Kodak 2010 Annual Report Download - page 75

73
The differences between income taxes computed using the U.S. federal income tax rate and the provision (benefit) for income taxes
for continuing operations were as follows:
For the Year Ended December 31,
(in millions)
2010
2009
2008
Amount computed using the statutory rate
$ (196)
$ (41)
$ (306)
Increase (reduction) in taxes
resulting from:
State and other income taxes, net of federal
1
1
4
Impact of goodwill impairment
217
-
229
Operations outside the U.S.
140
45
31
Valuation allowance
(46)
117
146
Tax settlements and adjustments, including interest
3
(4)
(248)
Other, net
(5)
(3)
(3)
Provision (benefit) for income taxes
$ 114
$ 115
$ (147)
During the fourth quarter of 2010, based on additional positive evidence regarding past earnings and projected future taxable income
from operating activities, the Company determined that it is more likely than not that a portion of the deferred tax assets outside the
U.S. would be realized and accordingly, recorded a tax benefit of $154 million associated with the release of the valuation allowance
on those deferred tax assets.
In June 2008, the Company received a tax refund from the U.S. Internal Revenue Service (“IRS”) of $581 million. The refund is
related to the audit of certain claims filed for tax years 1993-1998, and is composed of a refund of past federal income taxes paid of
$306 million and $275 million of interest earned on the refund. The federal tax refund claim related primarily to a 1994 loss
recognized on the Company’s sale of stock of a subsidiary, Sterling Winthrop Inc., which was originally disallowed under IRS
regulations in effect at that time. The IRS subsequently issued revised regulations that served as the basis for this refund.
The refund had a positive impact of $565 million on the Company’s net earnings for the year ended December 31, 2008. Of the $565
million increase in net earnings, $295 million related to the 1994 sale of Sterling Winthrop Inc., which was reflected in earnings from
discontinued operations, net of income taxes. The balance of $270 million, which represents interest, net of state income tax, was
reflected in loss from continuing operations and is included in the “Tax settlements and adjustments, including interest” line item
above. The difference between the cash refund received of $581 million and the positive net earnings impact of $565 million
represented incremental state tax expense incurred and the release of an existing income tax receivable related to the refund.