NOTE 12 - Income Taxes
Accumulated net earnings of certain foreign subsidiaries, which totaled $1.6 billion at December 31, 1999, are intended to be permanently reinvested outside the United States. Accordingly, federal taxes, which would have aggregated $236 million, have not been provided on those earnings.
The current and deferred components of the provision for income taxes were:
Deferred tax assets primarily reflect reserves not yet deducted for tax purposes of $1.7 billion and $1.8 billion for 1999 and 1998, respectively, deferred Cardmember fees of $230 million and $225 million, and deferred compensation of $358 million and $331 million at December 31, 1999 and 1998, respectively. Deferred tax liabilities for 1999 and 1998 mainly comprise deferred acquisition costs of $919 million and $853 million, respectively; and accelerated depreciation of $148 million and $158 million, respectively.
Deferred taxes related to SFAS No. 115 include deferred tax assets of $145 million for 1999 and deferred tax liabilities of $320 million for 1998.
The principal reasons that the aggregate income tax provision is different from that computed by using the U.S. statutory rate of 35 percent are:
Net income taxes paid by the company during 1999, 1998 and 1997 were $392 million, $977 million and $878 million, respectively, and include estimated tax payments and cash settlements relating to prior tax years.
The items composing comprehensive income in the Consolidated Statements of Shareholders’ Equity are presented net of income tax provision (benefit). The changes in net unrealized securities gains are presented net of tax provision (benefits) of $(473) million, $2 million and $104 million for 1999, 1998 and 1997, respectively. Foreign currency translation adjustments are presented net of tax (benefits) of $(3) million, $(8) million and $(4) million for 1999, 1998 and 1997, respectively.
