UPS 2014 Annual Report Download - page 117

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
105
NOTE 12. INCOME TAXES
The income tax expense (benefit) for the years ended December 31 consists of the following (in millions):
2014 2013 2012
Current:
U.S. Federal $ 932 $ 2,181 $ 1,901
U.S. State and Local 103 205 182
Non-U.S. 185 162 167
Total Current 1,220 2,548 2,250
Deferred:
U.S. Federal 427 (242)(1,871)
U.S. State and Local (11)(22)(201)
Non-U.S. (31)18(11)
Total Deferred 385 (246)(2,083)
Total $ 1,605 $ 2,302 $ 167
Income before income taxes includes the following components (in millions):
2014 2013 2012
United States $ 3,819 $ 6,040 $ 384
Non-U.S. 818 634 590
$ 4,637 $ 6,674 $ 974
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:
2014 2013 2012
Statutory U.S. federal income tax rate 35.0% 35.0% 35.0%
U.S. state and local income taxes (net of federal benefit) 1.2 2.1 —
Non-U.S. tax rate differential (2.4)(1.3)(6.1)
Nondeductible/nontaxable items 1.3 (0.2)(0.4)
U.S. federal tax credits (1.5)(1.2)(7.4)
Other 1.0 0.1 (4.0)
Effective income tax rate 34.6% 34.5% 17.1%
Our effective tax rate increased to 34.6% in 2014, compared with 34.5% in 2013, largely due to the impact of the gain
from liquidating a foreign subsidiary in early 2013 not being taxable (see note 15), offset by favorable changes in the proportion
of our taxable income in certain U.S. and non-U.S. jurisdictions relative to total pre-tax income and the increase in U.S. Federal
and state tax credits relative to total pre-tax income.
Beginning in 2012, we were granted a tax incentive for certain of our non-U.S. operations, which is effective through
December 31, 2017 and may be extended through December 31, 2022 if additional requirements are satisfied. The tax
incentive is conditional upon our meeting specific employment and investment thresholds. The impact of this tax incentive
decreased non-U.S. tax expense by $21 and $20 million for 2014 and 2013, respectively.