EMC » Topics » Provision for Income Taxes

This excerpt taken from the EMC 10-K filed Feb 26, 2010.

Provision for Income Taxes

Our effective income tax rate was 18.4%, 17.5% and 17.7% in 2009, 2008 and 2007, respectively. The effective income tax rate is based upon the income for the year, the composition of the income in different countries, and adjustments, if any, for the potential tax consequences, benefits or resolutions of audits or other tax contingencies. Our aggregate income tax rate in foreign jurisdictions is substantially lower than our income tax rate in the United States.

In 2009, the lower aggregate income tax rate in foreign jurisdictions reduced our effective rate by 17.5 percentage points compared to our statutory federal tax rate of 35.0%. The resolution of income tax audits and elimination of reserves associated with the expiration of statutes of limitations for which we believe we had certain tax exposure favorably reduced our effective tax rate by an additional 4.5 percentage points. In 2009, we effected a plan to reorganize our international operations by transferring certain assets of our RSA and Data Domain entities and legacy foreign corporations owned directly by EMC into a single EMC international holding company. As a result of this reorganization, we incurred income taxes which negatively impacted the rate by 4.4 percentage points. The net effect of tax credits, state taxes, non-deductible permanent differences and changes in valuation allowances and other items collectively increased the rate by 1.0 percentage point, driven principally by non-deductible permanent differences.

In 2008, the lower aggregate income tax rate in foreign jurisdictions reduced our effective rate by 15.9 percentage points compared to our statutory federal tax rate of 35.0%. The resolution of income tax audits and elimination of reserves associated with the expiration of statutes of limitations for which we believe we had certain tax exposure favorably reduced our effective tax rate by an additional 2.9 percentage points. The net effect of non-deductible permanent differences, state taxes, tax credits and other items was an increase to the rate of 1.3 percentage points.

In 2007, the lower aggregate income tax rate in foreign jurisdictions reduced our effective rate by 15.2 percentage points compared to our statutory federal tax rate of 35.0%. We had a reduction in our valuation allowance which principally arose from the utilization of capital loss carryforwards towards the capital gain on the sale of VMware stock to Cisco resulting in a benefit to our effective tax rate of 1.5 percentage points. The resolution of income tax audits and elimination of reserves associated with the expiration of statutes of limitations for which we believe we had certain tax exposure favorably reduced our effective tax rate by an additional 1.3 percentage points. The net effect of non-deductible permanent differences, state taxes, tax credits and other items was an increase to the rate of 0.7 percentage points.

 

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The effective tax rate increased from 2008 to 2009 by 0.9%, from 17.5% to 18.4%. This increase was principally attributable to the reorganization of RSA and Data Domain in 2009, which was partially offset by incremental benefits from the resolution of uncertain tax positions inclusive of the expiration of statutes of limitation. The effective tax rates for 2007 and 2008 were relatively constant.

This excerpt taken from the EMC 10-Q filed May 8, 2009.

Provision for Income Taxes

Our effective income tax rates were 15.6% and 25.1% for the three months ended March 31, 2009 and 2008, respectively. The effective income tax rate is based upon the estimated income for the year, the composition of the income in different countries, and adjustments, if any, in the applicable quarterly periods for the potential tax consequences, benefits or resolutions of tax audits or other tax contingencies. For the three months ended March 31, 2008 and 2009, the effective tax rate varied from the statutory tax rate principally as a result of the mix of income attributable to foreign versus domestic jurisdictions. Our aggregate income tax rate in foreign jurisdictions is lower than our income tax rate in the United States. The decrease in the effective tax rate in 2009 compared to 2008 was primarily attributable to non-deductible IPR&D charges during the quarter ended March 31, 2008 which

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS - (Continued)

 

increased the 2008 effective tax rate. Additionally, in 2009 our tax rate was impacted by the favorable resolution of uncertain tax positions related to transfer pricing and an increase in tax credits. These benefits were partially offset by an increase in our permanent book-tax differences.

We have substantially concluded all U.S. federal income tax matters for years through 2004 and are currently under audit for U.S. federal income tax for 2005 and 2006. We also have income tax audits in process in numerous state, local and international jurisdictions. Based on the timing and outcome of examinations of EMC, the result of the expiration of statutes of limitations for specific jurisdictions or the timing and result of ruling requests from taxing authorities, it is reasonably possible that the related unrecognized tax benefits could change from those recorded in our statement of financial position. We anticipate that several of these audits may be finalized within the next 12 months. Based on the status of these examinations and the protocol of finalizing such audits, it is not possible to estimate the impact of any amount of such changes, if any, to our previously recorded uncertain tax positions. However, it is reasonably possible that up to $32 to $37 of reserves for unrecognized tax benefits may be released within one year as a result of the lapse of statutes of limitations and the resolution of agreements with various foreign tax authorities.

These excerpts taken from the EMC 10-K filed Mar 2, 2009.

