Income and Other Taxes (Notes)

9 Months Ended

Oct. 28, 2011

Income Tax Expense (Benefit) [Abstract]

Income and Other Taxes [Text Block]

NOTE 13 — INCOME AND OTHER TAXES

Dell's effective income tax rate was 16.7% and 23.6% for the third quarters of Fiscal 2012 and Fiscal 2011, respectively, and 18.2% and 23.2% for the nine months ended October 28, 2011, and October 29, 2010, respectively. The decrease in Dell's effective income tax rate for the three and nine months ended October 28, 2011, was primarily attributable to an increase in the proportion of taxable income attributable to lower tax jurisdictions. The differences between the estimated effective income tax rates and the U.S. federal statutory rate of 35% principally result from Dell's geographical distribution of taxable income and differences between the book and tax treatment of certain items. In certain jurisdictions Dell's tax rate is significantly less than the applicable statutory rate as a result of tax holidays. The majority of Dell's foreign income that is subject to these tax holidays and lower tax rates is attributable to Singapore, China, and Malaysia. The fourth quarter and annual Fiscal 2012 income tax rates will be impacted by the actual mix of jurisdictions in which income is generated.

Dell is currently under income tax audits in various jurisdictions, including the United States. The tax periods open to examination by the major taxing jurisdictions to which Dell is subject include fiscal years 1997 through 2011. As a result of these audits, Dell maintains ongoing discussions and negotiations relating to tax matters with the taxing authorities in the applicable jurisdictions. Dell believes that it has provided adequate reserves related to all matters contained in tax periods open to examination.

Dell's U.S. federal income tax returns for fiscal years 2007 through 2009 are currently under examination by the Internal Revenue Service (“IRS”). The IRS issued a Revenue Agent's Report for fiscal years 2004 through 2006 proposing certain assessments primarily related to transfer pricing matters. Dell disagrees with certain of the proposed assessments and has contested them through the IRS administrative appeals procedures. The IRS remanded the audit for the tax years 2004 through 2006 back to examination for further review. Should Dell experience an unfavorable outcome in this IRS matter, such an outcome could have a material impact on its results of operations, financial condition, and cash flows. Although the timing of income tax audit resolutions and negotiations with taxing authorities is highly uncertain, Dell does not anticipate a significant change to the total amount of unrecognized income tax benefits within the next 12 months.

Dell takes certain non-income tax positions in the jurisdictions in which it operates and has received certain non-income tax assessments from various jurisdictions. These jurisdictions include Brazil, where Dell is in litigation with a state government over the proper application of transactional taxes to warranties related to the sale of computers. Dell has also negotiated certain tax incentives with the state that can be used to offset potential tax liabilities should the courts rule against it. The incentives are based upon the number of jobs Dell maintains within the state.  This case is currently on appeal by Dell, which has pledged its manufacturing facility in Hortolandia, Brazil to the government pending resolution of the case. Dell does not expect the outcome of this case to have a material impact on its consolidated financial statements.

Dell believes its positions in these non-income tax litigation matters are supportable, that a liability is not probable, and that it will ultimately prevail. In the normal course of business, Dell's positions and conclusions related to its non-income taxes could be challenged and assessments may be made. To the extent new information is obtained and Dell's views on its positions, probable outcomes of assessments, or litigation change, changes in estimates to Dell's accrued liabilities would be recorded in the period in which such determination is made.