E-Z-GO 2006 Annual Report Download - page 85

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64
Note 13. Income Taxes
We file a consolidated federal income tax return for all of our U.S. subsidiaries and separate returns for our foreign subsidiaries. Income from
continuing operations before income taxes is as follows:
(In millions)
2006 2005 2004
United States $ 796 $ 574 $ 333
Foreign 179 165 207
Total $ 975 $ 739 $ 540
Income tax expense for continuing operations is summarized as follows:
(In millions)
2006 2005 2004
Current:
Federal $ 152 $ 128 $ 49
State 817 2
Foreign 43 26 59
203 171 110
Deferred:
Federal 44 64 59
State 28 (7) 9
Foreign (6) (5) (13)
66 52 55
Income tax expense $ 269 $ 223 $ 165
The following table reconciles the federal statutory income tax rate to our effective income tax rate:
2006 2005 2004
Federal statutory income tax rate 35.0% 35.0% 35.0%
Increase (decrease) in taxes resulting from:
Valuation allowance on contingent receipts — 2.1 —
State income taxes 2.3 0.9 1.3
Special foreign dividend — 0.1 2.1
Favorable tax settlements (2.4) — —
Canadian dollar functional currency (1.2) — —
Foreign tax rate differential (2.7) (5.0) (4.8)
Export sales benefit (0.8) (1.1) (1.0)
Other, net (2.6) (1.8) (2.0)
Effective income tax rate 27.6% 30.2% 30.6%
The amount of income taxes we pay is subject to ongoing audits by federal, state and foreign tax authorities, which may result in proposed
assessments. Our estimate for the potential outcome for any uncertain tax issue is highly judgmental. We believe we have adequately provided for
any reasonably foreseeable outcome related to these matters. However, our future results may include favorable or unfavorable adjustments to our
estimated tax liabilities due to closure of income tax examinations, new regulatory or judicial pronouncements, or other relevant events. As a
result, our effective tax rate may fluctuate significantly on a quarterly basis.
Notes to the Consolidated Financial Statements