Provision for Income Taxes

        Our effective income tax rate was 18.4%, 18.4% and 11.7% in 2008, 2007 and 2006, respectively. The effective income tax rate is based upon the income for the year, the composition of the income in different countries, and adjustments, if any, for the potential tax consequences, benefits or resolutions of audits or other tax contingencies. Our aggregate income tax rate in foreign jurisdictions is lower than our income tax rate in the United States.

        In 2008, the lower aggregate income tax rate in foreign jurisdictions reduced our effective rate by 15.0 percentage points compared to our statutory federal tax rate of 35.0%. The resolution of income tax audits and elimination of reserves associated with the expiration of statutes of limitations for which we believe we had certain tax exposure favorably reduced our effective tax rate by an additional 2.7 percentage points. The net effect of non-deductible permanent differences, state taxes, tax credits and other items was an increase to the rate of 1.1 percentage points.

        In 2007, the lower aggregate income tax rate in foreign jurisdictions reduced our effective rate by 14.5 percentage points compared to our statutory federal tax rate of 35.0%. We had a reduction in our valuation allowance which principally arose from the utilization of capital loss carryforwards towards the capital gain on the sale of VMware stock to Cisco resulting in a benefit to our effective tax rate of 1.5 percentage points. The resolution of income tax audits and elimination

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of reserves associated with the expiration of statutes of limitations for which we believe we had certain tax exposure favorably reduced our effective tax rate by an additional 1.2 percentage points. The net effect of non-deductible permanent differences, state taxes, tax credits and other items was an increase to the rate of 0.6 percentage points.

        In 2006, the lower aggregate income tax rate in foreign jurisdictions reduced our effective rate by 13.9 percentage points compared to our statutory federal tax rate of 35.0%. The resolution of income tax audits and elimination of reserves associated with the expiration of statutes of limitations for which we believe we had certain tax exposure favorably reduced our effective tax rate by an additional 12.4 percentage points. The net effect of tax credits, state taxes, non-deductible permanent differences and changes in valuation allowances collectively had a negative impact on the rate of 3.0 percentage points, driven principally by non-deductible permanent differences.

        The effect of non-deductible permanent differences increased the tax rate by 4.6% in 2008 compared to 1.7% in 2007. The increase was principally due to increased non-deductible IPR&D and taxable earnings from foreign subsidiaries in 2008. Tax credits in 2008 reduced the effective tax rate by 4.9% compared to a 2.0% reduction in 2007. The increase was attributable to higher foreign tax credits relating to distributions from foreign subsidiaries in 2008 and higher U.S. R&D credits.

Provision for Income Taxes



        Our effective income tax rate was 18.4%, 18.4% and 11.7% in 2008, 2007 and 2006, respectively. The effective income tax rate is based
upon the income for the year, the composition of the income in different countries, and adjustments, if any, for the potential tax consequences, benefits or resolutions of audits or other tax
contingencies. Our aggregate income tax rate in foreign jurisdictions is lower than our income tax rate in the United States.



        In
2008, the lower aggregate income tax rate in foreign jurisdictions reduced our effective rate by 15.0 percentage points compared to our statutory federal tax rate of 35.0%. The
resolution of income tax audits and elimination of reserves associated with the expiration of statutes of limitations for which we believe we had certain tax exposure favorably reduced our effective
tax rate by an additional 2.7 percentage points. The net effect of non-deductible permanent differences, state taxes, tax credits and other items was an increase to the rate of
1.1 percentage points.



        In
2007, the lower aggregate income tax rate in foreign jurisdictions reduced our effective rate by 14.5 percentage points compared to our statutory federal tax rate of 35.0%. We
had a reduction in our valuation allowance which principally arose from the utilization of capital loss carryforwards towards the capital gain on the sale of VMware stock to Cisco resulting in a
benefit to our effective tax rate of 1.5 percentage points. The resolution of income tax audits and elimination



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HREF="#bg49401a_main_toc">Table of Contents






of
reserves associated with the expiration of statutes of limitations for which we believe we had certain tax exposure favorably reduced our effective tax rate by an additional 1.2 percentage
points. The net effect of non-deductible permanent differences, state taxes, tax credits and other items was an increase to the rate of 0.6 percentage points.




        In
2006, the lower aggregate income tax rate in foreign jurisdictions reduced our effective rate by 13.9 percentage points compared to our statutory federal tax rate of 35.0%. The
resolution of income tax audits and elimination of reserves associated with the expiration of statutes of limitations for which we believe we had certain tax exposure favorably reduced our effective
tax rate by an additional 12.4 percentage points. The net effect of tax credits, state taxes, non-deductible permanent differences and changes in valuation allowances collectively
had a negative impact on the rate of 3.0 percentage points, driven principally by non-deductible permanent differences.



        The
effect of non-deductible permanent differences increased the tax rate by 4.6% in 2008 compared to 1.7% in 2007. The increase was principally due to increased
non-deductible IPR&D and taxable earnings from foreign subsidiaries in 2008. Tax credits in 2008 reduced the effective tax rate by 4.9% compared to a 2.0% reduction in 2007. The increase
was attributable to higher foreign tax credits relating to distributions from foreign subsidiaries in 2008 and higher U.S. R&D credits.



