Staples 2015 Annual Report Download - page 140

APPENDIX C
C-23 STAPLES Form 10-K
STAPLES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
The provision (benefit) for income taxes related to continuing operations consists of the following (in millions):
2015 2014 2013
Current tax expense:
Federal $54 $117 $193
State 3 36 37
Foreign 28 29 21
Deferred tax expense (benefit):
Federal 17 (52) 73
State 1 (9) 6
Foreign 10 12 26
Total income tax expense $113 $133 $356
See Note D - Sale of Businesses and Assets for the losses
from discontinued operations before income taxes and related
income taxes reported in 2013. All pre-tax income presented
in discontinued operations is related to foreign operations.
A reconciliation of the federal statutory tax rate to Staples'
effective tax rate on income from continuing operations is
as follows:
2015 2014 2013
Federal statutory rate 35.0% 35.0% 35.0%
State effective rate, net of federal benefit 2.9 (1.6) 2.3
Effect of foreign taxes (12.9) (22.3) (9.9)
Tax credits (0.8) (1.5) (0.4)
Changes in uncertain tax positions (9.0) (13.7) 2.4
Goodwill impairment — 44.1 —
Change in valuation allowance 6.4 12.5 3.8
Other 1.4 (2.7) 0.3
Effective tax rate 23.0% 49.8% 33.5%
The effective tax rate in any year is impacted by the geographic
mix of earnings. Additionally, certain foreign operations are
subject to both U.S. and foreign income tax regulations, and
as a result, income before tax by location and the components
of income tax expense by taxing jurisdiction are not directly
related. The 2014 effective tax rate was unfavorably impacted
by the goodwill impairment charges recorded in 2014 (see
Note C - Goodwill and Long-Lived Assets). The 2015 and
2014 effective tax rates were favorably impacted by changes
in uncertain tax positions.
The Company operates in multiple jurisdictions and could be
subject to audit in these jurisdictions. These audits can involve
complex issues that may require an extended period of time
to resolve and may cover multiple years. In the Company's
opinion, an adequate provision for income taxes has been
made for all years subject to audit.
Income tax payments were $205 million, $204 million and
$266 million during 2015, 2014 and 2013, respectively.
During 2014, the Company repatriated $127 million of cash
held by a foreign subsidiary, and as a result recorded income
tax expense of $11 million in 2014 related to the net tax cost
in the U.S. stemming from the repatriation. As of January 30,
2016, the Company had $837 million of undistributed earnings.
It is the Company’s intention to indefinitely reinvest the majority
of the undistributed earnings outside of the U.S., and for
jurisdictions not deemed indefinitely reinvested there would be
no incremental tax due upon remittance. Accordingly, deferred
income taxes have not been provided for these funds. The
determination of the amount of the unrecognized deferred tax
liability related to the undistributed earnings is not practicable
because of the complexities associated with its hypothetical
calculation.