|12 Months Ended|
Dec. 31, 2016
|Income Tax Disclosure [Abstract]|
|Income Taxes [Text Block]||
Note 8: Income Taxes
Income Tax Provision
Income before taxes and the provision for taxes consisted of the following:
The difference between the tax provision at the statutory federal income tax rate and the tax provision as a percentage of income before income taxes (effective tax rate) for each period was as follows:
The majority of the increase in our effective tax rate in 2016 compared to 2015 was driven by one-time items and our 2015 decision to indefinitely reinvest some of our prior years' non-U.S. earnings, partially offset by higher proportion of our income in lower tax jurisdictions.
Most of the decrease in our effective tax rate in 2015 compared to 2014 was driven by one-time items, a higher proportion of our income from lower tax jurisdictions, and our decision to indefinitely reinvest certain prior years' non-U.S. earnings, which positively impacted our effective income tax rate.
Income in certain non-U.S. countries is fully exempt from income taxes for a limited period of time due to eligible activities and certain capital investment actions. These full tax exemptions expire at various dates through 2023; however, the exemptions in certain countries are eligible for renewal.
In 2016, the tax benefit attributable to tax holidays was $77 million ($85 million for 2015 and $166 million for 2014) with a $0.02 impact on diluted earnings per share ($0.02 for 2015 and $0.03 for 2014).
During 2016, net income tax benefits attributable to equity-based compensation transactions that were allocated to stockholders’ equity totaled $154 million (net benefits of $172 million in 2015 and net benefits of $103 million in 2014).
Deferred and Current Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts for income tax purposes. Significant components of our deferred tax assets and liabilities at the end of each period were as follows:
Deferred tax assets are included within other long-term assets on the consolidated balance sheets.
The valuation allowance as of December 31, 2016 included allowances related to unrealized state credit carryforwards of $839 million and matters related to our non-U.S. subsidiaries of $114 million.
As of December 31, 2016, our federal, state, and non-U.S. net operating loss carryforwards for income tax purposes were $321 million, $116 million, and $378 million, respectively. The majority of the non-U.S. net operating loss carryforwards have no expiration date. The remaining non-U.S., as well as the U.S. federal and state net operating loss carryforwards, expire at various dates through 2037. A significant amount of the net operating loss carryforwards in the U.S. relates to acquisitions and, as a result, is limited in the amount that can be recognized in any one year. The non-U.S. net operating loss carryforwards include $215 million that is not likely to be recovered and has been reduced by a valuation allowance.
As of December 31, 2016, we had not recognized U.S. deferred income taxes on a cumulative total of $46.4 billion of undistributed earnings and other basis differences for certain non-U.S. subsidiaries which includes the impact of the Altera acquisition. Determining the unrecognized deferred tax liability in these non-U.S. subsidiaries that are indefinitely reinvested is not practicable. We currently intend to indefinitely reinvest those earnings and other basis differences in operations outside the U.S.
Current income taxes receivable of $86 million as of December 31, 2016 ($468 million as of December 26, 2015) is included in other current assets. Current income taxes payable of $329 million as of December 31, 2016 ($272 million as of December 26, 2015) is included in other accrued liabilities.
Long-term income taxes payable of $125 million as of December 31, 2016 ($114 million as of December 26, 2015) is included in other long-term liabilities, which includes uncertain tax positions, reduced by the associated federal deduction for state taxes and non-U.S. tax credits, and may also include other long-term tax liabilities that are not uncertain but have not yet been paid.
Uncertain Tax Positions
The aggregate changes in the balance of gross unrecognized tax benefits for each period were as follows:
The related tax benefit for settlements, effective settlements, and remeasurements is insignificant for 2016 ($419 million in 2015 and insignificant in 2014).
If the remaining balance of $154 million of unrecognized tax benefits as of December 31, 2016 ($101 million as of December 26, 2015) were recognized in a future period, it would result in a tax benefit of $87 million (insignificant as of December 26, 2015) and a reduction in the effective tax rate. Interest, penalties and accrued interest related to unrecognized tax benefits were insignificant in periods presented
Our tax policy is to comply with the laws, regulations, and filing requirements of all jurisdictions in which we conduct business. We regularly engage in discussions and negotiations with tax authorities regarding tax matters in various jurisdictions. Although the timing of the resolutions and/or closures of audits is highly uncertain, it is reasonably possible that certain U.S. federal and non-U.S. tax audits may be concluded within the next 12 months, which could significantly increase or decrease the balance of our gross unrecognized tax benefits. However, the estimated impact of income tax expense and net income is not expected to be significant.
We file federal, state, and non-U.S. tax returns. For non-U.S. tax returns, we are generally no longer subject to tax examinations for years prior to 2002. For federal and state tax returns, we are no longer subject to tax examination for years prior to 2004. We have filed petitions before the U.S. Tax Court relating to the treatment of stock-based compensation expense in an inter-company cost-sharing transaction for certain pre-acquisition Altera tax years; the outcome of those appeals is pending in the U.S. Court of Appeals for the Ninth Circuit.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://www.xbrl.org/2003/role/presentationRef