Xerox 2013 Annual Report Download - page 126

A reconciliation of the U.S. federal statutory income tax rate to the consolidated effective income tax rate was as
follows:
Year Ended December 31,
2013 2012 2011
U.S. federal statutory income tax rate 35.0 % 35.0 %35.0 %
Nondeductible expenses 1.4 % 2.6 % 2.0 %
Effect of tax law changes (0.6)% 0.7 % 0.2 %
Change in valuation allowance for deferred tax assets 0.2 % (0.7)% (0.3)%
State taxes, net of federal benefit 2.6 % 2.1 % 2.4 %
Audit and other tax return adjustments (2.4)% (4.8)% (1.0)%
Tax-exempt income, credits and incentives (3.8)% (2.6)% (3.2)%
Foreign rate differential adjusted for U.S. taxation of foreign profits(1) (11.9)% (12.0)% (10.6)%
Other 0.5 % 0.1 % 0.1 %
Effective Income Tax Rate 21.0 % 20.4 %24.6 %
_____________________________
(1) The “U.S. taxation of foreign profits” represents the U.S. tax, net of foreign tax credits, associated with actual and deemed repatriations of
earnings from our non-U.S. subsidiaries.
On a consolidated basis, we paid a total of $155, $137 and $94 in income taxes to federal, foreign and state
jurisdictions during the three years ended December 31, 2013, respectively.
Total income tax expense (benefit) was allocated as follows:
Year Ended December 31,
2013 2012 2011
Pre-tax income $ 276 $272 $377
Discontinued operations 4 5 9
Common shareholders' equity:
Changes in defined benefit plans 318 (233)(277)
Stock option and incentive plans, net (13) (5) 1
Cash flow hedges — (24)3
Translation adjustments (9) (9) 2
Total Income Tax Expense (Benefit) $576 $6$115
Unrecognized Tax Benefits and Audit Resolutions
We recognize tax liabilities when, despite our belief that our tax return positions are supportable, we believe that
certain positions may not be fully sustained upon review by tax authorities. Each period we assess uncertain tax
positions for recognition, measurement and effective settlement. Benefits from uncertain tax positions are measured
at the largest amount of benefit that is greater than 50 percent likely of being realized upon settlement - the more
likely than not recognition threshold. Where we have determined that our tax return filing position does not satisfy
the more likely than not recognition threshold, we have recorded no tax benefits.
We are also subject to ongoing tax examinations in numerous jurisdictions due to the extensive geographical scope
of our operations. 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, 2013, 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.
109