Freeport-McMoRan 2013 Annual Report Download - page 108

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
106 | FREEPORT-McMoRan
of state deferred tax liabilities, partially offset by income tax expense of $76 million
associated with the write off of deferred tax assets related to environmental liabilities.
b. In 2012, Sociedad Minera Cerro Verde S.A.A. (Cerro Verde) signed a new 15-year mining
stability agreement with the Peruvian government, which became effective January 1,
2014. In connection with the new mining stability agreement, Cerro Verde’s income tax
rate increased from 30 percent to 32 percent, and FCX recognized additional deferred tax
expense of $29 million.
c. With the exception of TFM, FCX has not elected to permanently reinvest earnings from its
foreign subsidiaries and has recorded deferred tax liabilities for foreign earnings that are
available to be repatriated to the U.S. Cerro Verde previously recorded deferred Peruvian
income tax liabilities for income taxes that would become payable if the reinvested profits
used to fund the initial Cerro Verde sulfide expansion were distributed prior to the
expiration of Cerro Verde’s 1998 stability agreement on December 31, 2013. Because
reinvested profits at Cerro Verde were not expected to be distributed prior to December 31,
2013, a net deferred income tax liability of $234 million was reversed and recognized as an
income tax benefit in 2012.
d. In September 2011, Peru enacted a new mining tax and royalty regime and also created a
special mining burden that companies with stability agreements could elect to pay.
Cerro Verde elected to pay this special mining burden during the remaining term of its
1998 stability agreement, which expired on December 31, 2013. As a result, Cerro Verde
recognized additional tax expense of $53 million in 2011.
e. Benefit from the use of federal operating loss carryforwards acquired as part of the oil
and gas acquisitions.
A reconciliation of the U.S. federal statutory tax rate to FCX’s
effective income tax rate for the years ended December 31 follows:
FCX’s provision for income taxes for the years ended December 31
consists of the following:
2013 2012 2011
Current income taxes:
Federal $ 203 $ 238 $ 394
State 9 7 21
Foreign 1,081 1,002 1,934
Total current 1,293 1,247 2,349
Deferred income taxes (benefits):
Federal 234 87 82
State (35) 18 (19)
Foreign 346 363 622
Total deferred 545 468 685
Adjustments (199)
a
(205)
b,c
53
d
Federal operating loss carryforwards (164)
e
— —
Provision for income taxes $ 1,475 $ 1,510 $ 3,087
a. As a result of the oil and gas acquisitions, FCX recognized a net tax benefit of $199 million
consisting of income tax benefits of $190 million associated with net reductions in FCX’s
valuation allowances, $69 million related to the release of the deferred tax liability on
PXP’s investment in MMR common stock and $16 million associated with the revaluation
2013 2012 2011
Amount Percent Amount Percent Amount Percent
U.S. federal statutory tax rate $ 1,720 35% $ 1,920 35% $ 3,086 35%
Foreign tax credit limitation 117 2 110 2 163 2
Percentage depletion (223) (5) (263) (5) (283) (3)
Withholding and other impacts on foreign earnings 83 2 (221)
b
(4) 170 2
Valuation allowance on minimum tax credits (190)
a
(4) (9) — (47) (1)
State income taxes (43) — 17 — — —
Other items, net 11
a
— (44) — (2) —
Provision for income taxes $ 1,475 30% $ 1,510 28% $ 3,087 35%
a. Included a net tax benefit of $199 million as a result of the oil and gas acquisitions.
b. Included the reversal of Cerro Verde’s deferred income tax liability of $234 million.
The components of deferred taxes follow:
December 31, 2013 2012
Deferred tax assets:
Foreign tax credits $ 2,144 $ 2,022
Accrued expenses 1,098 819
Minimum tax credits 603 474
Net operating loss carryforwards 925 343
Employee benefit plans 443 315
Other 557 374
Deferred tax assets 5,770 4,347
Valuation allowances (2,487) (2,443)
Net deferred tax assets 3,283 1,904
Deferred tax liabilities:
Property, plant, equipment and mining
development costs (4,887) (4,462)
Oil and gas properties (4,708) —
Undistributed earnings (936) (884)
Other (34) (70)
Total deferred tax liabilities (10,565) (5,416)
Net deferred tax liabilities $ (7,282) $ (3, 512)
FCX paid federal, state, local and foreign income taxes totaling
$1.3 billion in 2013, $1.8 billion in 2012 and $3.4 billion in 2011. FCX
received refunds of federal, state, local and foreign income taxes
of $270 million in 2013, $69 million in 2012 and $15 million in 2011.