Boeing 2005 Annual Report Download - page 60

Notes to Consolidated Financial Statements
Note 5 - Income Taxes
The components of earnings before income taxes were:
Year ended December 31, 2005 2004 2003
U.S. $2,605 $1,960 $500
Foriegn 214
$2,819 $1,960 $500
Note: The 2004 and 2003 foreign earnings before income tax amounts are not
significant and as such are reflected in the U.S. numbers shown above.
Income tax expense/(benefit) consisted of the following:
Year ended December 31, 2005 2004 2003
U.S.
Taxes paid or currently payable $(276) $(435) $(1,923)
Change in deferred taxes 547 787 1,707
271 352 (216)
Foriegn
Taxes paid or currently payable 58
Change in deferred taxes (120)
(62)
State
Taxes paid or currently payable (86) (58) (33)
Change in deferred taxes 134 (154) 64
48 (212) 31
Income tax expense/(benefit) $(257 $(140 $1,(185)
Note: The 2004 and 2003 foreign income tax expense/(benefit) amounts are not
significant and as such are reflected in the U.S. numbers shown above.
The following is a reconciliation of the tax derived by applying
the U.S. federal statutory tax rate of 35% to the earnings
before income taxes and comparing that to the recorded
income tax expense/(benefit):
Year ended December 31, 2005 2004 2003
U.S. federal statutory tax 35.0% 35.0% 35.0%
Foreign Sales Corporation/
Extraterritorial Income tax benefit (5.6) (8.6) (23.0))
Research benefit (1.2) (1.4)) (7.4))
Non-deductibility of goodwill 0.3 0.1 45.8
Federal audit settlement (13.1) (7.5) (91.2)
Charitable contributions (0.5) (2.6)
Tax-deductible dividends (0.8) (0.9) (2.8)
State income tax provision,
net of effect on U.S. federal tax 1.1 (7.0) 4.2
Reversal of valuation allowances (3.2)
Other provision adjustments (3.4) (2.1) 5.0
Income tax expense/(benefit) 9.1% 7.1% (37.0)%
The components of net deferred tax assets at December 31
were as follows:
2005 2004
Deferred tax assets $«8,168 $8,664
Deferred tax liabilities (7,646) (7,519)
Valuation allowance (90)
Net deferred tax assets $«8,522 $1,055
Significant components of our deferred tax assets, net of
deferred tax liabilities, at December 31 were as follows:
2005 2004
Other comprehensive income
(net of valuation allowances
of $0 and $12) $«1,119 $1,150
Retiree health care accruals 2,314 2,212
Inventory and long-term contract
methods of income recognition
(net of valuation allowance
of $0 and $19) 1,368 1,188
Other employee benefits accruals
(net of valuation allowance
of $0 and $5) 1,363 1,276
In-process research and development
related to acquisitions 137 142
Net operating loss, credit, and
charitable contribution carryovers
(net of valuation allowance
of $0 and $48) 494 587
Pension benefit accruals
(net of valuation allowance
of $0 and $5) (4,799) (4,332)
Customer and commercial financing
(net of valuation allowance
of $0 and $1) (1,442) (1,168)
Unremitted earnings of
non-U.S. subsidiaries (32)
Net deferred tax assets $« 522 $1,055
Of the deferred tax asset for net operating loss, credit, and
charitable contribution carryovers, $152 expires in years ending
from December 31, 2006 through December 31, 2025 and
$342 may be carried over indefinitely.
Within the Consolidated Statements of Operations is Other
income, of which $100 relates to interest income received from
federal tax refunds during 2005 and the remaining amounts pri-
marily relate to interest income on marketable securities. During
2004 and 2003, Other income consisted primarily of interest
income received from tax refunds.
Net income tax refunds were $344, $903 and $507 in 2005,
2004 and 2003, respectively.
During 2005, we repatriated $426 in extraordinary dividends,
as defined in the American Jobs Creation Act of 2004, and
recorded a tax liability of $23. We have provided for U.S.
deferred income taxes and foreign withholding tax in the
amount of $32 on undistributed earnings not considered per-
manently reinvested in our non-U.S. subsidiaries. We have not
provided for U.S. deferred income taxes or foreign withholding
tax on the remainder of undistributed earnings from our non-
U.S. subsidiaries because such earnings are considered to be
permanently reinvested and it is not practicable to estimate the
amount of tax that may be payable upon distribution.
58 The Boeing Company and Subsidiaries