Costco 2013 Annual Report Download - page 68

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The provisions for income taxes for 2013, 2012, and 2011 are as follows:
2013 2012 2011
Federal:
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $572 $ 591 $409
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 12 74
Total federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 588 603 483
State:
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 100 78
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2 14
Total state . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 102 92
Foreign:
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 302 312 270
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13) (17) (4)
Total foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289 295 266
Total provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $990 $1,000 $841
Tax benefits associated with the exercise of employee stock options and other employee stock programs
were allocated to equity attributable to Costco in the amount of $59, $65, and $59, in 2013, 2012, and 2011,
respectively.
The reconciliation between the statutory tax rate and the effective rate for 2013, 2012, and 2011 is as follows:
2013 2012 2011
Federal taxes at statutory rate . . . . . . . . . $1,068 35.0% $ 969 35.0% $834 35.0%
State taxes, net . . . . . . . . . . . . . . . . . . . . 66 2.1 59 2.1 55 2.4
Foreign taxes, net. . . . . . . . . . . . . . . . . . . (87) (2.8) (61) (2.2) (66) (2.8)
Employee stock ownership plan (ESOP) . (65) (2.1) (7) (0.3) (6) (0.3)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80.2 40 1.5 24 1.0
Total . . . . . . . . . . . . . . . . . . . . . . . . . . $ 990 32.4% $1,000 36.1% $841 35.3%
The Company’s provision for income taxes for 2013 was favorably impacted by a $62 nonrecurring tax benefit
in connection with the special cash dividend of $7.00 per share paid by the Company to employees, who
through the Company's 401(k) Retirement Plan owned 22,600,000 shares of Company stock through an
ESOP. Dividends paid on these shares are deductible for U.S. income tax purposes.
The Company’s provision for income taxes for 2012 was adversely impacted by nonrecurring net tax expense
of $25 relating primarily to the following items: the adverse impact of an audit of Costco Mexico by the
Mexican tax authority; the tax effects of the cash dividend declared by Costco Mexico (included in Other in
the table above); and the tax effects of nondeductible expenses for the Company’s contribution to an initiative
reforming alcohol beverage laws in Washington State.
The components of the deferred tax assets (liabilities) are as follows:
2013 2012
Equity compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 80 $ 79
Deferred income/membership fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 148
Accrued liabilities and reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 530 461
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 55
Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (558) (522)
Merchandise inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (190) (182)
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34 $ 39