John Deere 2010 Annual Report Download - page 36

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The company has defi ned contribution plans related to
employee investment and savings plans primarily in the U.S.
The company’s contributions and costs under these plans were
$85 million in 2010, $131 million in 2009 and $126 million
in 2008.
8. INCOME TAXES
The provision for income taxes by taxing jurisdiction and
by sig nifi cant component consisted of the following in millions
of dollars:
2010 2009 2008
Current:
U.S.:
Federal ....................................................... $ 574 $ 3 $ 559
State .......................................................... 50 12 60
Foreign ........................................................... 363 273 402
Total current ........................................... 987 288 1,021
Deferred:
U.S.:
Federal ....................................................... 156 246 74
State .......................................................... 11 10 3
Foreign ........................................................... 8 (84) 13
Total deferred ......................................... 175 172 90
Provision for income taxes ............................. $ 1,162 $ 460 $ 1,111
Based upon location of the company’s operations, the
consolidated income before income taxes in the U.S. in 2010,
2009 and 2008 was $2,048 million, $756 million and $1,730
million, respectively, and in foreign countries was $977 million,
$583 million and $1,395 million, respectively. Certain foreign
operations are branches of Deere & Company and are, there-
fore, subject to U.S. as well as foreign income tax regulations.
The pretax income by location and the preceding analysis of the
income tax provision by taxing jurisdiction are, therefore, not
directly related.
A comparison of the statutory and effective income tax
provision and reasons for related differences in millions of
dollars follow:
2010 2009 2008
U.S. federal income tax provision
at a statutory rate of 35 percent ................ $ 1,05 9 $ 4 69 $ 1,0 93
Increase (decrease) resulting from:
Nondeductible health care claims* ........................ 123
Nondeductible goodwill impairment charge ........... 7 86
State and local income taxes, net of
federal income tax benefi t ............................... 40 14 41
Wind energy production tax credits ...................... (30) (26) (14)
Research and development tax credits ................. (5) (25) (18)
Taxes on foreign activities .................................... (15) (10) 21
Other-net ............................................................ (17) (48) (12)
Provision for income taxes ............................. $ 1,162 $ 460 $ 1,111
* Cumulative adjustment from change in law. Effect included in state taxes was
$7 million.
At October 31, 2010, accumulated earnings in certain
subsidiaries outside the U.S. totaled $1,934 million for which
no provision for U.S. income taxes or foreign withholding taxes
has been made, because it is expected that such earnings will be
reinvested overseas indefi nitely. Determination of the amount
of unrecognized deferred tax liability on these unremitted
earnings is not practical.
Deferred income taxes arise because there are certain
items that are treated differently for fi nancial accounting than
for income tax reporting purposes. An analysis of the deferred
income tax assets and liabilities at October 31 in millions of
dollars follows:
2010 2009
______________ _______________
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
Assets Liabilities Assets Liabilities
Other postretirement
benefi t liabilities ....................... $ 1,762 $ 1,860
Accrual for sales allowances ......... 361 324
Pension liabilities - net .................. 199 335
Accrual for employee benefi ts ....... 175 168
Tax over book depreciation ............ $ 521 $ 437
Tax loss and tax credit
carryforwards .......................... 141 204
Lease transactions ....................... 225 191
Allowance for credit losses ............ 137 140
Goodwill and other
intangible assets ...................... 117 124
Stock option compensation ........... 81 74
Deferred gains on distributed
foreign earnings ....................... 78 71
Inventory ...................................... 89 52
Deferred compens ation ................. 3 5 3 4
Undistributed foreign earnings ....... 18 41
Other items .................................. 348 128 361 104
Less valuation allowances ............. (64) (89)
Deferred income tax
assets and liabilities ............ $ 3,342 $ 1,009 $ 3,534 $ 897
Deere & Company fi les a consolidated federal income tax
return in the U.S., which includes the wholly-owned Financial
Services subsidiaries. These subsidiaries account for income
taxes generally as if they fi led separate income tax returns.
At October 31, 2010, certain tax loss and tax credit
carryforwards of $141 million were available with $124 million
expiring from 2011 through 2030 and $17 million with an
unlimited expiration date.
The Patient Protection and Affordable Care Act as
amended by the Healthcare and Education Reconciliation Act
of 2010 was signed into law in the company’s second fi scal
quarter of 2010. Under the new legislation, to the extent the
company’s future health care drug expenses are reimbursed
under the Medicare Part D retiree drug subsidy (RDS) program,
the expenses will no longer be tax deductible effective
November 1, 2013. Since the tax effects for the retiree health
care liabilities were refl ected in the company’s fi nancial
statements, the entire impact of this tax change relating to the
future retiree drug costs was recorded in tax expense in the