UPS 2007 Annual Report Download - page 101

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
NOTE 13. INCOME TAXES
The income tax expense (benefit) for the years ended December 31 consists of the following (in millions):
2007 2006 2005
Current:
U.S. Federal ....................................................... $ 35 $1,674 $1,683
U.S. State and Local ................................................. 67 217 176
Non-U.S. ........................................................ 107 129 135
Total Current .................................................. 209 2,020 1,994
Deferred: .............................................................
U.S. Federal ....................................................... (79) 291 211
U.S. State and Local ................................................. (36) 33 6
Non-U.S. ........................................................ (45) (36) (6)
Total Deferred ................................................. (160) 288 211
Total ......................................................... $ 49 $2,308 $2,205
Income before income taxes includes the following components (in millions):
2007 2006 2005
United States ........................................................... $(32) $6,020 $5,738
Non-U.S. ............................................................. 463 490 337
$431 $6,510 $6,075
A reconciliation of the statutory federal income tax rate to the effective income tax rate for the years ended
December 31 consists of the following:
2007 2006 2005
Statutory U.S. federal income tax rate ........................................ 35.0% 35.0% 35.0%
U.S. state and local income taxes (net of federal benefit) ......................... 0.5 2.2 2.0
Non-U.S. tax rate differential ............................................... (21.6) (1.2) 0.2
Nondeductible/nontaxable items ............................................ 3.1 1.4 (0.1)
U.S. federal tax credits .................................................... (22.0) (2.0) (1.3)
Other .................................................................. 16.5 0.1 0.5
Effective income tax rate .................................................. 11.5% 35.5% 36.3%
During the third quarter of 2006, we recognized a $52 million reduction of income tax expense related to
favorable developments with certain U.S. federal tax contingency matters involving non-U.S. operations.
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