Emerson 2005 Annual Report Download - page 56

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4 4 E M E R S O N 2 0 0 5
(13) INCOME TAXES
Earnings from continuing operations before income taxes consist of the following:
2003 2004 2005
United States $ 790 1,022 1,157
Non-U.S. 624 830 992
Earnings from continuing operations before income taxes $1,414 1,852 2,149
The principal components of income tax expense follow:
2003 2004 2005
Current:
Federal $ 170 132 458
State and local 7 26 42
Non-U.S. 154 229 272
Deferred:
Federal 73 185 (41)
State and local 17 5 (7)
Non-U.S. (20) 18 3
Income tax expense $ 401 595 727
The federal corporate statutory rate is reconciled to the Company’s effective income tax rate as follows:
2003 2004 2005
Federal corporate statutory rate 35.0% 35.0% 35.0%
State and local taxes, less federal tax benefit 1.1 1.1 1.0
Export benefit (1.7) (1.4) (1.1)
Repatriation – American Jobs Creation Act — — 3.0
Foreign rate differential (4.2) (3.8) (4.8)
Goodwill 1.3 — —
Capital losses (4.5) — —
Other 1.3 1.2 0.7
Effective income tax rate 28.3% 32.1% 33.8%
The American Jobs Creation Act of 2004 (the Act) was signed into law on October 22, 2004. The Act allows the repatriation of foreign
earnings at a reduced rate for one year, subject to certain limitations. During 2005, the Company repatriated approximately $1.4 billion
($1.8 billion in total) of cash from undistributed earnings of non-U.S. subsidiaries under the Act. As a result, the Company recorded a tax
expense of $63, or $0.15 per share, in 2005.