Amgen 2010 Annual Report Download - page 137

when we believe our deferred tax assets are not recoverable based on an assessment of estimated future taxable
income that incorporates ongoing, prudent and feasible tax planning strategies.
At December 31, 2010, we had net operating loss carryforwards of $303 million available to reduce future
taxable income in various state taxing jurisdictions. We have provided a valuation allowance against $44 million of
the state operating loss carryforwards. The state operating loss carryforwards expire between 2010 and 2018.
At December 31, 2010, we had $110 million of tax credit carryforwards available to reduce future state income
taxes which have no expiration date, and $80 million of state tax credit carryforwards for which a full valuation
allowance has been provided.
The reconciliation of the total gross amounts of UTBs (excluding interest, penalties, foreign tax credits and the
federal tax benefit of state taxes related to UTBs) for the years ended December 31, 2010, 2009 and 2008 is as
follows (in millions):
2010 2009 2008
Balance at beginning of year ....................................... $1,140 $1,113 $ 922
Additions based on tax positions related to the current year ................ 305 302 382
Reductions for tax positions of prior years ............................. (110) (215) —
Settlements .................................................... (415) (60) (191)
Balance at end of year ............................................ $ 920 $1,140 $1,113
Substantially all of the UTBs as of December 31, 2010, if recognized, would affect our effective tax rate.
During the year ended December 31, 2010, we settled our examination with the Internal Revenue Service
(“IRS”) related to certain transfer pricing tax positions for the years ended December 31, 2007 and 2008. In
addition, we also settled issues under appeal with the IRS for the years ended December 31, 2005 and 2006
primarily related to the impact of transfer pricing adjustments on the repatriation of funds. During the year ended
December 31, 2010, the IRS also agreed to Competent Authority relief for certain transfer pricing tax positions for
the years ended December 31, 2002 through December 31, 2006. As a result of these developments, we remeasured
our UTBs accordingly.
During the year ended December 31, 2009, we settled the examination of our U.S. income tax returns with the
IRS for certain matters, primarily related to transfer pricing tax positions, for the years ended December 31, 2005
and 2006. Also during the year ended December 31, 2009, we settled the examination of our California state income
tax returns for certain matters for the years ended December 31, 2004 and 2005. As a result of these developments,
we remeasured our UTBs accordingly.
During the year ended December 31, 2008, we reached an agreement with the IRS as to the amount of certain
transfer pricing adjustments for the years ended December 31, 2005 and 2006 which were covered by the closing
agreement entered into in 2007.
As of December 31, 2010, we believe it is reasonably possible that our gross liabilities for UTBs may decrease
by $200 million within the succeeding twelve months due to potential tax settlements.
Interest and penalties related to UTBs are included in our provision for income taxes. During 2010, 2009, and
2008, we accrued approximately $41 million, $57 million, and $71 million, respectively, of interest and penalties
through the income tax provision in the Consolidated Statements of Income. At December 31, 2010 and 2009,
accrued interest and penalties associated with UTBs totaled approximately $90 million and $125 million,
respectively.
F-15
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)