|
NOTES TO FINANCIAL STATEMENTS
NOTE 12 INCOME TAXES
The provision for income taxes consisted of:
| In millions |
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
| Year Ended June 30 |
|
2000 |
|
|
|
2001 |
|
|
2002 |
|
| |
|
|
|
|
|
|
|
|
|
|
| Current taxes: |
|
|
|
|
|
|
|
|
|
|
| |
U.S. and state |
$ |
4,744 |
|
|
$ |
3,243 |
|
$ |
3,644 |
|
| |
International |
|
535 |
|
|
|
514 |
|
|
575 |
|
|
|
|
|
|
|
|
| |
|
Current taxes |
|
5,279 |
|
|
|
3,757 |
|
|
4,219 |
|
| Deferred taxes |
|
(425 |
) |
|
|
47 |
|
|
(535 |
) |
|
|
|
|
|
|
|
| |
|
|
Provision for income taxes |
$ |
4,854 |
|
|
$ |
3,804 |
|
$ |
3,684 |
|
| |
|
|
|
|
|
|
|
U.S. and international components of income before income taxes were:
| In millions |
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
| Year Ended June 30 |
|
2000 |
|
|
|
2001 |
|
|
2002 |
|
| |
|
|
|
|
|
|
|
|
|
|
| U.S. |
$ |
11,860 |
|
|
$ |
9,189 |
|
$ |
8,920 |
|
| International |
|
2,415 |
|
|
|
2,336 |
|
|
2,593 |
|
|
|
|
|
|
|
|
| |
Income before income taxes |
$ |
14,275 |
|
|
$ |
11,525 |
|
$ |
11,513 |
|
| |
|
|
|
|
|
|
|
In 2000, the effective tax rate was 34.0%, and included the effect of a 2.5% reduction from the U.S. statutory rate for tax credits and a 1.5% increase for other items. In 2001, the effective tax rate was 33.0%, and included the effect of a 3.1% reduction from the U.S. statutory rate for tax credits and a 1.1% increase for other items. The effective tax rate in 2002 was 32.0%, and included the effect of a 2.4% reduction from the U.S. statutory rate for the extraterritorial income exclusion tax benefit and a 0.6% reduction for other items.
Deferred income taxes were:
| In millions |
|
|
|
| |
|
|
|
|
|
|
|
| June 30 |
|
2001 |
|
|
|
2002 |
|
| |
|
|
|
|
|
|
|
| Deferred income tax assets: |
|
|
|
|
|
|
|
| |
Revenue items |
$ |
1,469 |
|
|
$ |
2,261 |
|
| |
Expense items |
|
691 |
|
|
|
945 |
|
| |
Impaired investments |
|
1,070 |
|
|
|
2,016 |
|
|
|
|
|
|
| |
|
Deferred income tax assets |
$ |
3,230 |
|
|
$ |
5,222 |
|
| |
|
|
|
|
|
| Deferred income tax liabilities: |
|
|
|
|
|
|
|
| |
Unrealized gain on investments |
$ |
(395 |
) |
|
$ |
(887 |
) |
| |
International earnings |
|
(1,667 |
) |
|
|
(1,818 |
) |
| |
Other |
|
(55 |
) |
|
|
(803 |
) |
|
|
|
|
|
| |
|
Deferred income tax liabilities |
$ |
(2,117 |
) |
|
$ |
(3,508 |
) |
| |
|
|
|
|
|
Microsoft has not provided for U.S. deferred income taxes or foreign withholding taxes on $780 million of its undistributed earnings for certain non-U.S. subsidiaries, all of which relate to fiscal 2002 earnings, since these earnings are intended to be reinvested indefinitely.
On September 15, 2000, the U.S. Tax Court issued an adverse ruling with respect to Microsoft’s claim that the Internal Revenue Service (IRS) incorrectly assessed taxes for 1990 and 1991. The Company has filed an appeal with the Ninth Circuit Court of Appeals on this matter. Income taxes, except for items related to the 1990 and 1991 assessments, have been settled with the IRS for all years through 1996. The IRS is examining the Company’s 1997 through 1999 U.S. income tax returns. Management believes any adjustments which may be required will not be material to the financial statements. Income taxes paid were $800 million in 2000, $1.3 billion in 2001, and $1.9 billion in 2002.
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