Note 4 Income Taxes

Pre-tax income applicable to U.S. and foreign operations is as follows:

 

(Millions of dollars)
Year Ended December 31, 2000 1999 1998
United States $114 $262 $277
Foreign 369 365 319
.
Total income before income taxes $483 $627 $596


The following is an analysis of the provision for income taxes:
(Millions of dollars)
Year Ended December 31, 2000 1999 1998
Current tax expense (benefit)
U.S. Federal ($2) $39 $54
State and local 4 11 12
Foreign 66 49 50
.
Total current 68 99 116
.
Deferred tax expense (benefit)
U.S. Federal 20 49 29
Foreign 15 4 (18)
.
Total deferred 35 53 11
.
Total income taxes $103 $152 $127


Net deferred tax liabilities are comprised of the following:

. (Millions of dollars)
December 31, 2000 1999
Deferred Tax Liabilities
Fixed assets $715 $685
State and local 11 10
Other 145 164
.
Total deferred tax liabilities 871 859
.
Deferred Tax Assets
Benefit plans and related 175 194
Inventory 22 22
Alternative minimum tax and other credits 77 58
Carryforwards-gross 98 115
Other 119 72
. 491 461
Less: Valuation allowances 10 5
.
Total deferred tax assets 481 456
.
Net deferred tax liabilities $390 $403


An analysis of the difference between the provision for income taxes and the amount computed by applying the U.S. statutory income tax rate to pre-tax income follows:

 
(Millions of dollars)
Year ended December 31, 2000 1999 1998
$ % $ % $ %
U.S. statutory income tax rate 169 35.0 219 35.0 208 35.0
.            
State and local taxes 3 0.6 7 1.1 8 1.3
U.S. tax credits (6) (1.2) (4) (0.6) (3) (0.5)
Foreign taxes (49) (10.2) (72) (11.6) (80) (13.4)
Other-net (14) (2.9) 2 0.3 (6) (1)
.
Provision for income taxes 103 21.3 152 24.2 127 21.4

 

The valuation allowances increased $5 million in 2000 (decreased $1 million in 1999 and $4 million in 1998) all relating to foreign net operating loss carryforwards activity. At December 31, 2000, Praxair has approximately $9 million of foreign net operating loss carryforwards that expire principally through 2005, for which the deferred tax asset has been fully reserved by valuation allowances.

During 2000, Italy decreased its top marginal tax rate. During 1999, France, Japan and the United Kingdom decreased and Brazil increased their top marginal tax rate. The effects of these tax rate changes were immaterial.

Provision has not been made for additional Federal or foreign taxes at December 31, 2000 on $1,143 million of undistributed earnings of foreign subsidiaries that are planned to be reinvested indefinitely. These earnings could become subject to additional tax if they were remitted as dividends, loaned to Praxair, or upon sale of the subsidiary's stock. It is not practicable to estimate the amount or timing of the additional tax, if any, that might eventually be payable on the foreign earnings.