|12 Months Ended|
Dec. 31, 2011
|Income Tax Expense (Benefit) [Abstract]|
|Taxes [Text Block]||
Note 28: Taxes
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) was as follows:
Income in certain foreign 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 2020; however, the exemptions in certain countries are eligible for renewal. In 2011, the tax benefit attributable to tax holidays was $554 million with a $0.10 impact on diluted earnings per share. The tax holiday benefits for 2010 and 2009 were $256 million ($0.04 per diluted share) and $115 million ($0.02 per diluted share), respectively.
During 2011, net income tax deficiencies attributable to equity-based compensation transactions that were allocated to stockholders' equity totaled $18 million (net benefits of $40 million in 2010 and net deficiencies of $41 million in 2009).
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 year-ends were as follows:
Non-current deferred tax assets are included within other long-term assets on the consolidated balance sheets.
The valuation allowance is based on our assessment that it is more likely than not that certain deferred tax assets will not be realized in the foreseeable future. The valuation allowance as of December 31, 2011 included allowances related to unrealized state credit carryforwards of $215 million and matters related to our non-U.S. subsidiaries of $158 million.
As of December 31, 2011, our federal, state, and foreign net operating loss carryforwards for income tax purposes were approximately $317 million, $320 million, and $793 million, respectively. The majority of the foreign net operating loss carryforwards have no expiration date. The remaining foreign as well as the U.S. federal and state net operating loss carryforwards expire at various dates through 2032. 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 foreign net operating loss carryforwards include $491 million that is not likely to be recovered and has been reduced by a valuation allowance.
As of December 31, 2011, we had not recognized U.S. deferred income taxes on a cumulative total of $14.2 billion of undistributed earnings for certain non-U.S. subsidiaries and $2.8 billion of other basis differences of our investments in certain non-U.S. subsidiaries primarily related to McAfee. Determining the unrecognized deferred tax liability related to investments 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.
Long-term income taxes payable of $165 million as of December 31, 2011 ($190 million as of December 25, 2010), within other long-term liabilities, 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.
The aggregate changes in the balance of gross unrecognized tax benefits were as follows:
During 2011, we settled and effectively settled matters with the U.S. Internal Revenue Service and certain state tax authorities related to tax positions taken during prior periods. The result of the settlements, effective settlements, and resulting remeasurements was a reduction of $63 million in the balance of our gross unrecognized tax benefits ($73 million in 2010, $526 million in 2009), $61 million of which resulted in a tax benefit for 2011 ($48 million for 2010, $366 million for 2009).
If the remaining balance of $212 million of unrecognized tax benefits as of December 31, 2011 ($216 million as of December 25, 2010) were realized in a future period, it would result in a tax benefit of $92 million and a reduction in the effective tax rate ($124 million as of December 25, 2010).
During all years presented, we recognized interest and penalties related to unrecognized tax benefits within the provision for taxes on the consolidated statements of income. In 2011, we recognized an expense of $24 million, primarily due to the accrual of interest and penalties related to foreign unrecognized tax benefits. In 2009, we recognized a net benefit of $62 million, primarily due to the reversal of accrued interest and penalties related to settled and effectively settled matters described above (insignificant for 2010). As of December 31, 2011, we had $90 million of accrued interest and penalties related to unrecognized tax benefits ($49 million as of December 25, 2010).
Although the timing of the resolution and/or closure on audits is highly uncertain, it is reasonably possible that the balance of gross unrecognized tax benefits could significantly change in the next 12 months. However, given the number of years remaining subject to examination and the number of matters being examined, we are unable to estimate the full range of possible adjustments to the balance of gross unrecognized tax benefits.
We file U.S. federal, U.S. state, and non-U.S. tax returns. For U.S. state and non-U.S. tax returns, we are generally no longer subject to tax examinations for years prior to 2001. For U.S. federal tax returns, we are no longer subject to tax examination for years prior to 2008.
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