Union Pacific 2009 Annual Report Download - page 77

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77
7. Income Taxes
Components of income tax expense/(benefit) were as follows for the years ended December 31:
Millions of Dollars 2009 2008 2007
Current
$
366 $ 771 $ 822
Deferred 685 681 354
Unrecognized tax benefits 38 (134) (22)
Total income tax expense
$
1,089 $ 1,318 $ 1,154
For the years ended December 31, reconciliation between statutory and effective tax rates is as follows:
Tax Rate Percentages 2009 2008 2007
Federal statutory tax rate 35.0% 35.0% 35.0
%
State statutory rates, net of federal benefits 3.2 3.0 2.9
Deferred tax adjustments (0.8) (0.7) 1.0
Tax credits (0.8) (0.9) (0.6)
Other (0.1) (0.3) 0.1
Effective tax rate 36.5% 36.1% 38.4
%
In February of 2009, California enacted legislation that changed how corporate taxpayers determine the
amount of their income subject to California tax. This change reduced our 2009 deferred tax expense by
$14 million.
In 2007, the State of Illinois enacted legislation that changed how we determine the amount of our income
subject to Illinois tax. This legislation increased our 2007 deferred tax expense by $27 million. In
January of 2008, Illinois enacted technical corrections legislation that made additional changes in how we
determine the amount of our income subject to Illinois tax. This legislation reduced our 2008 deferred tax
expense by $16 million.
Deferred tax assets and liabilities are recorded for the expected future tax consequences of events that are
reported in different periods for financial reporting and income tax purposes. The majority of our
deferred tax liabilities relate to differences between the tax bases and financial reporting amounts of our
land and depreciable property, due to accelerated tax depreciation, revaluation of assets in purchase
accounting transactions, and differences in capitalization methods.
Deferred income tax liabilities/(assets) were comprised of the following at December 31:
Millions of Dollars 2009 2008
Net current deferred income tax asset
$
(339) $ (276)
Property 10,494 10,006
State taxes, net of federal benefits 726 675
Other (90) (399)
Net long-term deferred income tax liabilities 11,130 10,282
Net deferred income tax liability
$
10,791 $ 10,006