Kodak 2014 Annual Report Download - page 80

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:
During 2013, a substantial portion of the Company’s pre-petition debt securities, revolving credit facility and other obligations were extinguished. Absent an exception, a
debtor recognizes cancellation of indebtedness income (“CODI”) upon discharge of its outstanding indebtedness for an amount of consideration that is less than its adjusted
issue price. The Internal Revenue Code of 1986, as amended (“IRC”), provides that a debtor in a bankruptcy case may exclude CODI from taxable income but must reduce
certain of its tax attributes by the amount of any CODI realized as a result of the consummation of a plan of reorganization. The amount of CODI realized by a taxpayer is the
adjusted issue price of any indebtedness discharged less the sum of (i) the amount of cash paid, (ii) the issue price of any new indebtedness issued and (iii) the fair market
value of any other consideration, including equity, issued. As a result of the market value of equity upon emergence from chapter 11 bankruptcy proceedings, the estimated
amount of U.S. CODI was approximately $705 million, which reduced the value of Kodak’s U.S. net operating losses that had a value of $2,495 million. The actual reduction
in tax attributes occurred on the first day of the Company’s tax year subsequent to the date of emergence, or January 1, 2014.
IRC Sections 382 and 383 provide an annual limitation with respect to the ability of a corporation to utilize its tax attributes, as well as certain built-in-losses, against future
U.S. taxable income in the event of a change in ownership. The Debtors’ emergence from chapter 11 bankruptcy proceedings was considered a change in ownership for
purposes of IRC Section 382. The limitation under the IRC is based on the value of the corporation as of the emergence date. However, the ownership changes and resulting
annual limitation will result in the expiration of an estimated $711 million of net operating losses, $567 million of foreign tax credits and $21 million of research and
expenditure credits generated prior to the emergence date. The expiration of these tax attributes was fully offset by a corresponding decrease in Kodak’s U.S. valuation
allowance, which results in no net tax provision.
During 2013, the KPP Global Settlement provided for the acquisition by the KPP of certain assets, and the assumption by the KPP of certain liabilities of Kodak’s
Personalized Imaging and Document Imaging businesses (the “Business”). The underfunded position of the U.K. Pension Plan was approximately $1.5 billion. Kodak
Limited held a deferred tax asset related to the pension liability of $329 million. As a result of the KPP Global Settlement in the period ended December 31, 2013 and the
release from the pension liability to the KPP, Kodak Limited reversed the corresponding deferred tax asset.
Successor
Predecessor
(in millions)
Year Ended
December 31,
2014
Four Months
Ended
December 31,
2013
Eight Months
Ended
August 31,
2013
Year Ended
December 31,
2012
Amount computed using the statutory rate
$
(39
)
$
(25
)
$
825
$
(564
)
Increase (reduction) in taxes
resulting from:
State and other income taxes, net of
federal
1
2
-
1
Unremitted foreign earnings
4
36
32
35
Impact of goodwill and intangible impairments
-
(3
)
(22
)
-
Operations outside the U.S.
111
73
(18
)
(90
)
Legislative rate changes
-
-
1
23
Valuation allowance
(121
)
(100
)
39
312
Tax settlements and adjustments,
including interest
(5
)
1
5
(11
)
Discharge of debt and other reorganization related items
57
24
(722
)
-
Other, net
2
-
15
21
Provision (benefit) for income taxes
$
10
$
8
$
155
$
(273
)
77