Estee Lauder 2009 Annual Report Download - page 134

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THE EST{E LAUDER COMPANIES INC. 133
material incremental tax provision. As of June 30, 2008
and 2007, the Company had not provided federal income
and foreign withholding taxes on approximately $813
million and $539 million, respectively, of undistributed
earnings of international subsidiaries. The determination
and estimation of the future income tax consequences in
all relevant taxing jurisdictions involves the application of
highly complex tax laws in the countries involved, particu-
larly in the United States, and is based on the tax profi le of
the Company in the year of earnings repatriation. Accord-
ingly, it is not practicable to determine the amount of tax
associated with such undistributed earnings.
The $19.2 million benefi t recognized in fi scal 2009, net of
tax, resulted from reaching a formal settlement with the
Appeals Division of the IRS concerning disputed U.S.
foreign tax credit determinations.
The state and local tax benefi t of $5.9 million in fi scal
2008 included the favorable resolution of several state and
local income tax examinations as well as statute lapses.
Federal income and foreign withholding taxes have not
been provided on approximately $975 million of undis-
tributed earnings of international subsidiaries at June 30,
2009. The Company intends to reinvest these earnings in
its foreign operations indefi nitely, except where it is able
to repatriate these earnings to the United States without
NOTE 8—INCOME TAXES
The provision for income taxes is comprised of the following:
YEAR ENDED JUNE 30 2009 2008 2007
(In millions)
Current:
Federal $ 19.0 $ 141.4 $ 66.6
Foreign 174.5 214.1 166.7
State and local 30.6 20.0 12.0
224.1 375.5 245.3
Deferred:
Federal (84.0) (110.9) 11.3
Foreign (23.6) (4.1) (4.8)
State and local (0.6) (0.6) 3.4
(108.2) (115.6) 9.9
$ 115.9 $ 259.9 $255.2
A reconciliation between the provision for income taxes computed by applying the statutory Federal income tax rate to
earnings before income taxes and minority interest and the actual provision for income taxes is as follows:
YEAR ENDED JUNE 30 2009 2008 2007
($ in millions)
Provision for income taxes at statutory rate $119.9 $260.3 $248.9
Increase (decrease) due to:
State and local income taxes, net of Federal tax benefi t 5.3 (5.9) 11.2
Effect of foreign operations 0.8 4.3 (0.5)
IRS Appeals Division tax settlement (19.2) — —
AJCA incremental dividend — — (5.7)
Other nondeductible expenses 9.8 3.5 3.4
Tax credits (3.5) (4.2) (3.0)
Other, net 2.8 1.9 0.9
Provision for income taxes $115.9 $259.9 $255.2
Effective tax rate 33.8% 34.9% 35.9%