| INCOME TAXES
> The provision for income taxes consisted of:
| Year Ended June 30 |
1997 |
|
1998 |
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1999 |
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| Current taxes: |
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U.S. and state |
$1,710 |
|
$2,518 |
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$4,027 |
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International |
412 |
|
526 |
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281 |
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Current taxes |
2,122 |
|
3,044 |
|
4,308 |
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| Deferred taxes |
(262 |
) |
(417 |
) |
(202 |
) |
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Provision for income taxes |
$1,860 |
|
$2,627 |
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$4,106 |
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U.S. and international components of income before income taxes were:
| Year Ended June 30 |
1997 |
|
1998 |
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1999 |
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| U.S. |
$3,775 |
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$5,072 |
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$10,649 |
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| International |
1,539 |
|
2,045 |
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1,242 |
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Income before income taxes |
$5,314 |
|
$7,117 |
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$11,891 |
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The effective income tax rate was 35.0% in 1997 and increased to 36.9% in 1998 due to the non-deductible write-off of WebTV in-process technologies. In 1999, the effective tax rate was 35.0%, excluding the impact of the gain on the sale of Softimage, Inc. The components of the differences between the U.S. statutory tax rate and the Company’s effective tax rate were not significant.
Income taxes payable were:
| June 30 |
1998 |
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1999 |
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| Deferred income tax assets: |
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Revenue items |
$ 713 |
|
$ 1,145 |
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Expense items |
613 |
|
648 |
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Deferred income tax assets |
1,326 |
|
1,793 |
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| Deferred income tax liabilities: |
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Unrealized gain on investments |
(479 |
) |
(1,046 |
) |
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International earnings |
(373 |
) |
(647 |
) |
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Other |
(26 |
) |
(16 |
) |
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Deferred income tax liabilities |
(878 |
) |
(1,709 |
) |
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| Current income tax liabilities |
(1,363 |
) |
(1,691 |
) |
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Income taxes payable |
$ (915 |
) |
$(1,607 |
) |
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Income taxes have been settled with the Internal Revenue Service (IRS) for all years through 1989. The IRS has assessed taxes for 1990 and 1991, which the Company is contesting in U.S. Tax Court. The IRS is examining the Company’s U.S. income tax returns for 1992 through 1994. Management believes any related adjustments that might be required will not be material to the financial statements. Income taxes paid were $1.1 billion in 1997, $1.1 billion in 1998, and $874 million in 1999.
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