Income Taxes
The components of the (provision)/benefit for income taxes on continuing operations were:
|
| | | | | | | | | |
| Year Ended December 31 |
Millions of dollars | 2013 | 2012 | 2011 |
Current income taxes: | | | |
Federal | $ | (245 | ) | $ | (695 | ) | $ | (1,026 | ) |
Foreign | (485 | ) | (328 | ) | (334 | ) |
State | (49 | ) | (47 | ) | (109 | ) |
Total current | (779 | ) | (1,070 | ) | (1,469 | ) |
Deferred income taxes: | | | |
Federal | 4 |
| (168 | ) | (28 | ) |
Foreign | 125 |
| 15 |
| 57 |
|
State | 2 |
| (12 | ) | 1 |
|
Total deferred | 131 |
| (165 | ) | 30 |
|
Provision for income taxes | $ | (648 | ) | $ | (1,235 | ) | $ | (1,439 | ) |
The United States and foreign components of income from continuing operations before income taxes were as follows:
|
| | | | | | | | | |
| Year Ended December 31 |
Millions of dollars | 2013 | 2012 | 2011 |
United States | $ | 1,070 |
| $ | 2,826 |
| $ | 4,040 |
|
Foreign | 1,694 |
| 996 |
| 409 |
|
Total | $ | 2,764 |
| $ | 3,822 |
| $ | 4,449 |
|
Reconciliations between the actual provision for income taxes on continuing operations and that computed by applying the United States statutory rate to income from continuing operations before income taxes were as follows:
|
| | | | | | |
| Year Ended December 31 |
| 2013 | 2012 | 2011 |
United States statutory rate | 35.0 | % | 35.0 | % | 35.0 | % |
Impact of foreign income taxed at different rates | (9.3 | ) | (2.5 | ) | (0.5 | ) |
Domestic manufacturing deduction | (2.0 | ) | (2.2 | ) | (2.1 | ) |
State income taxes | 1.7 |
| 1.6 |
| 1.6 |
|
Adjustments of prior year taxes | (1.3 | ) | (0.6 | ) | (1.5 | ) |
Other impact of foreign operations | (0.2 | ) | (0.5 | ) | (0.4 | ) |
Other items, net | (0.4 | ) | 1.5 |
| 0.2 |
|
Total effective tax rate on continuing operations | 23.5 | % | 32.3 | % | 32.3 | % |
Our effective tax rate on continuing operations was 23.5% for 2013 and 32.3% for 2012 and 2011. The 2013 effective tax rate on continuing operations was positively impacted by several items during the year, including federal tax benefits of approximately $50 million due to the reinstatement of certain tax benefits and credits related to the first quarter enactment of the American Taxpayer Relief Act of 2012. Also contributing to the lower tax rate in 2013 was a $1.0 billion loss contingency related to the Macondo well incident, which was tax-effected at the United States statutory rate, as well as some favorable tax items in Latin America in the fourth quarter. Additionally, our effective tax rate was positively impacted by lower tax rates in certain foreign jurisdictions, as we continue to reposition our technology, supply chain, and manufacturing infrastructure to more effectively serve our customers internationally.
We have not provided United States income taxes and foreign withholding taxes on the undistributed earnings of foreign subsidiaries as of December 31, 2013 because we intend to permanently reinvest such earnings outside the United States. If these foreign earnings were to be repatriated in the future, the related United States tax liability may be reduced by any foreign income taxes previously paid on these earnings. As of December 31, 2013, the cumulative amount of earnings upon which United States income taxes have not been provided is approximately $6.1 billion. It is not practicable to estimate the amount of unrecognized deferred tax liability related to these earnings at this time.
The primary components of our deferred tax assets and liabilities were as follows:
|
| | | | | | |
| December 31 |
Millions of dollars | 2013 | 2012 |
Gross deferred tax assets: | | |
Net operating loss carryforwards | $ | 481 |
| $ | 474 |
|
Accrued liabilities | 600 |
| 329 |
|
Employee compensation and benefits | 351 |
| 375 |
|
Other | 162 |
| 160 |
|
Total gross deferred tax assets | 1,594 |
| 1,338 |
|
Gross deferred tax liabilities: | | |
Depreciation and amortization | 1,185 |
| 859 |
|
Other | 81 |
| 137 |
|
Total gross deferred tax liabilities | 1,266 |
| 996 |
|
Valuation allowances – net operating loss carryforwards | 374 |
| 395 |
|
Net deferred income tax asset (liability) | $ | (46 | ) | $ | (53 | ) |
At December 31, 2013, we had $1.6 billion of net operating loss carryforwards, of which $161 million will expire from 2014 through 2017, $295 million will expire from 2018 through 2022, and $53 million will expire from 2023 through 2033. The remaining balance will not expire.
The following table presents a rollforward of our unrecognized tax benefits and associated interest and penalties.
|
| | | | | | | |
Millions of dollars | Unrecognized Tax Benefits | | Interest
and Penalties |
Balance at January 1, 2011 | $ | 177 |
| | $ | 32 |
|
Change in prior year tax positions | 38 |
| | 41 |
|
Change in current year tax positions | 5 |
| | 1 |
|
Cash settlements with taxing authorities | (12 | ) | | (3 | ) |
Lapse of statute of limitations | (3 | ) | | (2 | ) |
Balance at December 31, 2011 | $ | 205 |
| | $ | 69 |
|
Change in prior year tax positions | 16 |
| | (1 | ) |
Change in current year tax positions | 14 |
| | 1 |
|
Cash settlements with taxing authorities | (3 | ) | | — |
|
Lapse of statute of limitations | (4 | ) | | (1 | ) |
Balance at December 31, 2012 | $ | 228 |
| (a) | $ | 68 |
|
Change in prior year tax positions | (53 | ) | | (9 | ) |
Change in current year tax positions | 30 |
| | 1 |
|
Cash settlements with taxing authorities | (21 | ) | | (17 | ) |
Lapse of statute of limitations | (9 | ) | | (9 | ) |
Balance at December 31, 2013 | $ | 175 |
| (a)(b) | $ | 34 |
|
| |
(a) | Includes $27 million as of December 31, 2013 and $59 million as of December 31, 2012 in foreign unrecognized tax benefits that would give rise to a United States tax credit. The remaining balance of $138 million, which excludes $10 million of unrecognized tax benefits covered by an indemnification asset, as of December 31, 2013 and $169 million as of December 31, 2012, if resolved in our favor, would positively impact the effective tax rate and, therefore, be recognized as additional tax benefits in our statement of operations. |
| |
(b) | Includes $3 million that could be resolved within the next 12 months. |
We file income tax returns in the United States federal jurisdiction and in various states and foreign jurisdictions. In most cases, we are no longer subject to state, local, or non-United States income tax examination by tax authorities for years before 2005. Tax filings of our subsidiaries, unconsolidated affiliates, and related entities are routinely examined in the normal course of business by tax authorities. Currently, our United States federal tax filings for the tax year 2012 is open for review, 2003 through 2009 are under appeal for tax items not agreed, and 2010 through 2011 are under examination by the Internal Revenue Service. During 2013, the Congressional Joint Committee on Taxation approved a $135 million income tax refund, excluding interest, to us for tax items agreed upon for the tax years 2003 through 2009.