This excerpt taken from the EMC 10-Q filed Nov 7, 2008.

Provision for Income Taxes

Our effective income tax rates were 14.4% and 19.8% for the three and nine months ended September 30, 2008, respectively. Our effective income tax rates were 21.5% and 20.6% for the three and nine months ended September 30, 2007, respectively. The effective income tax rate is based upon the estimated income for the year, the composition of the income in different countries, and adjustments, if any, in the applicable quarterly periods for the potential tax consequences, benefits or resolutions of tax audits or other tax contingencies. For the three and nine months ended September 30, 2008 and 2007, the effective tax rate varied from the statutory tax rate as a result of the mix of income attributable to foreign versus domestic jurisdictions. Our aggregate income tax rate in foreign jurisdictions is lower than our income tax rate in the United States.

Our effective income tax rate decreased from the three months ended September 30, 2007 to the three months ended September 30, 2008 due to the change in the mix of income between our foreign and domestic jurisdictions and the recognition of discrete tax benefits of $28.6 during the third quarter of 2008, principally from the utilization of foreign tax credits, which favorably impacted the tax rate by 5.8%. Partially offsetting these benefits was the loss of the U.S. federal research and development credit which expired at the end of 2007. Additionally, in 2007, our tax rate benefited from the release of a $29.3 valuation reserve on a capital loss when we recognized taxes from the capital gain on the sale of VMware stock, which had a net favorable impact on the 2007 tax rate of 1.5%.

Our effective income tax rate decreased from the nine months ended September 30, 2007 to the nine months ended September 30, 2008 due to the change in the mix of income between our foreign and domestic jurisdictions and the recognition of discrete tax benefits of $28.6 during the third quarter of 2008, principally from the utilization of foreign tax credits, which favorably impacted the tax rate by 2.1%. Partially offsetting these benefits was the loss of the U.S. federal research and development credit which expired at the end of 2007 and non-deductible IPR&D charges totaling $79.2 incurred in 2008. Additionally, in 2007, our tax rate benefited from the release of a $29.3 valuation reserve on a capital loss when we recognized taxes from the capital gain on the sale of VMware stock which had a net favorable impact on the 2007 tax rate of 0.5%.

The “Emergency Economic Stabilization Act of 2008,” which contains the “Tax Extenders and Alternative Minimum Tax Relief Act of 2008,” was signed into law on October 3, 2008. Under the Act, the U.S. federal research and development credit which expired at the end of 2007 was retroactively extended for amounts paid or incurred after December 31, 2007 and before

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS - (Continued)

 

January 1, 2010. The effects of the change in the tax law will be recognized in EMC’s fourth quarter of 2008, which is the quarter in which the law was enacted. We currently expect the research credit to favorably impact our tax rate by 1.8% for 2008.

We have substantially concluded all U.S. federal income tax matters for years through 2004 and are in the process of a U.S. federal income tax audit for 2005 and 2006. We have income tax audits in process in numerous state, local and international jurisdictions. Based on the timing and outcome of these examinations, the result of the expiration of statutes of limitations for specific jurisdictions or the timing and result of ruling requests from taxing authorities, it is reasonably possible that the related unrecognized tax benefits could change from those recorded in our statement of financial position. We anticipate that several of these audits may be finalized within the next 12 months. Based on the status of these examinations and the protocol of finalizing such audits, it is not possible to estimate the impact of any amount of such changes, if any, to our previously recorded uncertain tax positions. However, it is reasonably possible that up to $35.2 of reserves for unrecognized tax benefits may be released within one year as a result of the lapse of statutes of limitations and the resolution of agreements with various foreign tax authorities.

This excerpt taken from the EMC 10-Q filed Aug 8, 2008.

Provision for Income Taxes

Our effective income tax rates were 21.0% and 22.9% for the three and six months ended June 30, 2008, respectively. Our effective income tax rates were 21.7% and 19.9% for the three and six months ended June 30, 2007, respectively. The effective income tax rate is based upon the estimated income for the year, the composition of the income in different countries, and adjustments, if any, in the applicable quarterly periods for the potential tax consequences, benefits, resolutions of tax audits or other tax contingencies. For the three and six months ended June 30, 2008 and 2007, the effective tax rate varied from the statutory tax rate as a result of the mix of income attributable to foreign versus domestic jurisdictions. Our aggregate income tax rate in foreign jurisdictions is lower than our income tax rate in the United States.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS - (Continued)

 

Our effective income tax rate decreased from the three months ended June 30, 2007 compared to the three months ended June 30, 2008 as a result of the mix of income between our foreign and domestic jurisdictions, partially offset by the expiration of the U.S. federal research and development tax credit.

