United Healthcare 2003 Annual Report Download - page 60

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58 UnitedHealth Group
11 INCOME TAXES
The components of the provision (benefit) for income taxes are as follows:
Year Ended December 31, (in millions) 2003 2002 2001
Current Provision
Federal $932 $675 $524
State and Local 46 57 45
Total Current Provision 978 732 569
Deferred Provision (Benefit) 37 12 (10)
Total Provision for Income Taxes $1,015 $744 $559
The reconciliation of the tax provision at the U.S. Federal Statutory Rate to the provision for income taxes
is as follows:
Year Ended December 31, (in millions) 2003 2002 2001
Tax Provision at the U.S. Federal Statutory Rate $994 $734 $515
State Income Taxes, net of federal benefit 29 33 29
Tax-Exempt Investment Income (30) (26) (21)
Non-deductible Amortization – –29
Other, net 22 37
Provision for Income Taxes $1,015 $744 $559
The components of deferred income tax assets and liabilities are as follows:
As of December 31, (in millions) 2003 2002
Deferred Income Tax Assets
Accrued Expenses and Allowances $161 $215
Unearned Premiums 28 47
Medical Costs Payable and Other Policy Liabilities 83 60
Long-Term Liabilities 49 37
Net Operating Loss Carryforwards 86 61
Other 42 30
Subtotal 449 450
Less: Valuation Allowances (43) (39)
Total Deferred Income Tax Assets 406 411
Deferred Income Tax Liabilities
Capitalized Software Development (186) (176)
Net Unrealized Gains on Investments (82) (82)
Depreciation and Amortization (108) (54)
Total Deferred Income Tax Liabilities (376) (312)
Net Deferred Income Tax Assets $30 $99
Valuation allowances are provided when it is considered more likely than not that deferred tax assets will
not be realized. The valuation allowances primarily relate to future tax benefits on certain federal and state
net operating loss carryforwards. Federal net operating loss carryforwards expire beginning in 2012
through 2023, and state net operating loss carryforwards expire beginning in 2005 through 2023.
We made cash payments for income taxes of $783 million in 2003, $458 million in 2002 and
$384 million in 2001. We increased additional paid-in capital and reduced income taxes payable by
$222 million in 2003, and by $133 million in both 2002 and 2001 to reflect the tax benefit we received
upon the exercise of non-qualified stock options.
Consolidated income tax returns for fiscal years 2000 through 2002 are currently being examined by
the Internal Revenue Service. We do not believe any adjustments that may result from the examination will
have a significant impact on our consolidated financial position or results of operations.