Taxes
Income Taxes
|
| | | | | | | | | | | | |
| Year ended December 31 | |
| 2013 |
| | | 2012 |
| | 2011 |
|
Taxes on income | | | | | | |
U.S. federal | | | | | | |
Current | $ | 15 |
| | | $ | 1,703 |
| | $ | 1,893 |
|
Deferred | 1,128 |
| | | 673 |
| | 877 |
|
State and local | | | | | | |
Current | 120 |
| | | 652 |
| | 596 |
|
Deferred | 74 |
| | | (145 | ) | | 41 |
|
Total United States | 1,337 |
| | | 2,883 |
| | 3,407 |
|
International | | | | | | |
Current | 12,296 |
| | | 15,626 |
| | 16,548 |
|
Deferred | 675 |
| | | 1,487 |
| | 671 |
|
Total International | 12,971 |
| | | 17,113 |
| | 17,219 |
|
Total taxes on income | $ | 14,308 |
| | | $ | 19,996 |
| | $ | 20,626 |
|
In 2013, before-tax income for U.S. operations, including related corporate and other charges, was $4,672, compared with before-tax income of $8,456 and $10,222 in 2012 and 2011, respectively. For international operations, before-tax income was $31,233, $37,876 and $37,412 in 2013, 2012 and 2011, respectively. U.S. federal income tax expense was reduced by $175, $165 and $191 in 2013, 2012 and 2011, respectively, for business tax credits.
The reconciliation between the U.S. statutory federal income tax rate and the company’s effective income tax rate is detailed in the following table:
|
| | | | | | | | | | | | |
| Year ended December 31 | | |
| 2013 |
| | | | 2012 |
| | | 2011 |
| |
U.S. statutory federal income tax rate | 35.0 |
| % | | | 35.0 |
| % | | 35.0 |
| % |
Effect of income taxes from international operations at rates different from the U.S. statutory rate | 5.1 |
| | | | 7.8 |
| | | 7.5 |
| |
State and local taxes on income, net of U.S. federal income tax benefit | 0.6 |
| | | | 0.6 |
| | | 0.9 |
| |
Prior-year tax adjustments | (0.8 | ) | | | | (0.2 | ) | | | (0.1 | ) | |
Tax credits | (0.5 | ) | | | | (0.4 | ) | | | (0.4 | ) | |
Effects of changes in tax rates | — |
| | | | 0.3 |
| | | 0.5 |
| |
Other | 0.5 |
| | | | 0.1 |
| | | (0.1 | ) | |
Effective tax rate | 39.9 |
| % | | | 43.2 |
| % | | 43.3 |
| % |
The company’s effective tax rate decreased from 43.2 percent in 2012 to 39.9 percent in 2013. The decrease was primarily due to a lower effective tax rate in international upstream operations. The lower international upstream effective tax rate was driven by a greater portion of equity income in 2013 than in 2012 (equity income is included as part of before-tax income and is generally recorded net of income taxes) and foreign currency remeasurement impacts.
The company records its deferred taxes on a tax-jurisdiction basis and classifies those net amounts as current or noncurrent based on the balance sheet classification of the related assets or liabilities. The reported deferred tax balances are composed of the following:
|
| | | | | | | | |
| At December 31 | |
| 2013 |
| | | 2012 |
|
Deferred tax liabilities | | | | |
Properties, plant and equipment | $ | 25,936 |
| | | $ | 24,295 |
|
Investments and other | 2,272 |
| | | 2,276 |
|
Total deferred tax liabilities | 28,208 |
| | | 26,571 |
|
Deferred tax assets | | | | |
Foreign tax credits | (11,572 | ) | | | (10,817 | ) |
Abandonment/environmental reserves | (6,279 | ) | | | (5,728 | ) |
Employee benefits | (3,825 | ) | | | (5,100 | ) |
Deferred credits | (2,768 | ) | | | (2,891 | ) |
Tax loss carryforwards | (1,016 | ) | | | (738 | ) |
Other accrued liabilities | (533 | ) | | | (381 | ) |
Inventory | (358 | ) | | | (281 | ) |
Miscellaneous | (1,439 | ) | | | (1,835 | ) |
Total deferred tax assets | (27,790 | ) | | | (27,771 | ) |
Deferred tax assets valuation allowance | 17,171 |
| | | 15,443 |
|
Total deferred taxes, net | $ | 17,589 |
| | | $ | 14,243 |
|
Deferred tax liabilities at the end of 2013 increased by approximately $1,600 from year-end 2012. The increase was related to increased temporary differences for property, plant and equipment. Deferred tax assets were essentially unchanged between periods.
