Union Pacific 2002 Annual Report Download - page 75

Download and view the complete annual report

Please find page 75 of the 2002 Union Pacific annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 104

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104

49
4. Income Taxes
Components of income tax expense were as follows for the years ended December 31, 2002, 2001 and 2000:
Millions of Dollars 2002 2001 2000
Current:
Federal ........................................................................................................ $ 94 $ 133 $ 18
State............................................................................................................. 8 10 3
Total current. ................................................................................................... 102 143 21
Deferred:
Federal ........................................................................................................ 508 374 423
State............................................................................................................. 65 50 24
Total deferred................................................................................................... 573 424 447
Total.................................................................................................................. $ 675 $ 567 $ 468
Deferred income tax liabilities (assets) were comprised of the following at December 31, 2002 and 2001:
Millions of Dollars 2002 2001
Current liabilities...................................................................................................................... $ (346) $ (341)
Alternative minimum tax credits ............................................................................................ (211)-
Net operating loss..................................................................................................................... - (59)
Net current deferred income tax asset .................................................................................... (557) (400)
Excess tax over book depreciation .......................................................................................... 8,190 7,813
State taxes, net .......................................................................................................................... 609 577
Retirement benefits .................................................................................................................. (337) (287)
Alternative minimum tax credits ............................................................................................ (140) (315)
Net operating loss..................................................................................................................... - (96)
Other......................................................................................................................................... 156 190
Net long-term deferred income tax liability........................................................................... 8,478 7,882
Net deferred income tax liability............................................................................................. $ 7,921 $ 7,482
For the years ending December 31, 2002, 2001 and 2000, a reconciliation between statutory and effective tax rates of
continuing operations is as follows:
Percentages 2002 2001 2000
Statutory tax rate............................................................................................. 35.0% 35.0% 35.0%
State taxes-net.................................................................................................. 2.3 2.5 1.4
Dividend exclusion.......................................................................................... (0.6) (0.8) (1.1)
Prior years’ income tax examinations............................................................ (3.0) (0.1) -
Other................................................................................................................ (0.2) 0.4 0.4
Effective tax rate .............................................................................................. 33.5% 37.0% 35.7%
During 2002, the Corporation made considerable progress on a number of significant income tax examination issues for
prior tax years. Most of the Corporation’s tax issues relating to 1986 through 1994, as well as some issues for 1995 through
1998, have now been substantially resolved, resulting in a decrease in income tax expense of $67 million in 2002.
All federal income tax years prior to 1986 are closed, and most issues for 1986 through 1994 have been resolved. Years
1995 through 1998 are currently under examination by the IRS.
The Corporation believes it has adequately reserved for federal and state income taxes.