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71GOOGLE INC. |Form10-K
PART II
ITEM8.Notes to Consolidated Financial Statements
NOTE14. Income Taxes
Income from continuing operations before income taxes included income from domestic operations of $4,948million, $4,693million,
and $5,311million for 2010, 2011, and 2012, and income from foreign operations of $5,848million, $7,633million, and $8,075million
for 2010, 2011, and 2012. Substantially all of the income from foreign operations was earned by an Irish subsidiary.
The provision for income taxes consists of the following (in millions):
Year Ended December31,
2010 2011 2012
Current:
Federal $1,657 $1,724 $2,342
State 458 274 171
Foreign 167 248 358
Total 2,282 2,246 2,871
Deferred:
Federal (25) 452 (328)
State 47 (109) (19)
Foreign (13) (0) 74
Total 9 343 (273)
Provision for income taxes $2,291 $2,589 $2,598
The reconciliation of federal statutory income tax rate to our eff ective income tax rate is as follows (inmillions):
Year ended December31,
2010 2011 2012
Expected provision at federal statutory tax rate (35%) $ 3,779 $ 4,314 $ 4,685
State taxes, net of federal benefi t 322 122 99
Stock-based compensation expense 79 105 52
Change in valuation allowance (34) 27 1,921
Foreign rate diff erential (1,769) (2,001) (2,200)
Federal research credit (84) (140) 0
Tax exempt interest (12) (10) (7)
Non-deductible legal settlement 0 175 0
Basis diff erence in investment in Home business 0 0 (1,960)
Other permanent diff erences 10 (3) 8
Provision for income taxes $ 2,291 $ 2,589 $ 2,598
We have not provided U.S. income taxes and foreign withholding taxes on the undistributed earnings of foreign subsidiaries as
of December31,2012 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 any foreign income taxes previously paid on these
earnings. As of December31,2012, the cumulative amount of earnings upon which U.S. income taxes have not been provided
is approximately $33.3billion. Determination of the amount of unrecognized deferred tax liability related to these earnings is
not practicable.
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