Medtronic 2012 Annual Report Download - page 121

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Medtronic, Inc.
Notes to Consolidated Financial Statements (Continued)
104
Prior period current and noncurrent deferred tax assets and liabilities within the consolidated balance
sheets have been corrected to properly reflect the jurisdictional netting of deferred income taxes.
The Company’s effective income tax rate from continuing operations varied from the U.S. Federal
statutory tax rate as follows:
Fiscal Year
_________________________________________
2012 2011 2010
___________ ___________ ___________
U.S. Federal statutory tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . 35.0% 35.0% 35.0%
Increase (decrease) in tax rate resulting from:
U.S. state taxes, net of Federal tax benefit . . . . . . . . . . . . . . . . . 0.9 0.3 0.5
Research and development credit . . . . . . . . . . . . . . . . . . . . . . . (0.6) (1.2) (0.5)
Domestic production activities . . . . . . . . . . . . . . . . . . . . . . . . . . (0.5) (0.4) (0.3)
International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16.9) (19.4) (16.8)
Puerto Rico Excise Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.4) (0.6) –
Impact of restructuring charges, net, certain litigation
charges, net, and acquisition-related items . . . . . . . . . . . . . . . 0.3 2.4 2.0
Reversal of excess tax accruals . . . . . . . . . . . . . . . . . . . . . . . . . . (0.8) (1.8) –
Retiree medical subsidy law change . . . . . . . . . . . . . . . . . . . . . . ––0.4
Valuation allowance release . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.8) ––
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4 2.3 1.5
___________ ___________ ___________
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.6% 16.6% 21.8%
___________ ___________ ___________
___________ ___________ ___________
During the fourth quarter of fiscal year 2012, the Company entered into a sale-leaseback agreement
that was recorded as a capital lease and as a result of the transaction, the Company recorded a $33 million
tax benefit associated with the release of a valuation allowance associated with the usage of a capital loss
carryover. The $33 million tax benefit was recorded in the provision for income taxes in the consolidated
statement of earnings for fiscal year 2012.
In fiscal year 2011, the Company recorded a $67 million net tax benefit associated with the reversal of
excess tax accruals. This reversal related to the settlement of certain issues reached with the U.S. Internal
Revenue Service (IRS) involving the review of the Company’s fiscal years 1997 through 1999 and fiscal
years 2005 and 2006 domestic income tax returns, and the resolution of various state and foreign audit
proceedings covering multiple years and issues. The $67 million net tax benefit was recorded in the provision
for income taxes in the consolidated statement of earnings for fiscal year 2011.
In fiscal year 2010, the Company recorded a $15 million tax cost associated with the U.S. health care
reform legislation eliminating the federal tax benefit for government subsidies of retiree prescription drug
benefits. The $15 million tax cost was recorded in the provision for income taxes in the consolidated
statement of earnings for fiscal year 2010.
The Company has not provided U.S. income taxes on approximately $17.977 billion, $14.912 billion,
and $12.373 billion of undistributed earnings from non-U.S. subsidiaries as of April 27, 2012, April 29, 2011,
and April 30, 2010, respectively. These earnings are intended to be indefinitely reinvested outside the U.S.
Determination of the amount of unrecognized deferred tax liability on these undistributed earnings is not
practicable. Currently, the Company’s operations in Puerto Rico, Switzerland, and Singapore have various
tax incentive grants. Unless these grants are extended, they will expire between fiscal years 2013 and 2027.
The expiration of a tax incentive grant in fiscal year 2013 is not expected to have a significant impact on the
provision for income taxes in the consolidated statement of earnings in future years.