Goldman Sachs 2003 Annual Report Download - page 99

Notes to Consolidated Financial Statements
GOLDMAN SACHS 2003 ANNUAL REPORT 97
A reconciliation of the U.S. federal statutory income tax rate to the firm’s effective income tax rate is set forth below:
YEAR ENDED NOVEMBER
2003 2002 2001
U.S. federal statutory income tax rate 35.0% 35.0% 35.0%
Increase related to state and local taxes, net of U.S. income tax effects 2.1 2.7 2.8
Tax credits (3.1) (2.0) —
Foreign operations (1.2) (0.9) —
Tax-exempt income, including dividends (1.0) (1.3) (0.6)
Other 0.6 1.5 0.3
Effective income tax rate 32.4% 35.0% 37.5%
Tax benefits of approximately $103 million in November
2003, $119 million in November 2002 and $123 million
in November 2001, related to the delivery of restricted
stock units and the exercise of options, were credited
directly to “Additional paid-in capital” in the consoli-
dated statements of financial condition and changes in
shareholders’ equity.
note 14
REGULATED SUBSIDIARIES
GS&Co. and SLK are registered U.S. broker-dealers and
futures commission merchants subject to Rule 15c3-1 of
the Securities and Exchange Commission and Rule 1.17 of
the Commodity Futures Trading Commission, which
specify uniform minimum net capital requirements, as
defined, for their registrants. They have elected to com-
pute their net capital in accordance with the “Alternative
Net Capital Requirement” as permitted by Rule 15c3-1.
As of November 2003 and November 2002, GS&Co. had
regulatory net capital, as defined, of $3.66 billion and
$4.75 billion, respectively, which exceeded the amounts
required by $2.82 billion and $4.09 billion, respectively.
As of November 2003 and November 2002, SLK had
regulatory net capital, as defined, of $1.12 billion and
$1.28 billion, respectively, which exceeded the amounts
required by $1.08 billion and $1.24 billion, respectively.
GSI, a registered U.K. broker-dealer, is subject to the
capital requirements of the Financial Services Authority,
and GSJL, a Tokyo-based broker-dealer, is subject to
the capital requirements of the Financial Services
Agency. As of November 2003 and November 2002, GSI
and GSJL were in compliance with their local capital
adequacy requirements.
Certain other subsidiaries of the firm are also sub-
ject to capital adequacy requirements promulgated by
authorities of the countries in which they operate.
As of November 2003 and November 2002, these
subsidiaries were in compliance with their local capital
adequacy requirements.
The firm permanently reinvests eligible earnings of cer-
tain foreign subsidiaries that were incorporated for U.S.
income tax purposes at the end of fiscal 2001 and,
accordingly, does not accrue any U.S. income taxes that
would arise if such earnings were repatriated. As of
November 2003, this policy resulted in an unrecognized
net deferred tax liability of $84 million attributable to
reinvested earnings of $1.10 billion. Additionally, during
2003, the valuation allowance was increased by $1 mil-
lion, primarily due to an increase in certain foreign losses.
Acquired net operating loss carryforwards of $49 million
as of November 2003 and $58 million as of November
2002 are subject to annual limitations on utilization and
will begin to expire in 2019.