Starbucks 2007 Annual Report Download - page 67

Note 14: 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 Sept 30, 2007 Oct 1, 2006 Oct 2, 2005
Statutory rate ................................... 35.0% 35.0% 35.0%
State income taxes, net of federal income tax benefit ...... 3.4 3.4 3.9
Other, net ...................................... (2.1) (2.6) (1.0)
Effective tax rate ................................. 36.3% 35.8% 37.9%
The provision for income taxes consists of the following (in thousands):
Fiscal Year Ended Sept 30, 2007 Oct 1, 2006 Oct 2, 2005
Current taxes:
Federal ...................................... $326,725 $332,202 $273,178
State ........................................ 65,308 57,759 51,949
Foreign ...................................... 31,181 12,398 14,106
Deferred taxes, net ............................... (39,488) (77,589) (37,256)
Total .......................................... $383,726 $324,770 $301,977
U.S. income and foreign withholding taxes have not been provided on approximately $284.2 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. Determination of the amount of
unrecognized deferred income tax liabilities on these earnings is not practicable because such liability, if any, is
dependent on circumstances existing if and when remittance occurs.
The tax effect of temporary differences and carryforwards that comprise significant portions of deferred tax assets
and liabilities is as follows (in thousands):
Fiscal Year Ended Sept 30, 2007 Oct 1, 2006
Deferred tax assets:
Accrued occupancy costs ................................... $ 47,611 $ 36,205
Accrued compensation and related costs ........................ 131,882 90,815
Other accrued expenses .................................... 42,022 34,959
Foreign tax credits . . . ..................................... 11,137 20,948
Other. . . ............................................... 29,159 19,095
Total .................................................. 261,811 202,022
Valuation allowance . . ..................................... (13,658) (8,767)
Total deferred tax asset, net of valuation allowance ................. 248,153 193,255
Deferred tax liabilities:
Property, plant and equipment ............................... (8,070) (12,759)
Other. . . ............................................... (23,867) (16,249)
Total .................................................. (31,937) (29,008)
Net deferred tax asset . . ..................................... $216,216 $164,247
The Company will establish a valuation allowance if it is more likely than not that these items will either expire
before the Company is able to realize their benefits, or that future deductibility is uncertain. Periodically, the
valuation allowance is reviewed and adjusted based on management’s assessments of realizable deferred tax assets.
The valuation allowance as of September 30, 2007 and October 1, 2006 was related to net operating losses of
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