Amazon.com 2007 Annual Report Download - page 78

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AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The components of the provision for income taxes, net were as follows:
Year Ended December 31,
2007 2006 2005
(in millions)
Current taxes:
U.S. and state ..................................................... $275 $162 $16
International ...................................................... 8 3 9
Current taxes ................................................. 283 165 25
Deferred taxes ........................................................ (99) 22 70
Provision for income taxes, net ............................... $184 $187 $95
U.S. and international components of income before income taxes were as follows:
Year Ended December 31,
2007 2006 2005
(in millions)
U.S. ................................................................ $360 $396 $ 601
International .......................................................... 300 (19) (173)
Income before income taxes ......................................... $660 $377 $ 428
The items accounting for differences between income taxes computed at the federal statutory rate and the
provision recorded for income taxes are as follows:
Year Ended December 31,
2007 2006 2005
Federal statutory rate ................................................... 35.0% 35.0% 35.0%
Effect of:
Valuation allowance ........................................... (1.2) (2.6) (31.1)
Impact of international operations restructuring ...................... (12.3) 16.0 15.1
Other, net .................................................... 6.4 1.2 3.3
Total .................................................... 27.9% 49.6% 22.3%
The effective tax rate in 2007 was lower than the 35% U.S. federal statutory rate primarily due to earnings
of our subsidiaries outside of the U.S. in jurisdictions where our effective tax rate is lower than in the U.S. The
effective tax rate in 2006 was higher than the 35% U.S. federal statutory rate resulting from establishment of our
European headquarters in Luxembourg. Associated with the establishment of our European headquarters, we
transferred certain of our operating assets in 2005 and 2006 from the U.S. to international locations. These
transfers resulted in taxable income and exposure to additional taxable income assertions by taxing jurisdictions.
Included in the 2005 provision and reducing the impact of the international restructure was a tax benefit of
$90 million, resulting from certain of our deferred tax assets becoming more likely than not realizable. This tax
benefit represented $0.22 and $0.21 of basic and diluted earnings per share.
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