The overall valuation allowance relates to deferred tax assets for U.S. foreign tax credit carryforwards, tax loss carryforwards and temporary differences. It reduces the deferred tax assets to amounts that are, in management’s assessment, more likely than not to be realized. At the end of 2013, the company had tax loss carryforwards of approximately $3,064 and tax credit carryforwards of approximately $1,301 primarily related to various international tax jurisdictions. Whereas some of these tax loss carryforwards do not have an expiration date, others expire at various times from 2014 through 2029. U.S. foreign tax credit carryforwards of $11,572 will expire between 2014 and 2023.
At December 31, 2013 and 2012, deferred taxes were classified on the Consolidated Balance Sheet as follows:
|
| | | | | | | | |
| At December 31 | |
| 2013 |
| | | 2012 |
|
Prepaid expenses and other current assets | $ | (1,341 | ) | | | $ | (1,365 | ) |
Deferred charges and other assets | (2,954 | ) | | | (2,662 | ) |
Federal and other taxes on income | 583 |
| | | 598 |
|
Noncurrent deferred income taxes | 21,301 |
| | | 17,672 |
|
Total deferred income taxes, net | $ | 17,589 |
| | | $ | 14,243 |
|
Income taxes are not accrued for unremitted earnings of international operations that have been or are intended to be reinvested indefinitely. Undistributed earnings of international consolidated subsidiaries and affiliates for which no deferred income tax provision has been made for possible future remittances totaled approximately $31,300 at December 31, 2013. This amount represents earnings reinvested as part of the company’s ongoing international business. It is not practicable to estimate the amount of taxes that might be payable on the possible remittance of earnings that are intended to be reinvested indefinitely. At the end of 2013, deferred income taxes were recorded for the undistributed earnings of certain international operations where indefinite reinvestment of the earnings is not planned. The company does not anticipate incurring significant additional taxes on remittances of earnings that are not indefinitely reinvested.
Uncertain Income Tax Positions The company recognizes a tax benefit in the financial statements for an uncertain tax position only if management’s assessment is that the position is “more likely than not” (i.e., a likelihood greater than 50 percent) to be allowed by the tax jurisdiction based solely on the technical merits of the position. The term “tax position” in the accounting standards for income taxes refers to a position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring current or deferred income tax assets and liabilities for interim or annual periods.
The following table indicates the changes to the company’s unrecognized tax benefits for the years ended December 31, 2013, 2012 and 2011. The term “unrecognized tax benefits” in the accounting standards for income taxes refers to the differences between a tax position taken or expected to be taken in a tax return and the benefit measured and recognized in the financial statements. Interest and penalties are not included.
|
| | | | | | | | | | | | |
| 2013 |
| | | 2012 |
| | 2011 |
|
Balance at January 1 | $ | 3,071 |
| | | $ | 3,481 |
| | $ | 3,507 |
|
Foreign currency effects | (58 | ) | | | 4 |
| | (2 | ) |
Additions based on tax positions
taken in current year | 276 |
| | | 543 |
| | 469 |
|
Additions/reductions resulting from current-year asset acquisitions/sales | — |
| | | — |
| | (41 | ) |
Additions for tax positions taken
in prior years | 1,164 |
| | | 152 |
| | 236 |
|
Reductions for tax positions taken in prior years | (176 | ) | | | (899 | ) | | (366 | ) |
Settlements with taxing authorities in current year | (320 | ) | | | (138 | ) | | (318 | ) |
Reductions as a result of a lapse
of the applicable statute of limitations | (109 | ) | | | (72 | ) | | (4 | ) |
Balance at December 31 | $ | 3,848 |
| | | $ | 3,071 |
| | $ | 3,481 |
|
The increase in unrecognized tax benefits between December 31, 2012, and December 31, 2013 was primarily due to additions for refund claims to be filed with respect to prior years.
