Medtronic 2013 Annual Report Download - page 117

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75732me_10K.indd 102 6/25/13 6:39 PM
Table of Contents
Medtronic, Inc.
Notes to Consolidated Financial Statements (Continued)
The Company’s effective income tax rate from continuing operations varied from the U.S. Federal statutory tax rate as follows:
Fiscal Year
2013 2012 2011
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 0.5 0.9 0.3
Research and development credit (1.1) (0.6) (1.2)
Domestic production activities (0.3) (0.5) (0.4)
International (16.7) (16.9) (19.4)
Puerto Rico Excise Tax (1.3) (1.4) (0.6)
Impact of restructuring charges, net, certain litigation charges, net, and
acquisition-related items 2.0 0.3 2.4
Reversal of excess tax accruals — (0.8) (1.8)
Valuation allowance release (0.2) (0.8) —
Other, net 0.5 2.4 2.3
Effective tax rate 18.4% 17.6% 16.6%
In 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.
The Company has not provided U.S. income taxes on approximately $20.499 billion, $17.977 billion, and $14.912 billion of
undistributed earnings from non-U.S. subsidiaries as of April 26, 2013, April 27, 2012, and April 29, 2011, respectively. Except
for certain unique and immaterial situations, these earnings are indefinitely reinvested outside the U.S. and are available for use
by the Company's non-U.S. operations. The Company continues to be focused on goals to grow its business through increased
globalization of the Company. 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. The tax
reductions as compared to the local statutory rate favorably impacted earnings per diluted share by $0.42 in fiscal year 2013, $0.43
in fiscal year 2012, and $0.39 in fiscal year 2011. Unless these grants are extended, they will expire between fiscal years 2014
and 2027. The expiration of a tax incentive grant in fiscal year 2014 is not expected to have a significant impact on the provision
for income taxes in the consolidated statements of earnings in future years.
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