UPS 2010 Annual Report Download - page 113
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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
NOTE 12. INCOME TAXES
The income tax expense (benefit) for the years ended December 31 consists of the following (in millions):
2010 2009 2008
Current:
U.S. Federal ...................................................... $ 776 $ 715 $1,510
U.S. State and Local ................................................ 119 30 173
Non-U.S. ......................................................... 161 147 155
Total Current ................................................. 1,056 892 1,838
Deferred:
U.S. Federal ...................................................... 893 231 115
U.S. State and Local ................................................ 106 32 4
Non-U.S. ......................................................... (20) 59 55
Total Deferred ................................................ 979 322 174
Total ........................................................ $2,035 $1,214 $2,012
Income before income taxes includes the following components (in millions):
2010 2009 2008
United States ......................................................... $4,780 $3,027 $4,547
Non-U.S. ............................................................. 743 339 468
$5,523 $3,366 $5,015
A reconciliation of the statutory federal income tax rate to the effective income tax rate for the years ended
December 31 consists of the following:
2010 2009 2008
Statutory U.S. federal income tax rate ................................... 35.0% 35.0% 35.0%
U.S. state and local income taxes (net of federal benefit) .................... 2.4 1.4 2.5
Non-U.S. tax rate differential .......................................... (0.7) (1.5) 1.0
Nondeductible/nontaxable items ........................................ 0.3 0.9 5.1
U.S. federal tax credits ............................................... (1.8) (3.2) (3.0)
Other ............................................................. 1.6 3.5 (0.5)
Effective income tax rate ............................................. 36.8% 36.1% 40.1%
In the third quarter of 2010, we recognized a $40 million tax benefit associated with the release of a
valuation allowance against deferred tax assets in our international package operations, partially offset by tax
provided for interest earned on refunds.
In the first quarter of 2010, we changed the tax status of a German subsidiary that was taxable in the U.S.
and its local jurisdiction to one that is taxed solely in its local jurisdiction. This change was made primarily to
allow for more flexibility in funding this subsidiary’s operations with local liquidity sources, improve the cash
flow position in the U.S., and help mitigate future currency remeasurement risk. As a result of this change in tax
status, we recorded a non-cash charge of $76 million, which resulted primarily from the write-off of related
deferred tax assets which will not be realizable following the change in tax status.
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