EMC 2007 Annual Report Download - page 83

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EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
L. Income Taxes
Our provision for income taxes consists of (table in thousands):
2007 2006 2005
Federal:
Current $324,812 $ 335,193 $511,173
Deferred (53,312) (115,835) (10,947)
271,500 219,358 500,226
State:
Current 21,475 3,982 31,670
Deferred (1,556) (2,176) 3,549
19,919 1,806 35,219
Foreign:
Current 100,556 (44,545) (20,592)
Deferred (13,529) (13,955) 4,225
87,027 (58,500) (16,367)
Total provision for income taxes $378,446 $ 162,664 $519,078
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.
In 2007, 2006 and 2005, we were able to utilize $62.3 million, $31.1 million and $125.9 million, respectively, 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:
2007 2006 2005
Statutory federal tax rate 35.0% 35.0% 35.0%
State taxes, net of federal taxes 1.2 0.4 1.8
Resolution of income tax audits and expiration of statutes of limitation (1.2) (12.4) (9.9)
Tax rate differential for international jurisdictions and other international related tax items (14.5) (13.9) (8.3)
U.S. tax credits (2.0) (1.3) (1.5)
Changes in valuation allowance (1.5) 0.5 0.4
Permanent items 1.7 3.5 2.8
Tax cost of repatriation under the AJCA — — 10.9
Other (0.3) (0.1) 0.2
18.4% 11.7% 31.4%
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