Diversified industrial manufacturer Eaton Corporation (NYSE:ETN) announced today that the new health care reform act and education reconciliation bill (the Health Care and Education Reconciliation Act of 2010, H. R. 4872) will increase the company’s income tax expense by $25 million through a non-cash, one-time charge taken in the first quarter of 2010.

The $25 million charge relates to the write-off of deferred income tax assets because the new law eliminates the non-taxable nature of the retiree drug subsidy received by the company. Although this change in income tax deductibility does not take effect until 2013, Eaton is required to recognize the charge in the first quarter of 2010 when the Act was signed into law. This charge was not considered in guidance for first quarter or full year 2010.

Eaton Corporation is a diversified power management company with 2009 sales of $11.9 billion. Eaton is a global technology leader in electrical components and systems for power quality, distribution and control; hydraulics components, systems and services for industrial and mobile equipment; aerospace fuel, hydraulics and pneumatic systems for commercial and military use; and truck and automotive drivetrain and powertrain systems for performance, fuel economy and safety. Eaton has approximately 70,000 employees and sells products to customers in more than 150 countries. For more information, visit www.eaton.com.

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