UPS 2009 Annual Report Download - page 109

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
NOTE 12. INCOME TAXES
The income tax expense (benefit) for the years ended December 31 consists of the following (in millions):
2009 2008 2007
Current:
U.S. Federal ....................................................... $ 715 $1,510 $ 35
U.S. State and Local ................................................. 30 173 67
Non-U.S. ......................................................... 147 155 107
Total Current .................................................. 892 1,838 209
Deferred:
U.S. Federal ....................................................... 231 115 (79)
U.S. State and Local ................................................. 32 4 (36)
Non-U.S. ......................................................... 59 55 (45)
Total Deferred ................................................. 322 174 (160)
Total ......................................................... $1,214 $2,012 $ 49
Income before income taxes includes the following components (in millions):
2009 2008 2007
United States ........................................................... $3,027 $4,547 $ (32)
Non-U.S. .............................................................. 339 468 463
$3,366 $5,015 $431
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:
2009 2008 2007
Statutory U.S. federal income tax rate ......................................... 35.0% 35.0% 35.0%
U.S. state and local income taxes (net of federal benefit) .......................... 1.4 2.5 0.5
Non-U.S. tax rate differential ................................................ (1.5) 1.0 (21.6)
Nondeductible/nontaxable items .............................................. 0.9 5.1 3.1
U.S. federal tax credits ..................................................... (3.2) (3.0) (22.0)
Other ................................................................... 3.5 (0.5) 16.4
Effective income tax rate ................................................... 36.1% 40.1% 11.4%
In the fourth quarter of 2008, we completed our annual goodwill impairment testing and determined that our
UPS Freight reporting unit, which was formed through the acquisition of Overnite Corporation in 2005, had a
goodwill impairment of $548 million. The impairment was not deductible for tax purposes and therefore
negatively impacted our effective tax rate in 2008.
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