Google 2008 Annual Report Download - page 109

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Google Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 13. 401(k) Plan
We have a 401(k) Savings Plan (401(k) Plan) that qualifies as a deferred salary arrangement under
Section 401(k) of the Internal Revenue Code. Under the 401(k) Plan, participating employees may elect to
contribute up to 60% of their eligible compensation, subject to certain limitations. Employee and our contributions
are fully vested when contributed. We contributed approximately $14.3 million, $51.1 million and $72.6 million
during 2006, 2007 and 2008.
Note 14. Income Taxes
Income before income taxes included income from foreign operations of $1,318.4 million, $2,466.9 million
and $3,793.7 million for 2006, 2007 and 2008.
The provision for income taxes consisted of the following (in thousands):
Year Ended December 31,
2006 2007 2008
Current:
Federal .................................................... $ 812,280 $ 1,288,310 $ 1,348,210
State ...................................................... 191,266 294,935 467,572
Foreign .................................................... 28,516 51,227 90,930
Total .................................................. 1,032,062 1,634,472 1,906,712
Deferred:
Federal .................................................... (80,073) (135,047) (197,593)
State ...................................................... (18,395) (29,165) (62,538)
Foreign .................................................... — — (19,843)
Total .................................................. (98,468) (164,212) (279,974)
Provision for income taxes ........................................ $ 933,594 $1,470,260 $1,626,738
The reconciliation of federal statutory income tax rate to our effective income tax rate is as follows (in
thousands):
Year ended December 31,
2006 2007 2008
Expected provision at federal statutory tax rate (35%) ............... $1,403,864 $1,985,893 $2,048,758
State taxes, net of federal benefit ................................. 112,366 172,750 263,272
Stock-based compensation expense .............................. 26,878 123,869 90,805
Disqualifying dispositions of incentive stock options ................ (6,128) — —
Impairment charges ............................................. — — 312,603
Foreign rate differential .......................................... (505,729) (705,400) (1,019,536)
Federal research credit .......................................... (77,859) (81,469) (51,841)
Tax exempt interest ............................................. (31,583) (50,662) (51,713)
Other permanent differences ..................................... 11,785 25,279 34,390
Provision for income taxes ....................................... $ 933,594 $1,470,260 $ 1,626,738
We have not provided U.S. income taxes and foreign withholding taxes on the undistributed earnings of
foreign subsidiaries as of December 31, 2008 because we intend to permanently reinvest such earnings outside
the U.S. If these foreign earnings were to be repatriated in the future, the related U.S. tax liability may be reduced by
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