Walgreens 2014 Annual Report Download - page 83

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(8) Income Taxes
The components of Earnings Before Income Tax Provision were (in millions):
2014 2013
U.S. $3,386 $3,477
Non-U.S. 171 418
Total $3,557 $3,895
The provision for income taxes consists of the following (in millions):
2014 2013 2012
Current provision –
Federal $1,207 $1,122 $ 890
State 109 134 120
Non-U.S. 35 15 —
1,351 1,271 1,010
Deferred provision –
Federal 183 174 251
State (3) (2) (12)
Non-U.S. (5) 2 —
175 174 239
Income tax provision $1,526 $1,445 $1,249
The difference between the statutory federal income tax rate and the effective tax rate is as follows:
2014 2013 2012
Federal statutory rate 35.0% 35.0% 35.0%
State income taxes, net of federal benefit 1.9% 2.2% 2.1%
Loss on Alliance Boots call option (1) 8.5% 0.0% 0.0%
Foreign income taxed at non-US rate (3.1)% (0.3)% 0.0%
Other 0.6% 0.2% (0.1)%
Effective income tax rate 42.9% 37.1% 37.0%
(1) Upon the amendment and immediate exercise of the call option to acquire the remaining 55% ownership of
Alliance Boots, the Company was required to compare the fair value of the amended option with the book
value of the original option with a gain or loss recognized for the difference. The fair value of the amended
option resulted in a financial statement loss of $866 million. The loss on the Alliance Boots call option will
be, in part, a capital loss and available to be carried forward and offset future capital gains through fiscal
2020. The loss also contributed to the increased valuation allowance amount reported in the deferred income
tax table below.
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