Kraft 2009 Annual Report Download - page 99

The changes in our unrecognized tax benefits for the years ended December 31, 2009, 2008 and 2007 were (in millions):
2009 2008 2007
January 1 $ 807 $ 850 $ 667
Increases from positions taken during prior periods 90 17 131
Decreases from positions taken during prior periods (205) (90) (23)
Increases from positions taken during the current period 146 98 34
(Decreases) / increases from acquisition adjustments - (22) 72
Decreases relating to settlements with taxing authorities (26) (8) (38)
Reductions resulting from the lapse of the applicable
statute of limitations (14) (13) (6)
Currency / other 31 (25) 13
December 31 $ 829 $ 807 $ 850
We are regularly examined by federal and various state and foreign tax authorities. The U.S. federal statute of limitations remains open for the
year 2000 and onward. During 2009, we reached an agreement with the IRS on specific matters related to years 2000 through 2003. Our returns
for those years are still under examination, and the IRS recently began its examination of years 2004 through 2006. In addition, we are currently
under examination by taxing authorities in various U.S. state and foreign jurisdictions. U.S. state and foreign jurisdictions have statutes of
limitations generally ranging from three to five years. Years still open to examination by foreign tax authorities in major jurisdictions include
Germany (1999 onward), Brazil (2003 onward), Canada (2003 onward), Spain (2002 onward) and France (2006 onward).
At December 31, 2009, applicable U.S. federal income taxes and foreign withholding taxes had not been provided on approximately $5.7 billion of
accumulated earnings of foreign subsidiaries that are expected to be permanently reinvested. It is impractical for us to determine the amount of
unrecognized deferred tax liabilities on these permanently reinvested earnings.
The effective income tax rate on pre-tax earnings differed from the U.S. federal statutory rate for the following reasons for the years ended
December 31, 2009, 2008 and 2007:
2009 2008 2007
U.S. federal statutory rate 35.0% 35.0% 35.0%
Increase / (decrease) resulting from:
State and local income taxes, net of federal tax
benefit excluding IRS audit impacts 1.9% 2.6% 2.8%
Benefit principally related to reversal of federal and
state reserves on IRS audit settlements (2.8%) - -
Reversal of other tax accruals no longer required (0.3%) (1.7%) (1.4%)
Foreign rate differences, net of repatriation impacts (2.1%) (5.2%) (5.2%)
Other (2.3%) (1.7%) (1.0%)
Effective tax rate 29.4% 29.0% 30.2%
Our 2009 effective tax rate included net tax benefits of $225 million, primarily due to an agreement we reached with the IRS on specific matters,
settlements with various foreign and state tax authorities, the expiration of the statutes of limitations in various jurisdictions and the divestiture of
our Balance bar operations in the U.S.
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Source: KRAFT FOODS INC, 10-K, February 25, 2010 Powered by Morningstar® Document Research℠