Quest Diagnostics 2009 Annual Report Download - page 89

The components of income tax expense (benefit) for 2009, 2008 and 2007 were as follows:
2009 2008 2007
Current:
Federal . . ............................................................ $350,582 $299,937 $267,138
State and local....................................................... 81,292 57,750 59,625
Foreign. . ............................................................ 3,193 3,833 1,093
Deferred:
Federal . . ............................................................ 30,624 20,764 23,787
State and local....................................................... (3,552) 10,029 10,774
Foreign. . ............................................................ (1,665) (5,545) (3,843)
Total. . ............................................................ $460,474 $386,768 $358,574
A reconciliation of the federal statutory rate to the Company’s effective tax rate for 2009, 2008 and 2007
was as follows:
2009 2008 2007
Tax provision at statutory rate .......................................... 35.0% 35.0% 35.0%
State and local income taxes, net of federal benefit ...................... 4.0 4.6 4.6
Impact of foreign operations ............................................ (0.7) (1.1) (0.8)
Non-deductible expenses, primarily meals and entertainment expenses ..... 0.2 0.5 0.3
Impact of noncontrolling interests . . . .................................... (1.2) (1.2) (1.1)
Other, net .............................................................. 0.2 (1.0) 0.2
Effective tax rate..................................................... 37.5% 36.8% 38.2%
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets
(liabilities) at December 31, 2009 and 2008 were as follows: 2009 2008
Current deferred tax assets:
Accounts receivable reserves . . . ................................................ $ 72,076 $ 82,594
Liabilities not currently deductible.............................................. 59,724 135,825
Total current deferred tax assets. ............................................. $ 131,800 $ 218,419
Non-current deferred tax assets (liabilities):
Liabilities not currently deductible.............................................. $ 124,296 $ 125,693
Stock-based compensation...................................................... 72,248 55,413
Net operating loss carryforwards ............................................... 36,354 52,394
Depreciation and amortization . . ................................................ (421,335) (423,074)
Total non-current deferred tax liabilities ...................................... $(188,437) $(189,574)
At December 31, 2009 and 2008, non-current deferred tax liabilities of $188 million and $190 million,
respectively, are included in other long-term liabilities in the consolidated balance sheet.
As of December 31, 2009, the Company had estimated net operating loss carryforwards for federal, state and
foreign income tax purposes of $22 million, $609 million and $40 million, respectively, which expire at various
dates through 2029. As of December 31, 2009 and 2008, deferred tax assets associated with net operating loss
carryforwards of $48 million and $66 million, respectively, have each been reduced by a valuation allowance of
$12 million and $14 million, respectively.
Income taxes payable including those classified in other long-term liabilities in the consolidated balance
sheets at December 31, 2009 and 2008, were $100 million and $88 million, respectively.
As of January 1, 2007, the Company adopted an accounting standard related to the accounting for
uncertainty in income taxes. This standard clarifies the accounting for uncertainty in income taxes recognized in
financial statements and provides guidance on the recognition and measurement of tax positions taken or expected
to be taken by an entity. The adoption of this standard resulted in an increase to the Company’s contingent tax
liability reserves of $30 million with corresponding charges to retained earnings, goodwill and additional paid-in
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QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(dollars in thousands unless otherwise indicated)