617
NIKE, INC. 2016 Annual Report and Notice of Annual Meeting 113
FORM 10-K