Starbucks 2005 Annual Report Download - page 70

Note 15: Income Taxes
A reconciliation of the statutory federal income tax rate with the Company's effective income tax rate is as
follows:
Fiscal Year Ended Oct 2, 2005 Oct 3, 2004 Sept 28, 2003
Statutory rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 35.0% 35.0% 35.0%
State income taxes, net of federal income tax benefit ÏÏÏÏ 3.9 3.5 3.6
Other, netÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (1.0) (1.2) Ì
Effective tax rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 37.9% 37.3% 38.6%
The provision for income taxes consists of the following (in thousands):
Fiscal Year Ended Oct 2, 2005 Oct 3, 2004 Sept 28, 2003
Current taxes:
Federal ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $273,178 $188,647 $140,138
State ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 51,949 36,383 25,448
Foreign ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 14,106 10,193 8,489
Deferred taxes, net ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (37,256) (3,469) (6,958)
Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $301,977 $231,754 $167,117
U.S. income and foreign withholding taxes have not been provided on approximately $86.4 million of
cumulative undistributed earnings of foreign subsidiaries and equity investees. The Company intends to
reinvest these earnings for the foreseeable future. If these amounts were distributed to the United States, in
the form of dividends or otherwise, the Company would be subject to additional U.S. income taxes. Because of
the availability of U.S. foreign tax credits, the determination of the amount of unrecognized deferred income
tax liabilities on these earnings is not practicable.
In December 2004, the FASB issued Staff Position No. FAS 109-1, ""Application of SFAS No. 109,
Accounting for Income Taxes, to the Tax Deduction on Qualified Production Activities provided by the
American Jobs Creation Act of 2004'' (""FSP 109-1''). FSP 109-1 states that qualified domestic production
activities should be accounted for as a special deduction under SFAS No. 109, ""Accounting for Income
Taxes,'' and not be treated as a rate reduction. The provisions of FSP 109-1 are effective immediately. The
Company will qualify for a benefit beginning in fiscal 2006, which is not expected to be material to the
Company's financial statements.
In December 2004, the FASB issued Staff Position No. FAS 109-2, ""Accounting and Disclosure Guidance
for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004''
(""FSP 109-2''). The American Jobs Creation Act allows a special one-time dividends received deduction on
the repatriation of certain foreign earnings to a U.S. taxpayer (repatriation provision), provided certain criteria
are met. The law allows the Company to make an election to repatriate earnings through 2006. FSP 109-2
provides accounting and disclosure guidance for the repatriation provision. Although FSP 109-2 was effective
upon its issuance, it allows companies additional time beyond the enactment date to evaluate the effects of the
provision on its plan for investment or repatriation of unremitted foreign earnings. The Company continues to
evaluate the impact of the new Act to determine whether it will repatriate foreign earnings and the impact, if
any, this pronouncement will have on its consolidated financial statements. As of October 2, 2005, the
Company has not made an election to repatriate earnings under this provision. The Company may or may not
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