Discover 2011 Annual Report Download - page 88
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76
Income Tax Expense
The following table reconciles the Company’s effective tax rate to the U.S. federal statutory income tax rate:
U.S. federal statutory income tax rate
U.S. state and local income taxes and other income taxes, net of U.S. federal
income tax benefits
Valuation allowance - capital loss
Other
Effective income tax rate
For the Year Ended November 30,
2011
35.0%
2.4
(0.6)
(0.2)
36.6%
2010
35.0%
4.1
—
0.6
39.7%
2009
35.0%
4.1
1.1
(0.4)
39.8%
Income tax expense increased $780.5 million, or 155%, for the year ended November 30, 2011 as compared to the year
ended November 30, 2010, which resulted from an increase in pretax income. The effective tax rate decreased 3.1% for the
year ended November 30, 2011 from 39.7% for the year ended November 30, 2010. In 2011, we received confirmation of a
state's treatment on a previously uncertain tax position and the settlement of certain state examination issues which resulted in
the release of related reserves. We also released the valuation allowance previously recognized in May 2009 on a tax benefit
arising from the capital loss associated with sale of the Goldfish business unit. These reserve releases contributed to the
decrease in the effective tax rate.
For 2010, we had tax expense of $504 million as compared to a tax benefit of $92 million for 2009. The increase was the
result of shifting from a non-GAAP as-adjusted pretax loss position in 2009 to a pretax income position in 2010. 2010 also
included $49.9 million of state tax expense which was attributable to an increase in pretax income and tax liabilities in
additional states.
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