PACCAR 2009 Annual Report Download - page 60

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PACCAR Inc and Subsidiaries
N. INCOME TAXES
The Company’s tax rate is based on income and statutory tax rates in the various jurisdictions in which the Company
operates. Tax law requires items to be included in the Company’s tax returns at different times than the items
reflected in the Company’s financial statements. As a result, the Company’s annual tax rate reflected in its financial
statements is different than that reported in its tax returns. Some of these differences are permanent, such as expenses
that are not deductible in the Company’s tax return, and some differences reverse over time, such as depreciation
expense. These temporary differences create deferred tax assets and liabilities. The Company establishes valuation
allowances for its deferred tax assets if, based on the available evidence, it is more likely than not that some portion
or all of the deferred tax assets will not be realized.
The components of the Company’s income before income taxes include the following:
Year Ended December 31, 2009 2008 2007
Domestic $ 79.1 $ 96.0 $ 419.1
Foreign 95.9 1,368.0 1,345.2
$ 175.0 $ 1,464.0 $ 1,764.3
The components of the Company’s provision for income taxes include the following:
Year Ended December 31, 2009 2008 2007
Current provision (benefit):
Federal $ (102.4) $ (24.7) $ 120.5
State (2.5) (7.9) 11.1
Foreign 8.3 347.7 367.1
(96.6) 315.1 498.7
Deferred provision (benefit):
Federal 125.4 123.7 41.9
State 8.2 12.5 3.6
Foreign 26.1 (5.2) (7.2)
159.7 131.0 38.3
$ 63.1 $ 446.1 $ 537.0
Tax benefits recognized for net operating loss carryforwards were $27.8, $4.7 and $21.2 for the years ended 2009,
2008 and 2007. Tax expense for the year ended December 31, 2009, includes a charge of $11.4 resulting from the
retroactive effects of a Mexican tax law enacted in December 2009.
A reconciliation of the statutory U.S federal tax rate to the effective income tax rate is as follows:
2009 2008 2007
Statutory rate 35.0% 35.0% 35.0 %
Effect of:
Mexican tax law change 6.5
Qualified dividends to defined contribution plan (2.3) (.4) (.7)
Research and development credit (2.1) (.4) (.3)
Tax on foreign earnings .8 (4.6) (4.1)
Tax contingencies 2.2 (.3) (.1)
Other, net (4.0) 1.2 .6
36.1% 30.5% 30.4%
57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009, 2008 and 2007 (currencies in millions)