Freeport-McMoRan 2011 Annual Report Download - page 96

94 | FREEPORT-McMoRan COPPER & GOLD INC.
agreement. As a result, FCX recognized additional current and
deferred tax expense of $53 million ($49 million net of
noncontrolling interests) for the year 2011. e deferred portion of
this accrual relates primarily to the assets recorded in connection
with the 2007 acquisition of FMC.
In October 2010, the Chilean legislature approved an increase in
mining royalty taxes to help fund earthquake reconstruction
activities, education and health programs. Mining royalty taxes at
FCX’s El Abra and Candelaria mines were stabilized through 2017
at a rate of 4 percent. However, under the legislation, FCX opted to
transfer from its stabilized rate to the sliding scale of 4to 9 percent
(depending on a dened operational margin) for the years 2010
through 2012 and will return to its 4 percent rate for the years 2013
through 2017. Beginning in 2018 and through 2023, rates will
move to a sliding scale of 5 to 14 percent.
A summary of the activities associated with FCX’s reserve for
unrecognized tax benets, interest and penalties follows:
Unrecognized
Tax Benefits Interest Penalties
Balance at January 1, 2010 $ 253 $ 34 $ —
Additions:
Prior year tax positions 9 * *
Current year tax positions 24 * *
Interest and penalties — 2 —
Decreases:
Prior year tax positions (26) * *
Current year tax positions — * *
Lapse of statute of limitations (60) * *
Interest and penalties — (3) —
Balance at December 31, 2010 200 33 —
Additions:
Prior year tax positions 25 * *
Current year tax positions 16 * *
Interest and penalties — 7 —
Decreases:
Prior year tax positions (34) * *
Current year tax positions (8) * *
Lapse of statute of limitations (53) * *
Interest and penalties — (6) —
Balance at December 31, 2011 $ 146 $ 34 $ —
* Amounts not allocated.
e reserve for unrecognized tax benets of $146 million at
December 31, 2011, includes $101 million ($25 million net of
income tax benets) that, if recognized, would reduce FCX’s
provision for income taxes.
e net decrease in FCX’s reserve for unrecognized tax
benets primarily results from expiration of the applicable statute
of limitations that occurred in connection with reaching nal
settlements with taxing authorities. ere continues to be uncertainty
related to the timing of settlements with taxing authorities,
but if additional settlements are agreed upon during the year 2012,
FCX could experience a change in its reserve for unrecognized
tax benets.
FCX or its subsidiaries le income tax returns in the U.S. federal
jurisdiction and various state and foreign jurisdictions. e tax
years for FCX and its signicant subsidiaries that remain subject to
examination are as follows:
Jurisdiction Years Under Examination Additional Open Years
U.S. Federal Short Year Ending December 31, 2007 2011
2008-2010
Indonesia 2005-2008 2009-2011
Peru 2007-2008 2002-2006, 2009-2011
Chile 2010 2011
Arizona 2003-2007 2008-2011
New Mexico — 2003-2011
NOTE 13. Contingencies
Environmental.FCX incurred environmental capital expenditures
and other environmental costs (including joint venture partners’
share) to comply with applicable environmental laws and
regulations that aect its operations totaling $387 million in 2011,
$372 million in 2010 and $289 million in 2009.
FCX subsidiaries that operate in the U.S. are subject to various
federal, state and local environmental laws and regulations that
govern emissions of air pollutants; discharges of water pollutants;
and generation, handling, storage and disposal of hazardous
substances, hazardous wastes and other toxic materials. FCX
subsidiaries that operate in the U.S. also are subject to potential
liabilities arising under CERCLA or similar state laws that impose
responsibility on persons who arranged for the disposal of
hazardous substances, and on current and previous owners and
operators of a facility for the cleanup of hazardous substances
released from the facility into the environment, including damages
to natural resources, irrespective of when the damage to the
environment occurred or who caused it. at liability oen is
shared on a joint and several basis with all other owners and
operators, meaning that each owner or operator of the property is
fully responsible for the cleanup, although in many cases some or
all of the other historical owners or operators no longer exist, do
not have the nancial ability to respond or cannot be found. As a
result, because of FCX’s acquisition of FMC in 2007, many of the
subsidiary companies FCX now owns are responsible for a wide
variety of environmental remediation projects throughout the U.S.
FCX expects to spend substantial sums annually for many years to
address those remediation issues. Certain FCX subsidiaries have
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS