Dow Chemical 2013 Annual Report Download - page 153

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Deferred Tax Balances at December 31 2013 2012
In millions
Deferred Tax
Assets (1)
Deferred Tax
Liabilities
Deferred Tax
Assets (1)
Deferred Tax
Liabilities
Property $ 62 $ 2,165 $ 58 $ 2,128
Tax loss and credit carryforwards 2,012 — 1,954 —
Postretirement benefit obligations 3,619 1,150 4,900 1,291
Other accruals and reserves 1,901 392 2,167 329
Intangibles 113 827 218 994
Inventory 217 197 240 179
Long-term debt — 600 — 599
Investments 137 111 317 183
Other – net 1,143 794 1,168 642
Subtotal $ 9,204 $ 6,236 $ 11,022 $ 6,345
Valuation allowances (1,112) — (1,399) —
Total $ 8,092 $ 6,236 $ 9,623 $ 6,345
(1) Included in current deferred tax assets are prepaid tax assets totaling $205 million in 2013 and $218 million in 2012.
Gross operating loss carryforwards amounted to $11,435 million at December 31, 2013 and $10,436 million at December 31,
2012. At December 31, 2013, $1,452 million of the operating loss carryforwards were subject to expiration in 2014 through
2018. The remaining operating loss carryforwards expire in years beyond 2018 or have an indefinite carryforward period. Tax
credit carryforwards at December 31, 2013 amounted to $124 million ($226 million at December 31, 2012), net of uncertain
tax positions, of which $4 million is subject to expiration in 2014 through 2018. The remaining tax credit carryforwards expire
in years beyond 2018 or have an indefinite carryforward period.
The Company had valuation allowances that primarily related to the realization of recorded tax benefits on tax loss
carryforwards from operations in the United States, Brazil and Asia Pacific of $1,112 million at December 31, 2013 and
$1,399 million at December 31, 2012.
Undistributed earnings of foreign subsidiaries and related companies that are deemed to be permanently invested amounted to
$16,139 million at December 31, 2013, $14,504 million at December 31, 2012 and $12,741 million at December 31, 2011. It is
not practicable to calculate the unrecognized deferred tax liability on undistributed earnings.
Total Gross Unrecognized Tax Benefits
In millions 2013 2012 2011
Balance at January 1 $ 409 $ 339 $ 319
Increases related to positions taken on items from prior years 385 66 5
Decreases related to positions taken on items from prior years (137) (32) (11)
Increases related to positions taken in the current year 10 53 70
Settlement of uncertain tax positions with tax authorities (393) (9) (21)
Decreases due to expiration of statutes of limitations (8) (8) (23)
Balance at December 31 $ 266 $ 409 $ 339
At December 31, 2013, the total amount of unrecognized tax benefits was $266 million ($409 million at December 31, 2012),
of which $257 million would impact the effective tax rate, if recognized ($392 million at December 31, 2012).
Interest and penalties associated with uncertain tax positions, including the matters that resulted in the adjustment of uncertain
tax positions, are recognized as components of the “Provision for income taxes,” and totaled a benefit of $71 million in 2013, a
charge of $92 million in 2012 and a charge of $21 million in 2011. The Company’s accrual for interest and penalties was
$81 million at December 31, 2013 and $131 million at December 31, 2012.
During 2013, court rulings on two separate tax matters resulted in the adjustment of uncertain tax positions. In February 2013,
the U.S. District Court for the Middle District of Louisiana issued a ruling that disallowed, for tax purposes, transactions and
partnerships associated with Chemtech, a wholly owned subsidiary. In March 2013, the U.S. Supreme Court denied certiorari
in Union Carbide's research tax credit case. Through denial of certiorari, the decision issued by the U.S. Court of Appeals
denying Union Carbide's tax credit claim for supplies used in process-related research and development at its manufacturing
facilities became final. As a result of these rulings, the Company adjusted uncertain tax positions related to these matters,
resulting in a tax charge of $276 million in 2013.