Xerox 2004 Annual Report Download - page 70

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Information relating to the ESOP trust for the
three years ended December 31, 2004 follows:
2004 2003 2002
Dividends declared on
Convertible Preferred Stock $15 $41 $78
Cash contribution to the ESOP —14 31
Compensation expense —810
Note 13 – Income and Other Taxes
Income (loss) before income taxes for the three years
ended December 31, 2004 follows:
2004 2003 2002
Domestic income (loss) $426 $(299) $ 15
Foreign income 539 735 89
Income before income taxes $965 $ 436 $104
Provisions (benefits) for income taxes for the three
years ended December 31, 2004 follow:
200420032002
Federal income taxes
Current $ 26 $77 $39
Deferred 114 (132) (35)
Foreign income taxes
Current 178144145
Deferred 21 72 (141)
State income taxes
Current (19) (17) (2)
Deferred 20 (10) (2)
$340 $134 $ 4
Areconciliation of the U.S. federal statutory
income tax rate to the consolidated effective income
tax rate for the three years ended December 31, 2004
follows:
2004 2003 2002
U.S.federal statutory
income tax rate 35.0% 35.0% 35.0%
Nondeductible expenses 3.4 5.0 17.6
Effect of tax law changes (1.5) 1.0 (15.3)
Change in valuation allowance
for deferred tax assets 1.3 (3.8) 14.0
State taxes, net of federal benefit 1.3 (2.7) (2.3)
Audit and other tax
return adjustments 0.7 7.6 (53.7)
Tax-exempt income (0.7) (1.0) (9.3)
Dividends on Series B
convertible preferred stock (0.6) (3.1) (22.7)
Other foreign, including earnings
taxed at different rates (2.4) (7.0) 43.8
Other (1.3) (0.3) (3.3)
Effectiveincome tax rate 35.2% 30.7% 3.8%
The 2004 consolidated effective income tax rate of
35.2 percent was comparable to the U.S. federal statu-
tory income tax rate. The effective income tax rate
reflects the impact of nondeductible expenses and
unrecognized tax benefits primarily related to recur-
ring losses in certain jurisdictions where we continue
to maintain deferred tax asset valuation allowances.
This tax expense was partially offset by tax benefits
from other foreign adjustments, including earnings
taxed at different rates, tax law changes and other
items that are individually insignificant.
The difference between the 2003 consolidated
effective income tax rate of 30.7 percent and the U.S.
federal statutory income tax rate relates primarily to
tax benefits arising from the reversal of valuation
allowances on deferred tax assets following a re-
evaluation of their future realization due to improved
financial performance, other foreign adjustments,
including earnings taxed at different rates, the impact
of dividends on Series B Convertible Preferred Stock
and state tax benefits. Such benefits were partially
offset bytax expense for audit and other tax return
adjustments, as well as recurring losses in certain
jurisdictions where wecontinue to maintain deferred
tax asset valuation allowances.
The difference between the 2002consolidated
effectiveincome tax rate of 3.8 percent and the U.S.
federal statutory income tax rate relates primarily to
the recognition of tax benefits from the favorable reso-
lution of a foreign tax audit, tax law changes as well
as the retroactivedeclaration of Series B Convertible
Preferred Stock dividends. Such benefits were offset,
in part, by tax expense recorded for the ongoing
examination in India, the sale of our interest in
Katun Corporation as well as recurring losses in
certain jurisdictions where we are not providing tax
benefits and continue to maintain deferred tax asset
valuation allowances.
On a consolidated basis, we paid a total of $253,
$207, and $442 in income taxes to federal, foreign and
state jurisdictions in 2004, 2003 and 2002, respectively.
Total income tax expense (benefit) for the three
years ended December 31, 2004 was allocated as
follows:
2004 2003 2002
Income taxes on income $340 $134 $ 4
Common shareholders’ equity (1) (20) 123 (173)
Total $320 $257 $(169)
(1) For tax effects of items in accumulated other comprehensive loss and
tax benefits related to stock option and incentive plans.