Amgen 2012 Annual Report Download - page 119

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F-20
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, 2012, 2011 and 2010 is as follows (in millions):
2012 2011 2010
Balance at beginning of year $ 975 $ 920 $ 1,140
Additions based on tax positions related to the current year 300 283 305
Reductions for tax positions of prior years (45)(7)(110)
Settlements (30)(221)(415)
Balance at end of year $ 1,200 $ 975 $ 920
Substantially all of the UTBs as of December 31, 2012, if recognized, would affect our effective tax rate.
During the year ended December 31, 2012, we settled examinations with various state and foreign tax authorities for prior
tax years. As a result of these developments, we remeasured our UTBs accordingly.
During the year ended December 31, 2011, we settled our examination with the Internal Revenue Service (IRS) related to
certain transfer pricing tax positions for the years ended December 31, 2007, 2008 and 2009. As a result of these developments,
we remeasured our UTBs accordingly.
During the year ended December 31, 2010, we settled our examination with the 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.
As of December 31, 2012, we believe it is reasonably possible that our gross liabilities for UTBs may decrease by
approximately $280 million within the succeeding twelve months due to the resolution of federal and state audits, including a
decrease related to the IRS settlement described below.
Interest and penalties related to UTBs are included in our provision for income taxes. During 2012, 2011 and 2010, we
accrued approximately $30 million, $23 million and $41 million, respectively, of interest and penalties through the income tax
provision in the Consolidated Statements of Income. At December 31, 2012 and 2011, accrued interest and penalties associated
with UTBs totaled approximately $102 million and $105 million, respectively.
The reconciliation between the federal statutory tax rate applied to income before income taxes and our effective tax rate
for the years ended December 31, 2012, 2011 and 2010, is as follows:
2012 2011 2010
Federal statutory tax rate 35.0 % 35.0 % 35.0 %
Foreign earnings, including earnings invested indefinitely (17.8)% (19.4)% (19.1)%
State taxes 0.6 % 0.7 % 1.6 %
Credits, Puerto Rico Excise Tax (5.2)% (6.5)% 0.0 %
Credits, primarily federal R&D 0.0 % (1.5)% (0.9)%
Legal settlements (0.2)% 2.2 % 0.0 %
Audit settlements (federal, state, foreign) 0.3 % 0.0 % (3.1)%
Other, net 0.6 % 0.8 % (0.5)%
Effective tax rate 13.3 % 11.3 % 13.0 %