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67
NOTE 13 — INCOME TAXES
The components of the provision for income taxes were as follows:
(In millions)
Y
ear Ended June 30, 2015
2014 2013
Current Taxes
U.S. federal $ 3,661 $ 3,738 $ 3,131
U.S. state and local 364 266 332
Foreign 2,065 2,073 1,745
Current taxes 6,090 6,077 5,208
Deferred Taxes
Deferred taxes 224 (331) (19)
Provision for income taxes $6,314 $ 5,746 $5,189
U.S. and foreign components of income before income taxes were as follows:
(In millions)
Y
ear Ended June 30, 2015
2014 2013
U.S. $7,363 $ 7,127 $6,674
Foreign 11,144 20,693 20,378
Income before income taxes $ 18,507 $ 27,820 $ 27,052
The items accounting for the difference between income taxes computed at the U.S. federal statutory rate and our
effective rate were as follows:
Y
ear Ended June 30, 2015
2014 2013
Federal statutory rate 35.0% 35.0% 35.0%
Effect of:
Foreign earnings taxed at lower rates (20.9)% (17.1)% (17.5)%
Phone Hardware nondeductible charges and valuation allowance 19.1% 0.9% 0%
Domestic production activities deduction (2.4)% (1.0)% (1.2)%
Other reconciling items, net 3.3% 2.9% 2.9%
Effective rate 34.1% 20.7% 19.2%
The reduction from the federal statutory rate is primarily due to foreign earnings taxed at lower rates resulting from
producing and distributing our products and services through our foreign regional operations centers in Ireland,
Singapore, and Puerto Rico. In fiscal year 2015, this reduction was mostly offset by losses in foreign jurisdictions for
which we may not realize a tax benefit, primarily as a result of impairment and restructuring charges. Excluding these
losses, our foreign earnings, which are taxed at rates lower than the U.S. rate and are generated from our regional
operating centers, were 73%, 81%, and 79% of our foreign income before tax in fiscal years 2015, 2014, and 2013,
respectively. In general, other reconciling items consist of interest, U.S. state income taxes, and credits. In fiscal
years 2015, 2014, and 2013, there were no individually significant other reconciling items.