Sigma-Aldrich (SIAL)

Income Taxes

Income taxes, which include federal, state and international taxes were 28.9%, 26.9% and 24.8% of pretax income in 2007, 2006 and 2005, respectively. The higher effective tax rate for the full year of 2007 compared to the same period in 2006 reflects the absence of a net benefit from audit activity in 2007 and expiring U.S. export tax benefits in 2006, partially offset by an increase in the U.S. manufacturing deduction and reduced international taxes in 2007. The higher effective tax rate for 2006 of 26.9% compared to the same period in 2005 largely reflects a lower level of international tax benefits, partially offset by the absence of the tax charge to repatriate accumulated foreign earnings in 2005.

Our effective tax rate for 2008 is expected to increase to a range of 30% to 32% due to a higher net international tax level due to a large 2007 benefit from changes in our international organization and the expiration of the U.S. R&D tax credit. Reinstatement of the U.S. R&D credit currently being considered by the U.S. Congress would likely drive the tax rate for 2008 to the lower end of the 30-32% range.

Income Taxes

Income Taxes

Income taxes, which include federal, state and international taxes were 26.9%, 24.8% and 25.3% of pretax income in 2006, 2005 and 2004, respectively. The higher effective tax rate for 2006 of 26.9% largely reflects a lower level of international tax benefits, partially offset by the absence of the tax charge to repatriate accumulated foreign earnings in 2005. The effective income tax rate in 2005 of 24.8% reflects a favorable settlement of tax claims for 1998–2001 and a reduction in tax liabilities based on this settlement largely offset by the tax charge to repatriate accumulated foreign earnings.

Our effective tax rate for 2007 is expected to increase to 30–31% from the 2006 rate of 26.9% as benefits from 2006 tax audit activity are not expected to recur and U.S. export tax benefits (EIE) ended at December 31, 2006.

Income Taxes

Income taxes, which include federal, state and international taxes were 26.9%, 24.8% and 25.3% of pretax income in 2006, 2005 and 2004, respectively. The higher effective tax rate for 2006 of 26.9% largely reflects a lower level of international tax benefits, partially offset by the absence of the tax charge to repatriate accumulated foreign earnings in 2005. The effective income tax rate in 2005 of 24.8% reflects a favorable settlement of tax claims for 1998–2001 and a reduction in tax liabilities based on this settlement largely offset by the tax charge to repatriate accumulated foreign earnings.

Our effective tax rate for 2007 is expected to increase to 30–31% from the 2006 rate of 26.9% as benefits from 2006 tax audit activity are not expected to recur and U.S. export tax benefits (EIE) ended at December 31, 2006.

Income Taxes

Income taxes, which include federal, state and international taxes were 24.8%, 25.3% and 30.2% of pretax income from continuing operations in 2005, 2004 and 2003, respectively. The effective income tax rate in 2005 of 24.8% reflects a favorable settlement of tax claims for 1998-2001 and a reduction in tax liabilities based on this settlement largely offset by the tax charge to repatriate accumulated foreign earnings and a lower level of international and other tax benefits in 2005. The effective income tax rate in 2004 of 25.3% reflects benefits from changing our worldwide organizational structure to align our legal entities with our international operating organization, along with a higher level of international and other tax benefits.

The Company’s tax rate is expected to be approximately 31 % in 2006 as the net effect of the 2005 tax claim settlement benefit and the 2005 tax charge to repatriate accumulated foreign earnings will not recur.

(13) Income Taxes

In October 2004, the American Jobs Creation Act of 2004 (the “Act”) was signed into law. The Act creates a temporary incentive for U.S. corporations to repatriate undistributed foreign earnings by providing an 85% dividend received deduction for certain dividends from controlled foreign corporations in 2005. The deduction is subject to a number of limitations. As of September 30, 2005, the Company had not decided whether, and to what extent, the Company might repatriate its undistributed foreign earnings under the Act, and, accordingly, the consolidated financial statements do not reflect any provision for income tax on undistributed foreign earnings which may be repatriated under the provisions of the Act. Based on the Company’s preliminary analysis to date, amounts under consideration for application of the one-time dividend received deduction as a result of the repatriation provision range from zero to $160 million. The related income tax effect from such repatriation is dependent on a number of factors that are being analyzed and ultimate approval of the repatriation by the Company’s Board of Directors. The potential impact from this repatriation is an increase to the Company’s income tax provision of up to $5 million. The Company expects to finalize its decision by the end of 2005.

Income Taxes

Income taxes, which include federal, state and international taxes were 25.3%, 30.2% and 31.4% of pretax income from continuing operations in 2004, 2003 and 2002, respectively. The effective income tax rate in 2004 of 25.3% reflects benefits from changing our worldwide organizational structure to align our legal entities with our international operating organization, along with a higher level of international and other tax benefits. The effective rate of 30.2% in 2003 was favorably impacted by a higher benefit on U.S. export sales.

The Company’s tax rate is expected to be approximately 29% in 2005 as international tax benefits are not anticipated to be as significant as they were in 2004.