Danaher 2009 Annual Report Download - page 93

Table of Contents
The effective income tax rate for the years ended December 31 varies from the statutory federal income tax rate as follows:

  
Statutory federal income tax rate 35.0% 35.0% 35.0%
Increase (decrease) in tax rate resulting from:
State income taxes (net of Federal income tax benefit) 1.6 0.8 1.2
Taxes on foreign earnings (11.8) (11.1) (9.2)
In-process research and development — — 1.3
Resolution of uncertain tax positions / statute expirations (6.8) (0.1) (1.4)
Acquisition costs 0.5 — —
Research and experimentation credits and other 0.7 0.1 (1.1)
Effective income tax rate 19.2% 24.7% 25.8%
The effective tax rate for 2009 of 19.2% reflects net discrete tax benefits of approximately $97 million, or $0.29 per diluted share. The discrete benefit is
primarily associated with the reduction of income tax reserves during the period associated with the resolution of uncertain tax positions and the lapse of
statutes of limitations in various jurisdictions.
The Company made income tax payments of $283 million, $390 million, and $335 million in 2009, 2008, and 2007, respectively. The Company recognized
a tax benefit of $20 million, $5 million, and $66 million in 2009, 2008 and 2007, respectively, related to the exercise of employee stock options, which
vested prior to the Company’s required adoption of fair value accounting for stock options and for which no expense was recognized. This benefit has been
recorded as an increase to additional paid-in capital.
Included in deferred income taxes as of December 31, 2009 are tax benefits for U.S. and non-U.S. net operating loss carryforwards totaling $169 million (net
of applicable valuation allowances of $189 million). Certain of the losses can be carried forward indefinitely and others can be carried forward to various
dates through 2028. In addition, the Company had general business and foreign tax credit carryforwards of $187 million at December 31, 2009. Included in
the deferred tax asset related to net operating loss carryforwards and tax credits is $73 million associated with the indirect impact of certain unrecognized tax
benefits (see below).
Effective January 1, 2007, the Company adopted new accounting provisions associated with the uncertain tax positions. As a result of the adoption of these
provisions, the Company recognized a decrease in the liability for unrecognized tax benefits of $63 million, which was accounted for as an increase to the
January 1, 2007 balance of retained earnings in the accompanying Consolidated Statements of Stockholders’ Equity.
As of December 31, 2009, gross unrecognized tax benefits totaled $439 million ($361 million, net of offsetting indirect tax benefits and including $81 million
associated with potential interest and penalties). As of December 31, 2008, gross unrecognized tax benefits totaled $447 million ($426 million, net of offsetting
indirect tax benefits and including $89 million associated with potential interest and penalties). The Company recognized approximately $18 million, $19
million and $24 million in potential interest and penalties associated with uncertain tax positions during 2009, 2008 and 2007, respectively. To the extent
unrecognized tax benefits (including interest and penalties) are not assessed with respect to uncertain tax positions, amounts accrued will be reduced and
reflected as a reduction of the overall income tax provision. Unrecognized tax benefits and associated accrued interest and penalties are included in “Taxes,
income and other” in accrued expenses as detailed in Note 8.
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Source: DANAHER CORP /DE/, 10-K, February 24, 2010 Powered by Morningstar® Document Research℠
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