Our effective income tax rate increased from the six months ended June 30, 2007 compared to the six months ended June 30, 2008 due to non-deductible IPR&D charges in 2008, the expiration of the U.S. federal research and development tax credit for 2008 and higher discrete tax benefits in 2007, partially offset by a change in the mix of income between our foreign and domestic jurisdictions. Non-deductible IPR&D charges totaling $79.2 during the quarter ended March 31, 2008 and the expiration of the U.S. federal research and development tax credit increased the 2008 effective tax rate by approximately 3.5%. In addition, during the six months ended June 30, 2007, we recognized discrete net tax benefits of $22.2 which reduced the 2007 effective tax rate by 2.8%. This was made up primarily of reductions of income tax contingencies, release of a valuation allowance recorded on certain foreign deferred tax assets, and the tax benefit from employees’ disqualifying dispositions of qualified stock options.

We have substantially concluded all U.S. federal income tax matters for all years through 2004 and are continuing with the U.S. federal income tax audit for 2005 and 2006. We have income tax audits in process in numerous state, local and international jurisdictions. Based on the timing and outcome of these examinations, the result of the expiration of statutes of limitations for specific jurisdictions or the timing and result of ruling requests from taxing authorities, it is reasonably possible that the related unrecognized tax benefits could change from those recorded in our statement of financial position. We anticipate that several of these audits may be finalized within the next 12 months. Based on the status of these examinations and the protocol of finalizing such audits, it is not possible to estimate the impact of any amount of such changes, if any, to our previously recorded uncertain tax positions. However, it is reasonably possible that up to $46.0 of individually-insignificant unrecognized tax positions may be recognized within one year as a result of the lapse of statutes of limitations and the resolution of agreements with various foreign tax authorities.

This excerpt taken from the EMC 10-Q filed May 9, 2008.

Provision for Income Taxes

Our effective income tax rate was 25.5% and 17.8% for the three months ended March 31, 2008 and 2007, respectively. The effective income tax rate is based upon the estimated income for the year, the composition of the income in different countries, and adjustments, if any, in the applicable quarterly periods for the potential tax consequences, benefits, resolutions of tax audits or other tax contingencies. For the three months ended March 31, 2008, the effective tax rate varied from the statutory tax rate as a result of the mix of income attributable to foreign versus domestic jurisdictions. Our aggregate income tax rate in foreign jurisdictions is lower than our income tax rate in the United States. The increase in the effective tax rate in 2008 compared to 2007

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS - (Continued)

 

was primarily attributable to non-deductible IPR&D charges totaling $79.2 during the quarter ended March 31, 2008 which increased the 2008 effective tax rate by 4.5%. During the three months ended March 31, 2007, we recognized net tax benefits of $19.9 from reductions in income tax contingencies and the release of a valuation allowance recorded on certain foreign deferred tax assets which favorably impacted the 2007 effective tax rate by 5.2%.

These excerpts taken from the EMC 10-K filed Feb 29, 2008.

Provision for Income Taxes

        Our effective income tax rate was 18.4%, 11.7% and 31.4% in 2007, 2006 and 2005, respectively. The effective income tax rate is based upon the income for the year, the composition of the income in different countries, and adjustments, if any, for the potential tax consequences, benefits or resolutions of audits or other tax contingencies. Our aggregate income tax rate in foreign jurisdictions is lower than our income tax rate in the United States.

        In 2007, the lower aggregate income tax rate in foreign jurisdictions reduced our effective rate by 14.5 percentage points compared to our statutory federal tax rate of 35.0%. We had a reduction in our valuation allowance which principally arose from the utilization of capital loss carryforwards towards the capital gain on the sale of VMware stock to Cisco, resulting in a benefit to our effective tax rate of 1.5 percentage points. The resolution of income tax audits and elimination of reserves associated with the expiration of statutes of limitations for which we believe we had certain tax exposure favorably reduced our effective tax rate by an additional 1.2 percentage points. The net effect of non-deductible permanent differences, state taxes, tax credits and other items was an increase to the rate of 0.6 percentage points.

        In 2006, the lower aggregate income tax rate in foreign jurisdictions reduced our effective rate by 13.9 percentage points compared to our statutory federal tax rate of 35.0%. The resolution of income tax audits and elimination of reserves associated with the expiration of statutes of limitations for which we believe we had certain tax exposure favorably reduced our effective tax rate by an additional 12.4 percentage points. The net effect of tax credits, state taxes, non-deductible permanent differences and changes in valuation allowances collectively had a negative impact on the rate of 3.0 percentage points, driven principally by non-deductible permanent differences.

        In 2005, the lower aggregate income tax rate in foreign jurisdictions reduced our effective rate by 8.3 percentage points compared to our statutory federal tax rate of 35.0%. The resolution of income tax audits and elimination of reserves associated with the expiration of statutes of limitations for which we believe we had certain tax exposure favorably reduced our effective tax

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rate by an additional 9.9 percentage points. Our income tax rate was increased by 10.9 percentage points resulting from repatriating approximately $3,000 under the American Jobs Creation Act of 2004 (the "AJCA"). The net effect of tax credits, state taxes, non-deductible permanent differences and changes in valuation allowances collectively had a negative impact on the rate of 3.7 percentage points, driven principally by non-deductible permanent differences.

