Amgen 2015 Annual Report Download - page 97

F-19
Valuation allowances are provided to reduce the amounts of our deferred tax assets to an amount that is more likely than
not to be realized based on an assessment of positive and negative evidence, including estimates of future taxable income necessary
to realize future deductible amounts.
The valuation allowance for deferred tax assets decreased by $9 million and increased by $22 million in 2015 and 2014,
respectively. The decrease in 2015 was due primarily to the release of valuation allowances against U.S. and foreign deferred tax
assets due to the existence of sufficient taxable temporary differences that enable the use of the tax benefit of existing deferred
tax assets. The increase in 2014 was due primarily to valuation allowances established as part of acquisitions and the Company’s
expectation that some state NOLs and R&D credits will not be utilized.
At December 31, 2015, we had $32 million of federal tax credit carryforwards available to reduce future federal income
taxes and have provided no valuation allowance for those federal tax credit carryforwards. The federal tax credit carryforwards
expire between 2026 and 2034. We had $330 million of state tax credit carryforwards available to reduce future state income taxes
and have provided a valuation allowance for $241 million of those state tax credit carryforwards. All of the state tax credit
carryforwards have no expiry.
At December 31, 2015, we had $132 million of NOL carryforwards available to reduce future federal income taxes and have
provided a valuation allowance for $6 million of those federal NOL carryforwards. The federal NOL carryforwards, for which no
valuation allowance has been provided, expire between 2020 and 2034. We had $580 million of NOL carryforwards available to
reduce future state income taxes and have provided a valuation allowance for $499 million of those state NOL carryforwards. The
state NOLs for which no valuation allowance has been provided expire between 2016 and 2035. We had $1.7 billion of NOL
carryforwards available to reduce future foreign income taxes and have provided a valuation allowance for $750 million of those
foreign NOL carryforwards. $241 million of the foreign NOLs for which no valuation allowance has been provided have no expiry;
the remaining NOLs for which no valuation allowance has been provided will expire between 2016 and 2025.
The reconciliations of the total gross amounts of UTBs (excluding interest, penalties, foreign tax credits and the federal tax
benefit of state taxes related to UTBs) were as follows (in millions):
During the years ended December 31,
2015 2014 2013
Balance at beginning of year $ 1,772 $ 1,415 $ 1,200
Additions based on tax positions related to the current year 413 379 335
Additions based on tax positions related to prior years 93796
Reductions for tax positions of prior years (32)(45)(192)
Reductions for expiration of statute of limitations —(12)—
Settlements (48)(2)(24)
Balance at end of year $ 2,114 $ 1,772 $ 1,415
Substantially all of the UTBs as of December 31, 2015, if recognized, would affect our effective tax rate. During the year
ended December 31, 2015, we settled various examinations with state tax authorities for prior tax years. During the year ended
December 31, 2013, we settled our examination with the Internal Revenue Service (IRS) for the years ended December 31, 2007,
2008 and 2009. As a result of these developments, we remeasured our UTBs accordingly.
Interest and penalties related to UTBs are included in our provision for income taxes. During 2015, 2014 and 2013, we
accrued approximately $17 million, $35 million and $32 million, respectively, of interest and penalties through the income tax
provision in the Consolidated Statements of Income. At December 31, 2015 and 2014, accrued interest and penalties associated
with UTBs totaled approximately $151 million and $134 million, respectively.