Honeywell 2012 Annual Report Download - page 86

Deferred tax assets (liabilities)
Deferred income taxes represent the future tax effects of transactions which are reported in
different periods for tax and financial reporting purposes. The tax effects of temporary differences and
tax carryforwards which give rise to future income tax benefits and payables are as follows:
2012 2011
December 31,
Property, plant and equipment basis differences. . . . . . . . . . . . . . . . . . . $ (928) $(1,097)
Postretirement benefits other than pensions and post employment
benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 620 571
Investment and other asset basis differences . . . . . . . . . . . . . . . . . . . . . (1,084) (970)
Other accrued items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,918 2,852
Net operating and capital losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 820 810
Tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232 379
Undistributed earnings of subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (60) (57)
All other items—net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (45) (67)
2,473 2,421
Valuation allowance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (598) (591)
$ 1,875 $ 1,830
The Company has state tax net operating loss carryforwards of $3.0 billion at December 31, 2012
with various expiration dates through 2030. We also have foreign net operating and capital losses of
$2.8 billion which are available to reduce future income tax payments in several countries, subject to
varying expiration rules.
We have U.S. federal tax credit carryforwards of $6 million at December 31, 2012 with various
expiration dates through 2031. We also have state tax credit carryforwards of $55 million at December
31, 2012, including carryforwards of $33 million with various expiration dates through 2027 and tax
credits of $22 million which are not subject to expiration.
The valuation allowance against deferred tax assets increased by $7 million in 2012 and
decreased by $45 million and increased by $58 million in 2011 and 2010, respectively. The 2012
increase in the valuation allowance was primarily due to decreased earnings in France and
Luxembourg, partially offset by a decrease in the valuation allowance related to purchase accounting
for various acquisitions and audit settlements for various countries. The 2011 decrease in the valuation
allowance was primarily due to decreased foreign net operating losses related to the Netherlands and
Germany, partially offset by the increase in the valuation allowance of France, Luxembourg and
Canada. The 2010 increase in the valuation allowance was primarily due to increased foreign net
operating losses related to France, Luxembourg, and the Netherlands offset by the reversal of a
valuation allowance related to Germany. The 2010 increase in valuation allowance also includes
adjustments related to purchase accounting for various acquisitions.
Federal income taxes have not been provided on undistributed earnings of the majority of our
international subsidiaries as it is our intention to reinvest these earnings into the respective
subsidiaries. At December 31, 2012 Honeywell has not provided for U.S. federal income and foreign
withholding taxes on approximately $11.6 billion of such earnings of our non-U.S. operations. It is not
practicable to estimate the amount of tax that might be payable if some or all of such earnings were to
be repatriated, and the amount of foreign tax credits that would be available to reduce or eliminate the
resulting U.S. income tax liability.
We had $722 million, $815 million and $757 million of unrecognized tax benefits as of December
31, 2012, 2011, and 2010 respectively. If recognized, $722 million would be recorded as a component
of income tax expense as of December 31, 2012. For the year ended December 31, 2012, the
Company decreased its unrecognized tax benefits by $93 million due to the expiration of various
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HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)