John Deere 2009 Annual Report Download - page 34

8. INCOME TAXES
The provision for income taxes by taxing jurisdiction and
by sig nifi cant component consisted of the following in millions
of dollars:
2009 2008 2007
Current:
U.S.:
Federal ....................................................... $ 3 $ 559 $ 484
State .......................................................... 12 60 40
Foreign ........................................................... 273 402 354
Total current ........................................... 288 1,021 878
Deferred:
U.S.:
Federal ....................................................... 246 74 (2)
State .......................................................... 10 3 8
Foreign ........................................................... (84) 13 (1)
Total deferred ......................................... 172 90 5
Provision for income taxes ............................. $ 460 $ 1,111 $ 883
Based upon location of the company’s operations, the
consolidated income before income taxes in the U.S. in 2009,
2008 and 2007 was $756 million, $1,730 million and $1,601
million, respectively, and in foreign countries was $584 million,
$1,394 million and $1,075 million, respectively. Certain foreign
operations are branches of Deere & Company and are, there-
fore, subject to U.S., as well as foreign income tax regulations.
The pretax income by location and the preceding analysis of the
income tax provision by taxing jurisdiction are, therefore, not
directly related.
A comparison of the statutory and effective income tax
provision and reasons for related differences in millions of
dollars follow:
2009 2008 2007
U.S. federal income tax provision
at a statutory rate of 35 percent ................ $ 469 $ 1,093 $ 936
Increase (decrease) resulting from:
Nondeductible goodwill impairment charge ........... 86
State and local income taxes, net of
federal income tax benefi t ............................... 14 41 32
Wind energy production tax credits ...................... (26) (14) (4)
Research and development tax credits ................. (25) (18) (11)
Taxes on foreign activities .................................... (10) 21 (24)
Nondeductible costs and other-net ....................... (48) (12) (46)
Provision for income taxes ............................. $ 460 $ 1,111 $ 883
At October 31, 2009, accumulated earnings in certain
subsidiaries outside the U.S. totaled $1,348 million for which
no provision for U.S. income taxes or foreign withholding taxes
has been made, because it is expected that such earnings will be
reinvested overseas indefi nitely. Determination of the amount
of unrecognized deferred tax liability on these unremitted
earnings is not practical.
Deferred income taxes arise because there are certain items
that are treated differently for fi nancial accounting than for income
tax reporting purposes. An analysis of the deferred income tax
assets and liabilities at October 31 in millions of dollars follows:
2009 2008
______________ _______________
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
Assets Liabilities Assets Liabilities
Other postretirement
benefi t liabilities ....................... $ 1,860 $ 1,054
Pension liabilities - net .................. 335
Pension assets - net ..................... $ 361
Accrual for sales allowances ......... 324 361
Tax over book depreciation ............ $ 437 266
Tax loss and tax credit
carryforwards .......................... 204 124
Accrual for employee benefi ts ....... 168 231
Lease transactions ....................... 191 172
Allowance for credit losses ............ 140 113
Goodwill and other
intangible assets ...................... 124 126
Stock option compensation ........... 74 54
Deferred gains on distributed
foreign earnings ....................... 71 69
Intercompany profi t in inventory .... 52 70
Deferred compensation ................. 34 32
Undistributed foreign earnings ....... 41 40
Other items .................................. 361 104 237 38
Less valuation allowances ............. (89) (73)
Deferred income tax
assets and liabilities ............ $ 3,534 $ 897 $ 2,272 $ 1,003
Deere & Company fi les a consolidated federal income tax
return in the U.S., which includes the wholly-owned Financial
Services subsidiaries. These subsidiaries account for income
taxes generally as if they fi led separate income tax returns.
At October 31, 2009, certain tax loss and tax credit
carryforwards for $204 million were available with $136 million
expiring from 2011 through 2029 and $68 million with an
unlimited expiration date.
The company adopted FASB ASC 740, Income Taxes
(FASB Interpretation No. 48, Accounting for Uncertainty in
Income Taxes), at the beginning of 2008. As a result of adoption,
the company recorded an increase in its liability for unrecognized
tax benefi ts of $170 million, an increase in accrued interest and
penalties payable of $30 million, an increase in deferred tax
liabilities of $6 million, a reduction in the beginning retained
earnings balance of $48 million, an increase in tax receivables
of $136 million, an increase in deferred tax assets of $11 million
and an increase in interest receivable of $11 million.
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