Qualcomm 2004 Annual Report Download - page 75

The following is a reconciliation of the expected statutory federal income tax provision to the Company’s actual income tax provision for the years
ended September 30 (in millions):
2004 2003 2002
Expected income tax provision at federal statutory tax rate $ 809 $548 $ 218
State income tax provision, net of federal benefit 91 61 32
Goodwill amortization ——97
Other permanent differences —85
Foreign income taxed at other than U.S. rates (215) (59) (37)
Valuation allowance (44) — (189)
Tax credits (49) (32) (26)
Other (4) 10 (3)
Actual income tax provision $ 588 $536 $ 97
The Company did not provide for United States income taxes and foreign withholding taxes on a cumulative total of approximately $1.5 billion
of undistributed earnings from certain non-United States subsidiaries permanently invested outside the United States. Should the Company
repatriate foreign earnings, the Company would have to adjust the income tax provision in the period management determined that the Company
would repatriate the earnings. The Company is currently studying the impact of the one-time favorable foreign dividend provisions enacted on
October 22, 2004, as part of the American Jobs Creation Act of 2004, and may decide to repatriate future earnings of some of its foreign sub-
sidiaries. However, the decision to repatriate would relate solely to future earnings to be generated after the date such decision was made.
At September 30, 2004 and 2003, the Company had net deferred tax assets as follows (in millions):
2004 2003
Accrued liabilities, reserves and other $ 139 $ 599
Deferred revenues 133 172
Unrealized losses on marketable securities 5—
Unused net operating losses — 309
Capital loss carryover 249 150
Tax credits 454 345
Unrealized losses on investments 169 228
Total gross deferred assets 1,149 1,803
Valuation allowance (139) (660)
Total net deferred assets 1,010 1,143
Purchased intangible assets (8) (2)
Deferred contract costs (26) (43)
Unrealized gains on marketable securities (33) (39)
Other basis differences (43) (41)
Total deferred liabilities $ (110) $ (125)
Gross deferred tax assets and valuation allowance each decreased by $495 million from September 30, 2003, primarily as a result of discon-
tinued operations (Note 11), with no net effect on net deferred tax assets.
The Company reversed approximately $1.1 billion of its valuation allowance on substantially all of its United States deferred tax assets during
fiscal 2003 as a credit to stockholders’ equity.The Company believes it, morelikely than not, will have sufficient taxable income after stock
option related deductions to utilize its net deferred tax assets. As of September 30, 2004, the Company has provided a valuation allowance
on net capital losses in the amount of $139 million. This valuation allowance reflects the uncertainty surrounding the Company’s ability to
generate sufficient capital gains to utilize all capital losses.
At September 30, 2004, the Company had unused federal and state income tax credits of $658 million and $78 million, respectively, generally
expiring from 2005 through 2024. The Company does not expect these credits to expire unused.
Cash amounts paid for income taxes, net of refunds received, were $127 million, $125 million and $89 million for fiscal 2004, 2003 and 2002,
respectively. The income taxes paid primarily relate to foreign withholding taxes.
NOTE 7. CAPITAL STOCK
Preferred Stock
The Company has 8,000,000 shares of preferred stock authorized for issuance in one or more series, at a par value of $0.0001 per share.
In conjunction with the distribution of preferred share purchase rights, 1,500,000 shares of preferred stock are designated as Series A Junior
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