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Notes to Consolidated Financial Statements
calendar year 2010 that is deferred by participants under the Deferred Compensation Plan, with a $1.5 million cap on eligible
compensation, will be made to eligible participants’ accounts at the end of calendar year 2010. The deferred compensation liability
under the Deferred Compensation Plan, together with a deferred compensation plan assumed from Scientific-Atlanta, was
approximately $280 million and $220 million as of July 31, 2010 and July 25, 2009, respectively, and was recorded primarily in
other long-term liabilities.
14. Income Taxes
(a) Provision for Income Taxes
The provision for income taxes consists of the following (in millions):
Years Ended July 31, 2010 July 25, 2009 July 26, 2008
Federal:
Current $ 1,469 $ 1,615 $ 2,384
Deferred (435) (397) (693)
1,034 1,218 1,691
State:
Current 186 132 173
Deferred —(30) (62)
186 102 111
Foreign:
Current 470 386 418
Deferred (42) (147) (17)
428 239 401
Total $ 1,648 $ 1,559 $ 2,203
Income before provision for income taxes consists of the following (in millions):
Years Ended July 31, 2010 July 25, 2009 July 26, 2008
United States $ 1,102 $ 1,650 $ 3,044
International 8,313 6,043 7,211
Total $ 9,415 $ 7,693 $ 10,255
The items accounting for the difference between income taxes computed at the federal statutory rate and the provision for income
taxes consists of the following:
Years Ended July 31, 2010 July 25, 2009 July 26, 2008
Federal statutory rate 35.0% 35.0% 35.0%
Effect of:
State taxes, net of federal tax benefit 1.4 1.3 0.9
Foreign income at other than U.S. rates (19.3) (18.9) (16.1)
Tax credits (0.5) (2.4) (0.8)
Tax audit settlement —— (1.6)
Transfer pricing adjustment related to share-based compensation (1.7) 2.3 —
Nondeductible compensation 2.0 2.6 1.8
International realignment —— 2.2
Other, net 0.6 0.4 0.1
Total 17.5% 20.3% 21.5%
During fiscal 2010, the U.S. Court of Appeals for the Ninth Circuit (the “Ninth Circuit”) withdrew its prior holding and reaffirmed the
2005 U.S. Tax Court ruling in Xilinx, Inc. v. Commissioner. This final decision impacted the tax treatment of share-based
compensation expenses for the purpose of determining intangible development costs under a company’s research and
development cost sharing arrangement. While the Company was not a named party to the case, this decision resulted in a change
in the Company’s tax benefits recognized in its financial statements. As a result of the decision, the Company recognized tax
72 Cisco Systems, Inc.