EMC 2006 Annual Report Download - page 80

Table of Contents
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
acquisitions and $73.3 million in non-deductible stock-based compensation expense for options issued as incentive stock options and shares issued under
EMC's Employee Stock Purchase Plan.
The American Jobs Creation Act of 2004 (the "AJCA") created a temporary incentive for U.S. corporations to repatriate accumulated income earned
abroad by providing an 85% dividends received deduction for certain dividends from controlled foreign corporations. In October 2005, our Chief Executive
Officer and Board of Directors approved a domestic reinvestment plan to repatriate approximately $3.0 billion in foreign earnings; such repatriation resulted
in a current tax provision of $180.2 million. Additionally, we recognized a $163.9 million benefit in 2005 resulting from the favorable resolution of certain
income tax audits and expiration of statutes of limitations, the majority of which is attributable to foreign operations.
In 2006, 2005 and 2004, we were able to utilize $31.1 million, $125.9 million and $252.7 million of net operating loss carryforwards and tax credits to
reduce the current portion of our tax provision.
The effective income tax rate is based upon the income for the year, the composition of the income in different countries, and adjustments, if any, for
the potential tax consequences, benefits or resolutions of tax audits. A reconciliation of our income tax provision to the statutory federal tax rate is as follows:
2006 2005 2004
Statutory federal tax rate 35.0% 35.0% 35.0%
State taxes, net of federal taxes 0.4 1.8 1.0
Resolution of income tax audits and expiration of statutes of limitation (12.4) (9.9) (4.9)
Tax rate differential for international jurisdictions and other international related tax items (13.9) (8.3) (9.4)
U.S. tax credits (1.3) (1.5) (0.8)
Changes in valuation allowance 0.5 0.4 1.2
Permanent items 3.5 2.8 3.6
Tax cost of repatriation under the AJCA — 10.9 —
Other (0.1) 0.2 0.8
11.7% 31.4% 26.5%
The components of the current and noncurrent deferred tax assets are as follows (table in thousands):
December 31, 2006 December 31, 2005
Deferred
Tax
Asset
Deferred
Tax
Liability
Deferred
Tax
Asset
Deferred
Tax
Liability
Current:
Accounts and notes receivable $ 69,313 $ — $ 56,060 $ —
Inventory 54,948 — 47,999 —
Accrued expenses 177,246 — 129,409 —
Deferred revenue 116,639 — 92,850 —
Total current 418,146 — 326,318 —
Noncurrent:
Property, plant and equipment, net — (22,477) — (37,951)
Intangible and other assets, net — (381,008) — (212,995)
Equity 368,645 — 39,241 —
Deferred revenue 21,362 — 45,733 —
Other noncurrent liabilities — (54,595) — (54,765)
Credit carryforwards 20,086 — 18,507 —
Net operating loss carryforwards 173,422 — 90,300 —
Other comprehensive loss 34,542 — 555 —
Total noncurrent 618,057 (458,080) 194,336 (305,711)
Gross deferred tax assets and liabilities 1,036,203 (458,080) 520,654 (305,711)
Valuation allowance (55,531) — (63,817) —
Total deferred tax assets and liabilities $ 980,672 $ (458,080) $ 456,837 $ (305,711)