Prudential 2006 Annual Report Download - page 160

PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
17. INCOME TAXES
The components of income tax expense (benefit) for the years ended December 31, were as follows:
2006 2005 2004
(in millions)
Current tax expense (benefit)
U.S. ................................................................................... $ 135 $(267) $475
State and local .......................................................................... (1) 20 23
Foreign ................................................................................ 367 187 81
Total .................................................................................. 501 (60) 579
Deferred tax expense (benefit)
U.S. ................................................................................... 499 586 54
State and local .......................................................................... 27 165 (26)
Foreign ................................................................................ 221 117 331
Total .................................................................................. 747 868 359
Total income tax expense ...................................................................... $1,248 $ 808 $938
The Company’s actual income tax expense for the years ended December 31, differs from the expected amount computed by
applying the statutory federal income tax rate of 35% to income from continuing operations before income taxes, equity in earnings
of operating joint ventures, extraordinary gain on acquisition and cumulative effect of accounting change for the following reasons:
2006 2005 2004
(in millions)
Expected federal income tax expense .......................................................... $1,541 $1,501 $1,150
Non-taxable investment income .............................................................. (252) (185) (149)
Repatriation of foreign earnings .............................................................. (58) 61 (24)
Non-deductible expenses .................................................................... 45 70 6
State and local income taxes ................................................................. 21 22 (9)
Valuation allowance ....................................................................... (2) 76 (24)
Completion of Internal Revenue Service examination for the years 1997 to 2001 ........................ — (720) —
Other ................................................................................... (47) (17) (12)
Total income tax expense ............................................................... $1,248 $ 808 $ 938
Deferred tax assets and liabilities at December 31, resulted from the items listed in the following table:
2006 2005
(in millions)
Deferred tax assets
Policyholder dividends ...................................................................................... $ 873 $1,045
Insurance reserves ......................................................................................... 1,127 1,044
Net operating and capital loss carryforwards ..................................................................... 863 831
Other .................................................................................................... 1,139 1,627
Deferred tax assets before valuation allowance ................................................................... 4,002 4,547
Valuation allowance ........................................................................................ (592) (676)
Deferred tax assets after valuation allowance .................................................................... 3,410 3,871
Deferred tax liabilities
Net unrealized investment gains ............................................................................... 1,825 2,450
Deferred policy acquisition costs .............................................................................. 2,778 2,418
Employee benefits ......................................................................................... 94 389
Other .................................................................................................... 936 767
Deferred tax liabilities ...................................................................................... 5,633 6,024
Net deferred tax liability ......................................................................................... $(2,223) $(2,153)
PRUDENTIAL FINANCIAL, INC. 2006 ANNUAL REPORT
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