MasterCard 2014 Annual Report Download - page 79

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MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
77
Note 17. Income Taxes
The total income tax provision for the years ended December 31 is comprised of the following components:
2014 2013 2012
(in millions)
Current
Federal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 977 $ 1,010 $ 524
State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 33 24
Foreign. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 528 456 390
1,552 1,499 938
Deferred
Federal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (81) (100) 248
State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) (4) 7
Foreign. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6) (11) (19)
(90) (115) 236
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,462 $ 1,384 $ 1,174
The domestic and foreign components of income before income taxes for the years ended December 31 are as follows:
2014 2013 2012
(in millions)
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,378 $ 2,741 $ 2,508
Foreign. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,701 1,759 1,425
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,079 $ 4,500 $ 3,933
MasterCard has not provided for U.S. federal income and foreign withholding taxes on approximately $3.3 billion of undistributed
earnings from non-U.S. subsidiaries as of December 31, 2014 because such earnings are intended to be reinvested indefinitely
outside of the United States. If these earnings were distributed, foreign tax credits may become available under current law to
reduce the resulting U.S. income tax liability. However, it is not practicable to determine the amount of the tax and credits.
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:
2014 2013 2012
Amount Percent Amount Percent Amount Percent
(in millions, except percentages)
Income before income taxes . . . . . . . . . . . . . . . $ 5,079 $ 4,500 $ 3,933
Federal statutory tax . . . . . . . . . . . . . . . . . . . . . 1,778 35.0 % 1,575 35.0 % 1,376 35.0 %
State tax effect, net of federal benefit . . . . . . . . 29 0.6 % 19 0.4 % 23 0.6 %
Foreign tax effect. . . . . . . . . . . . . . . . . . . . . . . . (108) (2.1)% (208) (4.6)% (175) (4.4)%
Foreign repatriation . . . . . . . . . . . . . . . . . . . . . . (177) (3.5)% (14) (0.3)% (27) (0.7)%
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (60) (1.2)% 12 0.3 % (23) (0.6)%
Income tax expense . . . . . . . . . . . . . . . . . . . . . . $ 1,462 28.8 % $ 1,384 30.8 % $ 1,174 29.9 %
Effective Income Tax Rate
The effective income tax rates for the years ended December 31, 2014, 2013 and 2012 were 28.8%, 30.8% and 29.9%, respectively.
The effective tax rate for 2014 was lower than the effective tax rate for 2013 primarily due to the recognition of a larger repatriation
benefit and an increase in the Company’s domestic production activity deduction in the U.S. related to the Company’s authorization
revenue, partially offset by an unfavorable mix of taxable earnings in 2014. 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, which was partially offset by a more favorable mix of taxable earnings in
2013.