Provision for Income Taxes



        Our effective income tax rate was 18.4%, 11.7% and 31.4% in 2007, 2006 and 2005, respectively. The effective income tax rate is based upon the income for the
year, the composition of the income in different countries, and adjustments, if any, for the potential tax consequences, benefits or resolutions of audits or other tax contingencies. Our aggregate
income tax rate in foreign jurisdictions is lower than our income tax rate in the United States.




        In
2007, the lower aggregate income tax rate in foreign jurisdictions reduced our effective rate by 14.5 percentage points compared to our statutory federal tax rate of 35.0%. We
had a reduction in our valuation allowance which principally arose from the utilization of capital loss carryforwards towards the capital gain on the sale of VMware stock to Cisco, resulting in a
benefit to our effective tax rate of 1.5 percentage points. The resolution of income tax audits and elimination of reserves associated with the expiration of statutes of limitations for which
we believe we had certain tax exposure favorably reduced our effective tax rate by an additional 1.2 percentage points. The net effect of non-deductible permanent differences, state
taxes, tax credits and other items was an increase to the rate of 0.6 percentage points.




        In
2006, the lower aggregate income tax rate in foreign jurisdictions reduced our effective rate by 13.9 percentage points compared to our statutory federal tax rate of 35.0%. The
resolution of income tax audits and elimination of reserves associated with the expiration of statutes of limitations for which we believe we had certain tax exposure favorably reduced our effective
tax rate by an additional 12.4 percentage points. The net effect of tax credits, state taxes, non-deductible permanent differences and changes in valuation allowances collectively
had a negative impact on the rate of 3.0 percentage points, driven principally by non-deductible permanent differences.




        In
2005, the lower aggregate income tax rate in foreign jurisdictions reduced our effective rate by 8.3 percentage points compared to our statutory federal tax rate of 35.0%. The
resolution of income tax audits and elimination of reserves associated with the expiration of statutes of limitations for which we believe we had certain tax exposure favorably reduced our effective
tax



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rate
by an additional 9.9 percentage points. Our income tax rate was increased by 10.9 percentage points resulting from repatriating approximately $3,000 under the American Jobs Creation
Act of 2004 (the "AJCA"). The net effect of tax credits, state taxes, non-deductible permanent differences and changes in valuation allowances collectively had a negative impact on the
rate of 3.7 percentage points, driven principally by non-deductible permanent differences.



This excerpt taken from the EMC 10-Q filed Nov 8, 2007.

Provision for Income Taxes

Our effective income tax rate was 21.5% and 20.6% for the three and nine months ended September 30, 2007, respectively. The effective income tax rate is based upon the estimated income for the year, the composition of the income in different countries, and adjustments, if any, in the applicable quarterly periods for the potential tax consequences, benefits, resolutions of tax audits or other tax contingencies. For the three and nine months ended September 30, 2007 and 2006, the effective tax rate varied from the statutory tax rate as a result of the mix of income attributable to foreign versus domestic jurisdictions. Our aggregate income tax rate in foreign jurisdictions is lower than our income tax rate in the United States. Additionally, during the three and nine months ended September 30, 2007, we incurred discrete net tax costs of $23.0 and $0.8, respectively. The net discrete tax costs incurred during the third quarter of 2007 primarily included taxes from the capital gain on the sale of VMware stock, partially offset by a release of a valuation reserve on capital loss carryforwards. The net discrete tax costs incurred during the nine months ended September 30, 2007 also includes tax benefits from the reduction of income tax contingencies and tax benefits from employees’ disqualifying dispositions of qualified stock options.

Our effective income tax rate was 26.6% and 22.2% for the three and nine months ended September 30, 2006, respectively. For both periods, the effective tax rate varied from the statutory tax rate as a result of the mix of income attributable to foreign versus domestic jurisdictions. Additionally, during the three and nine months ended September 30, 2006, we recognized discrete tax benefits of $12.2 and $56.9, respectively. The $12.2 benefit recognized during the third quarter of 2006 resulted primarily from the favorable resolution of certain income tax contingencies. The net benefit recognized during the nine months ended September 30, 2006 included a $33.3 benefit from the favorable resolution of certain income tax audits and a $23.6 benefit that resulted primarily from a reduction in certain income tax contingencies. Partially offsetting these benefits were non-deductible in-process research and development charges totaling $23.0 for the three months ended September 30, 2006 and $35.4 for the nine months ended September 30, 2006.

This excerpt taken from the EMC 10-Q filed Aug 9, 2007.

