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Table of Contents
INTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 10: Provision for Taxes
Income before taxes and the provision for taxes consisted of the following:
The tax benefit from employee stock plans was $344 million for 2004 ($216 million for 2003 and $270 million for 2002).
The difference between the tax provision at the statutory federal income tax rate and the tax provision attributable to income before
income taxes was as follows:
During 2004, in connection with preparing and filing its 2003 federal tax return and preparing its state tax returns, the company reduced
its 2004 tax provision by $195 million. This reduction in the 2004 tax provision was primarily driven by tax benefits for export sales and state
tax benefits for divestitures that exceeded the amounts originally estimated in connection with the 2003 provision. Also during 2004, the
company reversed previously accrued taxes related primarily to the closing of a state income tax audit that reduced the tax provision for 2004
by $62 million.
The company reduced its tax provision for 2003 by approximately $758 million due to the tax benefits related to the sale of certain
businesses and assets through the sale of stock of acquired companies ($75 million in 2002). See “Note 13: Acquisitions and Divestitures.”
In 2001, the U.S. Internal Revenue Service (IRS) commenced an examination of Intel’s tax returns for the years 1999 and 2000. In
August 2003, the IRS proposed certain adjustments primarily related to the amounts reflected by Intel on these returns as a tax benefit for its
export sales (see
“
Note 18: Contingencies
”
).
Subsequently, in January 2005, the IRS issued formal assessments for these adjustments. The
(Dollars in Millions)
2004
2003
2002
Income before taxes:
U.S.
$
7,422
$
5,705
$
2,165
Non
-
U.S.
2,995
1,737
2,039
Total income before taxes
$
10,417
$
7,442
$
4,204
Provision for taxes:
Current:
Federal
$
2,787
$
808
$
542
State
(69
)
223
143
Non
-
U.S.
390
379
292
3,108
1,410
977
Deferred:
Federal
(128
)
420
91
Other
(79
)
(29
)
19
(207
)
391
110
Total provision for taxes
$
2,901
$
1,801
$
1,087
Effective tax rate
27.8
%
24.2
%
25.9
%
(In Percentages)
2004
2003
2002
Statutory federal income tax rate
35.0
%
35.0
%
35.0
%
Increase (reduction) in rate resulting from:
State taxes, net of federal benefits
(0.4
)
1.9
2.2
Non
-
U.S. income taxed at different rates
(2.5
)
(2.8
)
(5.9
)
Non
-
deductible acquisition
-
related costs and goodwill impairments
0.1
3.1
1.3
Tax benefit related to divestitures
—
(
10.2
)
(1.8
)
Export sales benefit
(4.8
)
(2.5
)
(3.0
)
Other
0.4
(0.3
)
(1.9
)
Income tax rate
27.8
%
24.2
%
25.9
%