Approximately 71 percent of the $3,848 of unrecognized tax benefits at December 31, 2013, would have an impact on the effective tax rate if subsequently recognized. Certain of these unrecognized tax benefits relate to tax carryforwards that may require a full valuation allowance at the time of any such recognition.
Tax positions for Chevron and its subsidiaries and affiliates are subject to income tax audits by many tax jurisdictions throughout the world. For the company’s major tax jurisdictions, examinations of tax returns for certain prior tax years had not been completed as of December 31, 2013. For these jurisdictions, the latest years for which income tax examinations had been finalized were as follows: United States – 2008, Nigeria – 2000, Angola – 2001, Saudi Arabia – 2009 and Kazakhstan – 2007.
The company engages in ongoing discussions with tax authorities regarding the resolution of tax matters in the various jurisdictions. Both the outcome of these tax matters and the timing of resolution and/or closure of the tax audits are highly uncertain. However, it is reasonably possible that developments on tax matters in certain tax jurisdictions may result in significant increases or decreases in the company’s total unrecognized tax benefits within the next 12 months. Given the number of years that still remain subject to examination and the number of matters being examined in the various tax jurisdictions, the company is unable to estimate the range of possible adjustments to the balance of unrecognized tax benefits.
The company completed its assessment of the potential impact of the August 2012 decision by the U.S. Court of Appeals for the Third Circuit that disallowed the Historic Rehabilitation Tax Credits claimed by an unrelated taxpayer. The findings of this assessment did not result in a material impact on the company's financial position, results of operations or cash flows.
On the Consolidated Statement of Income, the company reports interest and penalties related to liabilities for uncertain tax positions as “Income tax expense.” As of December 31, 2013, accruals of $215 for anticipated interest and penalty obligations were included on the Consolidated Balance Sheet, compared with accruals of $293 as of year-end 2012. Income tax expense (benefit) associated with interest and penalties was $(42), $145 and $(64) in 2013, 2012 and 2011, respectively.
Taxes Other Than on Income
|
| | | | | | | | | | | | |
| Year ended December 31 | |
| 2013 |
| | | 2012 |
| | 2011 |
|
United States | | | | | | |
Excise and similar taxes
on products and merchandise | $ | 4,792 |
| | | $ | 4,665 |
| | $ | 4,199 |
|
Import duties and other levies | 4 |
| | | 1 |
| | 4 |
|
Property and other
miscellaneous taxes | 1,036 |
| | | 782 |
| | 726 |
|
Payroll taxes | 255 |
| | | 240 |
| | 236 |
|
Taxes on production | 333 |
| | | 328 |
| | 308 |
|
Total United States | 6,420 |
| | | 6,016 |
| | 5,473 |
|
International | | | | | | |
Excise and similar taxes on
products and merchandise | 3,700 |
| | | 3,345 |
| | 3,886 |
|
Import duties and other levies | 41 |
| | | 106 |
| | 3,511 |
|
Property and other
miscellaneous taxes | 2,486 |
| | | 2,501 |
| | 2,354 |
|
Payroll taxes | 168 |
| | | 160 |
| | 148 |
|
Taxes on production | 248 |
| | | 248 |
| | 256 |
|
Total International | 6,643 |
| | | 6,360 |
| | 10,155 |
|
Total taxes other than on income | $ | 13,063 |
| | | $ | 12,376 |
| | $ | 15,628 |
|
