Fluor 2013 Annual Report Download - page 117

FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The company had non-U.S. net operating loss carryforwards, related to various jurisdictions, of
approximately $1.1 billion as of December 31, 2013. Of the total losses, $1.0 billion can be carried forward
indefinitely and $46 million will begin to expire in various jurisdictions starting in 2014.
The company had foreign tax credits of approximately $31 million as of December 31, 2013, which will
begin to expire in 2021.
The company maintains a valuation allowance to reduce certain deferred tax assets to amounts that
are more likely than not to be realized. The allowance for 2013 is primarily due to the deferred tax assets
established for certain net operating loss carryforwards and certain reserves on investments. The allowance
for 2012 was primarily related to the deferred tax assets established for certain net operating and capital
loss carryforwards and certain reserves on investments. The net increase in the valuation allowance during
2013 was primarily due to an increase in net operating losses.
The company conducts business globally and, as a result, the company or one or more of its
subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign
jurisdictions. In the normal course of business, the company is subject to examination by taxing authorities
throughout the world, including such major jurisdictions as Australia, Canada, the Netherlands, South
Africa, the United Kingdom and the United States. Although the company believes its reserves for its tax
positions are reasonable, the final outcome of tax audits could be materially different, both favorably and
unfavorably. With a few exceptions, the company is no longer subject to U.S. federal, state and local, or
non-U.S. income tax examinations for years before 2003.
During 2012, the company reached an agreement on certain issues with the U.S. Internal Revenue
Service (‘‘IRS’’) on a tax audit for tax years 2003 through 2005. This agreement resulted in a net reduction
in tax expense of $13 million.
The unrecognized tax benefits as of December 31, 2013 and 2012 were $54 million and $47 million, of
which $40 million and $33 million, if recognized, would have favorably impacted the effective tax rates at
the end of 2013 and 2012, respectively. The company does not anticipate any significant changes to the
unrecognized tax benefits within the next twelve months.
A reconciliation of the beginning and ending amount of unrecognized tax benefits including interest
and penalties is as follows:
(in thousands) 2013 2012
Balance at beginning of year $47,043 $ 214,998
Change in tax positions of prior years 1,015 (64,214)
Change in tax positions of current year 7,397 —
Reduction in tax positions for statute expirations (1,401) —
Reduction in tax positions for audit settlements — (103,741)
Balance at end of year $54,054 $ 47,043
The company recognizes accrued interest and penalties related to unrecognized tax benefits in income
tax expense. The company has $7 million in interest and penalties accrued as of both December 31, 2013
and 2012.
F-18