Sprint - Nextel 2007 Annual Report Download - page 118

SPRINT NEXTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 7. Income Taxes
Income tax benefit (expense) allocated to continuing operations consists of the following:
Year Ended December 31,
2007 2006 2005
(in millions)
Current income tax benefit (expense)
Federal ............................................................. $ 15 $102 $395
State ............................................................... (7) (119) (67)
Total current income tax benefit (expense) ..................................... 8 (17) 328
Deferred income tax benefit (expense)
Federal ............................................................. 113 (556) (835)
State ............................................................... 247 88 37
Total deferred income tax benefit (expense) .................................... 360 (468) (798)
Foreign income tax (expense) ............................................... (3) (3) —
Total income tax benefit (expense) ........................................... $365 $(488) $(470)
The differences that caused our effective income tax rates to vary from the 35% federal statutory rate for
income taxes related to continuing operations were as follows:
Year Ended December 31,
2007 2006 2005
(in millions)
Income tax benefit (expense) at the federal statutory rate ....................... $10,481 $(519) $(452)
Effect of:
Goodwill impairment ............................................... (10,265) — —
State income taxes, net of federal income tax effect ....................... 51 (47) (20)
State law changes, net of federal income tax effect ........................ 105 27 —
Tax audit settlements ............................................... — 42 —
Other, net ........................................................ (7) 9 2
Income tax benefit (expense) ............................................. $ 365 $(488) $(470)
Effective income tax rate ................................................ 1.2% 32.9% 36.4%
Income tax benefit (expense) allocated to other items was as follows:
Year Ended December 31,
2007 2006 2005
(in millions)
Discontinued operations .................................................... — $(234) $(635)
Cumulative effect of change in accounting principle .............................. — — 10
Unrecognized net periodic pension and postretirement benefit cost(1) ................. (10) 4 39
Unrealized gains (losses) on securities(1) ....................................... (3) 48 (27)
Unrealized gains (losses) on qualifying cash flow hedges(1) ......................... — (5) (7)
Stock ownership, purchase and option arrangements(2) ............................ (15) 1 38
Cumulative effect of adoption of SAB No. 108—leases(3) .......................... — 31 —
Goodwill, reduction of valuation allowance on acquired assets ...................... 93 68 18
(1) These amounts have been recorded directly to shareholders’ equity—accumulated other comprehensive loss
on the consolidated balance sheets.
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