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73GOOGLE INC. |Form10-K
PART II
ITEM8.Notes to Consolidated Financial Statements
Uncertain Tax Positions
The following table summarizes the activity related to our gross unrecognized tax benefi ts from January1, 2010 to December31,2012
(in millions):
Balance as of January1, 2010 $1,188
Increases related to prior year tax positions 37
Decreases related to prior year tax positions (197)
Decreases related to settlement with tax authorities (47)
Decreases as a result of a lapse of applicable statute of limitation (97)
Increases related to current year tax positions 256
Balance as of December31, 2010 1,140
Increases related to prior year tax positions 77
Decreases related to prior year tax positions (9)
Increases related to current year tax positions 361
Decreases related to settlement with tax authorities (5)
Balance as of December31,2011 1,564
Increases related to prior year tax positions 43
Decreases related to prior year tax positions (40)
Decreases related to settlement with tax authorities (62)
Increases related to acquisition 17
Increases related to current year tax positions 411
Balance as of December31, 2012 $1,933
Our total unrecognized tax benefi ts that, if recognized, would aff ect our eff ective tax rate were $951million, $1,350million, and
$1,749million as of December31,2010, 2011, and 2012.
As of December31, 2011 and 2012, we had accrued $129million and $139million for payment of interest and penalties. Interest
and penalties included in our provision for income taxes were not material in all the periods presented.
We and our subsidiaries are routinely examined by various taxing authorities. Although we fi le U.S. federal, U.S. state, and foreign
tax returns, our two major tax jurisdictions are the U.S. and Ireland. During the three months ended December31, 2007, the IRS
completed its examination of our 2003 and 2004 tax years. We have fi led an appeal with the IRS for certain issues related to this
audit and settlements were reached in 2012 on all but one issue which we plan to litigate in court. As a result we released the
related reserves in the three month ended December31, 2012. The IRS is currently in examination of our 2007, 2008, and 2009
tax years. We expect the examination to be completed within the next 12 months, but we do not anticipate any signifi cant impact
to our unrecognized tax benefi t balance as of December31, 2012, related to our 2007, 2008, and 2009 tax years.
Our 2010, 2011 and 2012 tax years remain subject to examination by the IRS for U.S. federal tax purposes, and our 2006 through
2012 tax years remain subject to examination by the appropriate governmental agencies for Irish tax purposes. There are various
other ongoing audits in various other jurisdictions that are not material to our fi nancial statements.
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