IBM 2006 Annual Report Download - page 94

It is not possible to predict the maximum potential amount of
future payments under these or similar agreements due to the condi-
tional nature of the company’s obligations and the unique facts and
circumstances involved in each particular agreement. Historically,
payments made by the company under these agreements have not had
a material effect on the company’s business, financial condition or
results of operations.
In addition, the company guarantees certain loans and financial
commitments. The maximum potential future payment under these
financial guarantees was $32 million and $39 million at December 31,
2006 and 2005, respectively. The fair value of the guarantees recog-
nized in the company’s Consolidated Statement of Financial Position
is not material.
P. TAXES
(Dollars in millions)
FOR THE YEAR ENDED DECEMBER 31: 2006 2005 2004
Income from continuing
operations before
income taxes:
U.S. operations $ , $ , $ ,
Non-U.S. operations , , ,
Total income from
continuing operations
before income taxes $, $, $,
The continuing operations provision for income taxes by geographic
operations is as follows:
(Dollars in millions)
FOR THE YEAR ENDED DECEMBER 31: 2006 2005 2004
U.S. operations $, $, $,
Non-U.S. operations , , ,
Total continuing
operations provision
for income taxes $, $, $,
The components of the continuing operations provision for income
taxes by taxing jurisdiction are as follows:
(Dollars in millions)
FOR THE YEAR ENDED DECEMBER 31: 2006 2005 2004
U.S. federal:
Current $  $  $ ()*
Deferred , , ,*
, , 
U.S. state and local:
Current   
Deferred   
  
Non-U.S:
Current , , ,
Deferred   
, , ,
Total continuing operations
provision for income taxes , , ,
Provision for social security,
real estate, personal
property and other taxes , , ,
Total taxes included in
income from continuing
operations $, $, $,
* Included in the U.S. federal current and deferred tax provisions are a benefit of
$848 million and a charge of $848 million, respectively, due to a 2004 Internal
Revenue Service (IRS) settlement.
A reconciliation of the statutory U.S. federal tax rate to the company’s
continuing operations effective tax rate is as follows:
FOR THE YEAR ENDED DECEMBER 31: 2006 2005 2004
Statutory rate % % %
Foreign tax differential () () ()
State and local   
“Act” repatriation —  —
Other () — ()
Effective rate % % %
The effect of tax law changes on deferred tax assets and liabilities did
not have a material impact on the company’s effective tax rate.
The significant components of deferred tax assets and liabilities
that are recorded in the Consolidated Statement of Financial Position
were as follows:
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INTERNATIONAL BUSINESS MACHINES CORPORATION AND SUBSIDIARY COMPANIES
92 2006 Annual Report
Consolidated Statements ......................................................... 
Notes .....................................................................................
A-G ......................................................................................... 
H-M ......................................................................................... 
N-S .......................................................................................... 
N. Stockholders’ Equity Activity .......................................... 
O. Contingencies and Commitments ................................... 
P. Taxes ................................................................................ 
Q. Research, Development and Engineering ...................... 
R. 2005 Actions .................................................................... 
S. Earnings Per Share of Common Stock ............................. 
T-X .......................................................................................... 
Black
MAC
390 CG10