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44
10. Income Taxes
Pretax income from continuing operations for the years ended December 31, 2006, 2005 and 2004
was taxed under the following jurisdictions (in thousands):
2006 2005 2004
Domestic $ 413,082 $ 432,923 $ 400,585
Foreign 1,269 35 (725)
Total $ 414,351 $ 432,958 $ 399,860
Components of the provision (benefit) for income taxes for the years ended December 31, 2006,
2005 and 2004 consist of (in thousands):
2006 2005 2004
Current:
Federal $ 140,054 $ 143,805 $ 128,527
State 21,760 15,762 27,671
Foreign 417 - -
Total current 162,231 159,567 156,198
Deferred:
Domestic (13,904) 1,299 2,217
Foreign (56) - -
Total deferred (13,960) 1,299 2,217
Provision for income taxes $ 148,271 $ 160,866 $ 158,415
The current income tax liabilities for 2006, 2005 and 2004 were reduced by $30.5 million, $11.0
million and $19.6 million, respectively, for tax benefits recorded directly to paid-in capital relating
to the exercise and vesting of shares pursuant to the CDW stock incentive plans as described in
Note 11.
The reconciliation between the statutory tax rate expressed as a percentage of income before
income taxes and the actual effective tax rate for the years ended December 31, 2006, 2005 and
2004 is as follows (dollars in thousands):
2006 2005
2004
Statutory federal income tax
rate
$ 145,023 35.0 % $ 151,535 35.0 %
$ 139,951 35.0 %
State taxes, net of federal
benefit
12,605 * 3.0 9,066 2.1
18,268 4.6
Release of reserves for prior
year federal taxes
(6,840) (1.6) - -
--
Other (2,914) (0.7) 277 0.1 (94) 0.0
Change in valuation
allowance
397 0.1 (12) 0.0
290 0.0
Effective tax rates $ 148,271 35.8 % $ 160,866 37.2 % $ 158,415 39.6 %
* Includes a benefit of $1,044 attributable to the release of reserves for state income taxes