Xerox 2010 Annual Report Download - page 96

Notes to the Consolidated
Financial Statements
Dollars in millions, except per-share data and unless otherwise indicated.
94 Xerox 2010 Annual Report
On a consolidated basis, we paid a total of $49, $78 and $194 in income
taxes to federal, foreign and state jurisdictions during the three years
ended December 31, 2010, 2009 and 2008, respectively.
Total income tax expense (benefit) for the three years ended December
31, 2010 was allocated as follows:
2010 2009 2008
Pre-tax income $ 256 $ 152 $ (231)
Common shareholders’ equity:
Changes in defined benefit plans 12 (61) (183)
Stock option and incentive
plans, net (6) 21 (2)
Translation adjustments
and other 11 (13) 10
Total Income Tax Expense
(Benefit) $ 273 $ 99 $ (406)
Unrecognized Tax Benefits and Audit Resolutions
Due to the extensive geographical scope of our operations, we are
subject to ongoing tax examinations in numerous jurisdictions.
Accordingly, we may record incremental tax expense based upon
the more-likely-than-not outcomes of any uncertain tax positions.
In addition, when applicable, we adjust the previously recorded tax
expense to reflect examination results when the position is effectively
settled. Our ongoing assessments of the more-likely-than-not outcomes
of the examinations and related tax positions require judgment and
can increase or decrease our effective tax rate, as well as impact our
operating results. The specific timing of when the resolution of each
tax position will be reached is uncertain. As of December 31, 2010, we
do not believe that there are any positions for which it is reasonably
possible that the total amount of unrecognized tax benefits will
significantly increase or decrease within the next 12 months.
A reconciliation of the beginning and ending amount of unrecognized
tax benefits is as follows:
2010 2009 2008
Balance at January 1 $ 148 $ 170 $ 303
Additions from acquisitions 46 — —
Additions related to current year 38 6 12
Additions related to prior
years positions 24 27 13
Reductions related to prior
years positions (16) (33) (65)
Settlements with taxing
authorities(1) (19) (7) (28)
Reductions related to lapse of
statute of limitations (35) (29) (45)
Currency — 14 (20)
Balance at December 31 $ 186 $ 148 $ 170
(1) Majority of settlements did not result in the utilization of cash.
Note 16 – Income and Other Taxes
Income (loss) before income taxes for the three years ended December
31, 2010 was as follows:
2010 2009 2008
Domestic income (loss) $ 433 $ 45 $ (622)
Foreign income 382 582 543
Income (Loss) Before
Income Taxes $ 815 $ 627 $ (79)
Provisions (benefits) for income taxes for the three years ended
December 31, 2010 was as follows:
2010 2009 2008
Federal income taxes
Current $ 153 $ (50) $ (26)
Deferred (17) 109 (285)
Foreign income taxes
Current 59 84 118
Deferred 8 11 4
State income taxes
Current 46 (2) 1
Deferred 7 — (43)
Total Provision (Benefits) $ 256 $ 152 $ (231)
A reconciliation of the U.S. federal statutory income tax rate to the
consolidated effective income tax rate for the three years ended
December 31, 2010 was as follows:
2010 2009 2008
U.S. federal statutory income
tax rate 35.0% 35.0% 35.0%
Nondeductible expenses 6.3 3.2 (19.5)
Effect of tax law changes (0.2) — 16.1
Change in valuation allowance
for deferred tax assets 2.6 (1.7) (21.0)
State taxes, net of federal benefit 2.0 (0.2) 36.7
Audit and other tax return
adjustments (4.2) (8.7) 84.4
Tax-exempt income (0.4) (0.5) 8.5
Other foreign, including earnings
taxed at different rates (8.1) (3.7) 148.9
Other (1.6) 0.8 3.3
Effective Income Tax Rate 31.4% 24.2% 292.4%