Provision for Income Taxes

Our effective income tax rate was 21.7% and 19.9% for the three and six months ended June 30, 2007, respectively. The effective income tax rate is based upon the estimated income for the year, the composition of the income in different countries, and adjustments, if any, in the applicable quarterly periods for the potential tax consequences, benefits, resolutions of tax audits or other tax contingencies. For the three and six months ended June 30, 2007 and 2006, the effective tax rate varied from the statutory tax rate as a result of the mix of income attributable to foreign versus domestic jurisdictions. Our aggregate income tax rate in foreign jurisdictions is lower than our income tax rate in the United States. During the three months ended June 30, 2007, we recognized discrete net tax benefits of $2.3 that resulted primarily from reductions in certain income tax contingencies and the tax benefit from employees’ disqualifying dispositions of qualified stock options. For the six months ended June 30, 2007, we recognized discrete net tax benefits of $22.2. This was made up primarily of reductions of income tax contingencies, release of a valuation allowance recorded on certain foreign deferred tax assets, and the tax benefit from employees’ disqualifying dispositions of qualified stock options.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS - (Continued)

 

Our effective income tax rate was 14.4% and 19.7% for the three and six months ended June 30, 2006, respectively. For both periods, the effective tax rate varied from the statutory tax rate as a result of the mix of income attributable to foreign versus domestic jurisdictions. Additionally, during the three and six months ended June 30, 2006, we recognized discrete net tax benefits of $33.3 and $44.7, respectively. The $33.3 discrete net benefit recognized during the second quarter of 2006 resulted primarily from the favorable resolution of certain income tax audits. The discrete net benefit recognized during the six months ended June 30, 2006 also includes an $11.4 discrete benefit that resulted primarily from a reduction in certain income tax contingencies. Partially offsetting these discrete benefits were non-deductible in-process research and development charges totaling $12.4 incurred in connection with several acquisitions made during the second quarter of 2006. Our effective income tax rate increased from the three months ended June 30, 2006 to June 30, 2007 primarily due to the substantially larger benefit from reductions in certain income tax contingencies in the quarter ended June 30, 2006.

This excerpt taken from the EMC 10-Q filed May 4, 2007.

Provision for Income Taxes

Our effective income tax rate was 17.8% and 24.5% for the three months ended March 31, 2007 and 2006, respectively. The effective income tax rate is based upon the estimated income for the year, the composition of the income in different countries, and adjustments, if any, in the applicable quarterly periods for the potential tax consequences, benefits or resolutions of tax audits or other tax contingencies. For the three months ended March 31, 2007, the effective tax rate varied from the statutory tax rate as a result of the mix of income attributable to foreign versus domestic jurisdictions. Our aggregate income tax rate in foreign jurisdictions is lower than our income tax rate in the United States. During the three months ended March 31, 2007, we recognized net tax benefits of $19.9 from reductions in income tax contingencies and the release of a valuation allowance recorded on certain foreign deferred tax assets. During the three months ended March 31, 2006, we recognized net tax benefits of $11.4 from reductions in income tax contingencies. Our effective income tax rate decreased from the three months ended March 31, 2006 to March 31, 2007 primarily due to a change in the forecasted mix of our domestic and international profits.

This excerpt taken from the EMC 10-K filed Feb 27, 2007.

Provision for Income Taxes

 

Our effective income tax rate was 11.7%, 31.4% and 26.5% in 2006, 2005 and 2004, respectively. The effective income tax rate is based upon the income for the year, the composition of the income in different countries, and adjustments, if any, for the potential tax consequences, benefits, resolutions of tax audits or other tax contingencies. For 2006, 2005 and 2004 the effective tax rate varied from the statutory rate as a result of the mix of income attributable to foreign versus domestic jurisdictions. Our aggregate income tax rate in foreign jurisdictions is lower than our income tax rate in the United States. Additionally, in 2006, we recognized an income tax benefit of $171.8 from the favorable resolution of income tax audits and expiration of statutes of limitations. Partially offsetting these benefits were non-deductible IPR&D charges of $35.4 from acquisitions and $73.3 in non-deductible stock-based compensation expense for options issued as incentive stock options and shares issued under EMC’s ESPP. In 2005, we repatriated approximately $3,000.0 under the American Jobs Creation Act of 2004 (the “AJCA”). The repatriation resulted in an incremental income tax expense of $180.2. Also in 2005, we incurred $17.4 of non-deductible IPR&D charges from acquisitions. These unfavorable increases to our effective tax rate were partially offset by an income tax benefit of $163.9 from the favorable resolution of certain income tax audits and expiration of statutes of limitations. For 2004, as a result of tax audits, we recognized a $20.0 reduction in our estimated income tax exposure pertaining to our international tax liabilities. Partially offsetting these benefits were non-deductible IPR&D charges of $17.4 from acquisitions.

 

This excerpt taken from the EMC 8-K filed Nov 13, 2006.

