MasterCard 2015 Annual Report Download - page 81

MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
75
Note 17. Income Taxes
The total income tax provision for the years ended December 31 is comprised of the following components:
2015 2014 2013
(in millions)
Current
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 677 $ 977 $ 1,010
State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 47 33
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 444 528 456
1,166 1,552 1,499
Deferred
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 (81) (100)
State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) (3) (4)
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17) (6) (11)
(16) (90) (115)
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,150 $ 1,462 $ 1,384
The domestic and foreign components of income before income taxes for the years ended December 31 are as follows:
2015 2014 2013
(in millions)
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,399 $ 3,378 $ 2,741
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,559 1,701 1,759
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,958 $ 5,079 $ 4,500
MasterCard has not provided for U.S. federal income and foreign withholding taxes on approximately $3.5 billion of undistributed
earnings from non-U.S. subsidiaries as of December 31, 2015 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:
2015 2014 2013
Amount Percent Amount Percent Amount Percent
(in millions, except percentages)
Income before income taxes . . . . . . . . . . . . . . . . $ 4,958 $ 5,079 $ 4,500
Federal statutory tax. . . . . . . . . . . . . . . . . . . . . . . 1,735 35.0 % 1,778 35.0 % 1,575 35.0 %
State tax effect, net of federal benefit. . . . . . . . . 27 0.5 % 29 0.6 % 19 0.4 %
Foreign tax effect. . . . . . . . . . . . . . . . . . . . . . . . . . (144) (2.9)% (108) (2.1)% (208) (4.6)%
Foreign repatriation . . . . . . . . . . . . . . . . . . . . . . . (172) (3.5)% (177) (3.5)% (14) (0.3)%
Impact of settlements with tax authorities. . . . . (147) (2.9)% — — % — — %
Other foreign tax credits. . . . . . . . . . . . . . . . . . . . (109) (2.2)% (6) (0.1)% (3) — %
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (40) (0.8)% (54) (1.1)% 15 0.3 %
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . $ 1,150 23.2 % $ 1,462 28.8 % $ 1,384 30.8 %
Effective Income Tax Rate
The effective income tax rates for the years ended December 31, 2015, 2014 and 2013 were 23.2%, 28.8% and 30.8%, respectively.
The effective tax rate for 2015 was lower than the effective tax rate for 2014 primarily due to settlements with tax authorities in
multiple jurisdictions. Further, the information gained related to these matters was considered in measuring uncertain tax
benefits recognized for the periods subsequent to the periods settled. In addition, the recognition of other U.S. foreign tax credits
and a more favorable geographic mix of taxable earnings also contributed to the lower effective tax rate in 2015. 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.