MasterCard 2013 Annual Report Download - page 48

44
Income Taxes
The effective income tax rates for the years ended December 31, 2013, 2012 and 2011 were 30.8%, 29.9% and 30.6%,
respectively. The effective tax rate for 2013 was higher than the effective tax rate for 2012 primarily due to the
recognition of a discrete benefit relating to additional export incentives in 2012 and a lower benefit related to foreign
repatriations in 2013, partially offset by a more favorable mix of earnings in 2013. The effective tax rate for 2012 was
lower than the effective tax rate for 2011 primarily due to discrete benefits related to additional export incentives and
the conclusion of tax examinations in certain jurisdictions, as well as a larger benefit from the domestic production
activities deduction in the U.S. related to our authorization software.
The provision for income taxes differs from the amount of income tax determined by applying the U.S. federal statutory
income tax rate of 35% to pretax income for the years ended December 31, as a result of the following:
For the years ended December 31,
2013 2012 2011
Amount Percent Amount Percent Amount Percent
(in millions, except percentages)
Income before income tax expense. . . . . . . . . . . . . $ 4,500 $ 3,933 $ 2,748
Federal statutory tax . . . . . . . . . . . . . . . . . . . . . . . . 1,575 35.0 % 1,376 35.0 % 961 35.0 %
State tax effect, net of federal benefit. . . . . . . . . . . 19 0.4 % 23 0.6 % 14 0.5 %
Foreign tax effect . . . . . . . . . . . . . . . . . . . . . . . . . . (208) (4.6)% (175) (4.4)% (133) (4.9)%
Non-deductible expenses and other differences . . . 13 0.3 % (21) (0.5)% 34 1.2 %
Tax exempt income. . . . . . . . . . . . . . . . . . . . . . . . . (1) — % (2) (0.1)% (3) (0.1)%
Foreign repatriation . . . . . . . . . . . . . . . . . . . . . . . . (14) (0.3)% (27) (0.7)% (31) (1.1)%
Income tax expense. . . . . . . . . . . . . . . . . . . . . . . . . $ 1,384 30.8 % $ 1,174 29.9 % $ 842 30.6 %
The Company's GAAP effective tax rates for 2013 and 2011 were affected by the tax benefits related to the MDL
Provision as illustrated in the table below. The effective tax rate was 29.9% in 2012 including and excluding the portion
of the MDL Provision recorded in 2012.
GAAP to Non-GAAP effective tax rate reconciliation
For the years ended December 31,
2013 2011
Actual MDL Provision Non- GAAP Actual MDL Provision Non- GAAP
(in millions, except percentages)
Income before income taxes. . . . . . . . . . . . . . . . . . $4,500 $ 95 $4,595 $2,748 $ 770 $3,518
Income tax expense. . . . . . . . . . . . . . . . . . . . . . . . . (1,384) (34) (1,418) (842) (275) (1,117)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,116 $ 61 $3,177 $1,906 $ 495 $2,401
Effective tax rate. . . . . . . . . . . . . . . . . . . . . . . . . . . 30.8% 30.9% 30.6% 31.8%
During 2013, the Company's unrecognized tax benefits related to tax positions taken during the current and prior periods
increased by $63 million. The increase in the Company's unrecognized tax benefits for 2013 was primarily due to
judgments related to current year tax positions. As of December 31, 2013, the Company's unrecognized tax benefits
related to positions taken during the current and prior period were $320 million, all of which would reduce the Company's
effective tax rate if recognized.
In 2010, in connection with the expansion of the Company's operations in the Asia Pacific, Middle East and Africa
region, the Company's subsidiary in Singapore, MasterCard Asia Pacific Pte. Ltd. (“MAPPL”), received an incentive
grant from the Singapore Ministry of Finance. See Note 17 (Income Taxes) to the consolidated financial statements
included in Part II, Item 8 of this Report for further discussion.