Provision for Income Taxes

Our effective income tax rate was 31.4%, 26.5% and 13.1% in 2005, 2004 and 2003, respectively. The effective income tax rate is based upon the income for the year, the composition of the income in different countries, and adjustments, if any, for the potential tax consequences, benefits or resolutions of tax audits. For 2005, 2004 and 2003 the effective tax rate varied from the statutory rate as a result of the mix of income attributable to foreign versus domestic jurisdictions. Our aggregate income tax rate in foreign jurisdictions is lower than our income tax rate in the United States. Additionally, in 2005, we recognized an income tax benefit of $163.9 from the favorable resolution of certain income tax audits and expiration of statutes of limitations. These favorable reductions in our effective tax rate were partially offset by several factors. In 2005, we repatriated approximately $3,000.0 under the American Jobs Creation Act of 2004. The repatriation resulted in an incremental income tax expense of $180.2. Also in 2005, we incurred $17.4 of non-deductible IPR&D charges from acquisitions. We did not derive a tax benefit from these charges. For 2004, as a result of tax audits, we recognized a $20.0 reduction in our estimated income tax exposure pertaining to certain of our international tax liabilities. Partially offsetting these benefits were non-deductible IPR&D charges of $17.4 incurred in connection with acquisitions. For 2003, we favorably resolved a series of tax matters which aggregated $80.9. The tax matters included the resolution of certain merger-related contingencies. Partially offsetting these benefits were non-deductible IPR&D charges of $29.1 incurred in connection with acquisitions.

This excerpt taken from the EMC 10-Q filed Nov 6, 2006.

Provision for Income Taxes

Our effective income tax rate was 26.6% and 22.2% for the three and nine months ended September 30, 2006, respectively. The effective income tax rate is based upon the estimated income for the year, the composition of the income in different countries, and adjustments, if any, in the applicable quarterly periods for the potential tax consequences, benefits, resolutions of tax audits or other discrete tax items.

For the three and nine months ended September 30, 2006, the effective tax rate varied from the statutory tax rate as a result of the mix of income attributable to foreign versus domestic jurisdictions. Our aggregate income tax rate in foreign jurisdictions is lower than our income tax rate in the United States. Additionally, during the three and nine months ended September 30, 2006, we recognized tax benefits of $12.2 and $56.9, respectively. The $12.2 benefit recognized during the third quarter of 2006 resulted primarily from a reduction in certain income tax contingencies. The net benefit recognized during the nine months ended September 30, 2006 includes a $33.3 benefit from the favorable resolution of certain income tax audits and a $23.6 benefit that resulted primarily from a reduction in certain income tax contingencies. Partially offsetting these benefits were non-deductible IPR&D charges totaling $23.0 for the three months ended September 30, 2006 and $35.4 for the nine months ended September 30, 2006.

Our effective income tax rate was 0.6% for the three months ended September 30, 2005 and 17.0% for the nine months ended September 30, 2005. For both periods, the effective tax rate varied from the statutory tax rate as a result of the mix of income attributable to foreign versus domestic jurisdictions. Additionally, during the three and nine month periods ended September 30, 2005, we recognized a $105.7 and $113.1 benefit, respectively, resulting from the favorable resolution of certain income tax audits and expiration of statutes of limitations. Partially offsetting this benefit for the nine months ended September 30, 2005 was a non-deductible IPR&D charge of $3.1 incurred in connection with a business acquisition.

We are currently undergoing several tax audits in different countries in which we operate. Although the timing and the final outcome cannot be determined, we currently estimate the resolution of the audits may result in an income tax benefit of approximately $50.0 in the fourth quarter of 2006. The benefit will be recognized in the quarter in which the audits are finalized. Absent these adjustments, we expect our income tax rate for the remainder of 2006 to be approximately 26%; however, the rate is subject to change based on the percent of our income derived in different countries and adjustments, if any, for the potential tax consequences, benefits or resolutions of tax audits.

This excerpt taken from the EMC 10-Q filed Aug 10, 2006.

Provision for Income Taxes

Our effective income tax rate was 14.4% and 19.7% for the three and six months ended June 30, 2006, respectively. The effective income tax rate is based upon the estimated income for the year, the composition of the income in different countries, and adjustments, if any, in the applicable quarterly periods for the potential tax consequences, benefits, resolutions of tax audits or other discrete tax items.

For the three and six months ended June 30, 2006, the effective tax rate varied from the statutory tax rate as a result of the mix of income attributable to foreign versus domestic jurisdictions. Our aggregate income tax rate in foreign jurisdictions is lower than our income tax rate in the United States. Additionally, during the three and six months ended June 30, 2006, we recognized tax benefits of $33.3 and $44.7, respectively. The $33.3 benefit recognized during the second quarter of 2006 resulted primarily from the favorable resolution of certain income tax audits. The benefit recognized during the six months ended June 30, 2006 also includes an $11.4 benefit that resulted primarily from a reduction in certain income tax contingencies. Partially offsetting these benefits were non-deductible IPR&D charges totaling $12.4 incurred in connection with several acquisitions made during the second quarter of 2006.

