3M 2008 Annual Report Download - page 73

67
NOTE 8. Income Taxes
Income Before Income Taxes and Minority Interest
(Millions) 2008 2007 2006
United States.......................................................................... $ 2,251 $ 2,820 $ 3,191
International............................................................................ 2,857 3,295 2,434
Total ................................................................................ $ 5,108 $ 6,115 $ 5,625
Provision for Income Taxes
(Millions) 2008 2007 2006
Currently payable
Federal................................................................................ $ 636 $ 1,116 $ 1,087
State ................................................................................... 14 58 128
International ........................................................................ 820 779 824
Deferred
Federal................................................................................ 78 (105 ) (261 )
State ................................................................................... 34 1 (24 )
International ........................................................................ 6 115 (31 )
Total ................................................................................ $ 1,588 $ 1,964 $ 1,723
Components of Deferred Tax Assets and Liabilities
(Millions) 2008 2007
Accruals not currently deductible
Employee benefit costs ...................................................... $ 230 $ 240
Product and other claims.................................................... 198 258
Pension costs ......................................................................... 914 (99 )
Restructuring costs................................................................. 11 2
Stock-based compensation.................................................... 425 377
Product and other insurance receivables............................... (100 ) (154 )
Accelerated depreciation........................................................ (463 ) (403 )
Other ...................................................................................... (177 ) 6
Net deferred tax asset ........................................................ $ 1,038 $ 227
Reconciliation of Effective Income Tax Rate
2008 2007 2006
Statutory U.S. tax rate............................................................ 35.0 % 35.0 % 35.0 %
State income taxes — net of federal benefit .......................... 0.9 0.9 1.0
International income taxes — net........................................... (3.9 ) (2.8 ) (1.5 )
Foreign export sales benefit................................................... — — (0.9 )
U.S. business credits.............................................................. (0.4 ) (0.3 ) (0.3 )
Reserves for tax contingencies/return to provision ................ 0.3 0.4 (2.7 )
Gain on sale of pharmaceuticals business............................. — — 0.4
Restructuring actions.............................................................. 0.4 0.1 (0.3 )
In-process research and development write-off..................... 0.1 — 0.6
Medicare Modernization Act................................................... (0.2 ) (0.4 ) (0.4 )
Domestic Manufacturer’s deduction....................................... (0.8 ) (0.8 ) (0.3 )
All other — net........................................................................ (0.3 ) — —
Effective worldwide tax rate................................................ 31.1 % 32.1 % 30.6 %
The Company files income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions.
With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax
examinations by tax authorities for years before 2002. During 2008, the Company paid IRS assessments related to
tax and interest for the 2001 through 2004 tax years. The IRS’s adjustments to the Company’s tax positions including
interest were fully reserved. As a result of these additional tax payments, the Company’s net unrecognized tax
benefits for tax and interest were reduced by $71 million during 2008.