Polaris 2010 Annual Report Download - page 71

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Note 4: Income Taxes
Polaris’ Income before income taxes was generated from its United States and foreign operations as follows:
(In thousands): 2010 2009 2008
For the Years Ended December 31,
United States ...................................... $210,155 $143,483 $163,322
Foreign .......................................... 8,386 7,691 13,740
Income before income taxes ........................... $218,541 $151,174 $177,062
Components of Polaris’ Provision for income taxes are as follows:
(In thousands): 2010 2009 2008
For the Years Ended December 31,
Current:
Federal ........................................... $ 73,597 $27,104 $48,370
State............................................. 7,381 3,723 5,520
Foreign........................................... 6,783 5,757 6,744
Deferred............................................ (16,358) 13,573 (967)
Total .............................................. $ 71,403 $50,157 $59,667
Reconciliation of the Federal statutory income tax rate to the effective tax rate is as follows:
2010 2009 2008
For the Years Ended
December 31,
Federal statutory rate ........................................... 35.0% 35.0% 35.0%
State income taxes, net of federal benefit ............................ 1.8 2.3 2.3
Domestic manufacturing deduction . . . .............................. (1.8) (1.1) (1.1)
Research tax credit............................................. (1.2) (1.2) (1.0)
Settlement of tax audits ......................................... —— (0.1)
Valuation allowance for foreign subsidiaries net operating losses ........... 0.4 — 0.5
Other permanent differences ...................................... (1.5) (1.8) (1.9)
Effective income tax rate ........................................ 32.7% 33.2% 33.7%
United States income taxes have not been provided on undistributed earnings of certain foreign subsidiaries as
of December 31, 2010. The Company has reinvested such earnings overseas in foreign operations indefinitely and
expects that future earnings will also be reinvested overseas indefinitely in these subsidiaries.
Polaris utilizes the liability method of accounting for income taxes whereby deferred taxes are determined
based on the estimated future tax effects of differences between the financial statement and tax bases of assets and
56
POLARIS INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)