Freeport-McMoRan 2011 Annual Report Download - page 95

2011 ANNUAL REPORT | 93
FCX paid federal, state, local and foreign income taxes totaling
$3.4 billion in 2011, $2.6 billion in 2010 and $1.6 billion in 2009.
FCX received refunds of federal, state, local and foreign income
taxes of $15 million in 2011, $26 million in 2010 and $193 million
in 2009.
e components of deferred taxes follow:
December 31, 2011 2010
Deferred tax assets:
Foreign tax credits $ 2,011 $ 1,837
Net operating loss carryforwards 356 442
Minimum tax credits 406 413
Accrued expenses
962 931
Employee benefit plans
245 215
Inventory
161 164
Other 276 224
Deferred tax assets 4,417 4,226
Valuation allowances
(2,393) (2,226)
Net deferred tax assets 2,024 2,000
Deferred tax liabilities:
Property, plant, equipment and development costs (4,227) (3,874)
Undistributed earnings
(1,010) (917)
Other (72) (28)
Total deferred tax liabilities (5,309) (4,819)
Net deferred tax liabilities $ (3,285) $ (2,819)
At December31,2011, FCX had U.S. foreign tax credit
carryforwards of $2.0 billion that will expire between 2012 and 2021,
and U.S. minimum tax credits carryforwards of $406 million
that can be carried forward indenitely, but may be used only to
the extent that regular tax exceeds the alternative minimum tax
in any given year.
At December31,2011, FCX had (i)DRC net operating loss
carryforwards of $560 million that can be carried forward
indenitely, (ii)U.S. net state operating loss carryforwards of
$468 million million that expire between 2012 and 2031, and
(iii)Spanish net operating loss carryforwards of $541 million
that expire between 2012 and 2026.
On the basis of available information at December31,2011,
FCX has provided valuation allowances for certain of its deferred
tax assets where FCX believes it is more likely than not that
some portion or all of such assets will not be realized. Valuation
allowances totaled $2.4 billion at December31,2011, and $2.2 billion
at December31,2010, and covered all of FCX’s U.S. foreign tax
credit carryforwards, and a portion of its foreign net operating loss
carryforwards, U.S. state net operating loss carryforwards and
U.S. minimum tax credit carryforwards. ese valuation
allowances include $80 million at December31,2011, and $59 million
at December31,2010, for tax benets that, if recognized, would
be credited directly to other comprehensive income.
e $167 million increase in the valuation allowance during
2011 was primarily a result of an increase in foreign tax credit
carryforwards, partly oset by a decrease in minimum tax credit
carryforwards.
In December 2011, the U.S. Treasury Department issued
temporary and proposed regulations on the treatment of amounts
paid for repair and maintenance costs of xed assets. ese
regulations generally apply to tax years beginning on or aer
January 1, 2012. Transition rules providing procedural guidance
are anticipated to be published during 2012. FCX is currently
evaluating the impact of the new regulations on its operating
results; however, this evaluation will not be completed until the
additional procedural guidance is issued. Neither the regulations
nor the additional procedural guidance are expected to have a
material impact on FCX’s results of operations or nancial condition.
In September 2011, Peru enacted a new mining tax and royalty
regime. Under the new regime, companies that do not have
stability agreements will be subject to a revised royalty and a
special mining tax. Cerro Verde operates under a stability
agreement and, therefore, is not subject to the revised royalty and
special mining tax until its stability agreement expires on
December31, 2013. e Peruvian government has also created a
special mining burden that companies with stability agreements
can elect to pay. e special mining burden is levied on prots and
is based on a sliding scale of 4 to 13 percent, with a maximum
eective tax rate of 8.79 percent. Cerro Verde will elect to pay this
special mining burden during the remaining term of its stability
2011 2010 2009
Amount Percent Amount Percent Amount Percent
U.S. federal statutory tax rate $ 3,086 35% $ 2,979 35% $ 2,036 35%
Foreign tax credit limitation 163 2 93 1 112 2
Percentage depletion (283) (3) (263) (3) (168) (3)
Withholding taxes 170 2 174 2 228 4
Valuation allowance on minimum tax credits (47) (1) 18 — 104 2
State income taxes — — 17 — (2) —
Other items, net (2) — (35) — (3) —
Provision for income taxes $ 3,087 35% $ 2,983 35% $ 2,307 40%
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation of the U.S. federal statutory tax rate to FCX’s
eective income tax rate for the years ended December31 follows: