PACCAR 2010 Annual Report Download - page 67

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M . I N C O M E TA XE S
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, 2010 2009 2008
Domestic $ 186.3 $ 79.1 $ 96.0
Foreign 474.0 95.9 1,368.0
$ 660.3 $ 175.0 $ 1,464.0
The components of the Company’s provision for income taxes include the following:
Year Ended December 31, 2010 2009 2008
Current provision (benefit):
Federal $ 24.5 $ (102.4) $ (24.7)
State 8.2 (2.5) (7.9)
Foreign 123.7 8.3 347.7
156.4 (96.6) 315.1
Deferred provision (benefit):
Federal 24.6 125.4 123.7
State (7.1) 8.2 12.5
Foreign 28.8 26.1 (5.2)
46.3 159.7 131.0
$ 202.7 $ 63.1 $ 446.1
Tax benefits recognized for net operating loss carryforwards were $9.0, $27.8 and $4.7 for the years ended 2010,
2009, and 2008, respectively.
A reconciliation of the statutory U.S. federal tax rate to the effective income tax rate is as follows:
2010 2009 2008
Statutory rate 35.0% 35.0% 35.0%
Effect of:
Mexican tax law change 6.5
Qualified dividends to defined contribution plan (.7) (2.3) (.4)
Research and development credit (.5) (2.1) (.4)
Tax on foreign earnings (3.9) .8 (4.6)
Tax contingencies (.8) 2.2 (.3)
Other, net 1.6 (4.0) 1.2
30.7% 36.1% 30.5%
64
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
December 31, 2010, 2009 and 2008 (currencies in millions)