Our effective income tax rate was 26.9% for the three months ended June 30, 2005 and 26.2% for the six months ended June 30, 2005. For both periods, the effective tax rate varied from the statutory tax rate as a result of the mix of income attributable to foreign versus domestic jurisdictions. Additionally, for the six months ended June 30, 2005 we recognized a tax benefit of $7.4, primarily from a reduction in certain income tax contingencies. Partially offsetting this benefit was a non-deductible IPR&D charge of $3.1 incurred in connection with a business acquisition. We expect our income tax rate for the remainder of 2006 to be approximately 26%, however the rate is subject to change based on the percent of our income derived in different countries and adjustments, if any, for the potential tax consequences, benefits or resolutions of tax audits.

This excerpt taken from the EMC 10-Q filed Aug 4, 2006.

Provision for Income Taxes

Our effective income tax rate was 14.4% and 19.7% for the three and six months ended June 30, 2006, respectively. The effective income tax rate is based upon the estimated income for the year, the composition of the income in different countries, and adjustments, if any, in the applicable quarterly periods for the potential tax consequences, benefits, resolutions of tax audits or other discrete tax items.

For the three and six months ended June 30, 2006, the effective tax rate varied from the statutory tax rate as a result of the mix of income attributable to foreign versus domestic jurisdictions. Our aggregate income tax rate in foreign jurisdictions is lower than our income tax rate in the United States. Additionally, during the three and six months ended June 30, 2006, we recognized tax benefits of $33.3 and $44.7, respectively. The $33.3 benefit recognized during the second quarter of 2006 resulted primarily from the favorable resolution of certain income tax audits. The benefit recognized during the six months ended June 30, 2006 also includes an $11.4 benefit that resulted primarily from a reduction in certain income tax contingencies. Partially offsetting these benefits were non-deductible IPR&D charges totaling $12.4 incurred in connection with several acquisitions made during the second quarter of 2006.

Our effective income tax rate was 26.9% for the three months ended June 30, 2005 and 26.2% for the six months ended June 30, 2005. For both periods, the effective tax rate varied from the statutory tax rate as a result of the mix of income attributable to foreign versus domestic jurisdictions. Additionally, for the six months ended June 30, 2005 we recognized a tax benefit of $7.4, primarily from a reduction in certain income tax contingencies. Partially offsetting this benefit was a non-deductible IPR&D charge of $3.1 incurred in connection with a business acquisition. We expect our income tax rate for the remainder of 2006 to be approximately 26%, however the rate is subject to change based on the percent of our income derived in different countries and adjustments, if any, for the potential tax consequences, benefits or resolutions of tax audits.

This excerpt taken from the EMC 10-Q filed May 5, 2006.

Provision for Income Taxes

Our effective income tax rate was 24.5% and 25.4% for the three months ended March 31, 2006 and 2005, respectively. The effective income tax rate is based upon the estimated income for the year, the composition of the income in different countries, and adjustments, if any, in the applicable quarterly periods for the potential tax consequences, benefits or resolutions of tax audits. For the three months ended March 31, 2006, the effective tax rate varied from the statutory tax rate as a result of the mix of income attributable to foreign versus domestic jurisdictions. Our aggregate income tax rate in foreign jurisdictions is lower than our income tax rate in the United States. Additionally, during the three months ended March 31, 2006, we recognized an $11.4 net benefit resulting primarily from a reduction in certain income tax contingencies. For the three months ended March 31, 2005, we recognized a net tax benefit of $8.4 primarily from a reduction in certain tax contingencies. Partially offsetting this benefit was a non-deductible IPR&D charge of $3.1 incurred in connection with the Smarts acquisition.

This excerpt taken from the EMC 10-K filed Mar 6, 2006.

Provision for Income Taxes

 

Our effective income tax rate was 31.4%, 26.5% and 13.1% in 2005, 2004 and 2003, respectively. The effective income tax rate is based upon the income for the year, the composition of the income in different countries, and adjustments, if any, for the potential tax consequences, benefits or resolutions of tax audits. For 2005, 2004 and 2003 the effective tax rate varied from the statutory rate as a result of the mix of income attributable to foreign versus domestic jurisdictions. Our aggregate income tax rate in foreign jurisdictions is lower than our income tax rate in the United States. Additionally, in 2005, we recognized an income tax benefit of $163.9 from the favorable resolution of certain income tax audits and expiration of statutes of limitations. These favorable reductions in our effective tax rate were partially offset by several factors. In 2005, we repatriated approximately $3,000.0 under the American Jobs Creation Act of 2004. The repatriation resulted in an incremental income tax expense of $180.2. Also in 2005, we incurred $17.4 of non-deductible IPR&D charges from acquisitions. We did not derive a tax benefit from these charges. For 2004, as a result of tax audits, we recognized a $20.0 reduction in our estimated income tax exposure pertaining to

 

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certain of our international tax liabilities. Partially offsetting these benefits were non-deductible IPR&D charges of $17.4 incurred in connection with acquisitions. For 2003, we favorably resolved a series of tax matters which aggregated $80.9. The tax matters included the resolution of certain merger-related contingencies. Partially offsetting these benefits were non-deductible IPR&D charges of $29.1 incurred in connection with acquisitions.

 

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