Kraft 2010 Annual Report Download - page 94

Note 14. Income Taxes:
Earnings from continuing operations before income taxes and the provision for income taxes consisted of the following for the years ended December 31,
2010, 2009, and 2008:
2010 2009 2008
(in millions)
Earnings from continuing operations before income taxes:
United States $ 1,071 $ 2,047 $ 1,136
Outside United States 2,571 1,899 1,200
Total $ 3,642 $ 3,946 $ 2,336
Provision for income taxes:
United States federal:
Current $ 91 $ 335 $ 321
Deferred 322 108 (12)
413 443 309
State and local:
Current 47 82 52
Deferred 61 (39) (21)
108 43 31
Total United States 521 486 340
Outside United States:
Current 763 681 490
Deferred (137) (31) (172)
Total outside United States 626 650 318
Total provision for income taxes $ 1,147 $ 1,136 $ 658
The 2010 earnings and gain from discontinued operations from the sale of the Frozen Pizza business included tax expense of $1.2 billion. Additionally, the
2008 earnings and gain from discontinued operations from the split-off of the Post cereals business included a net tax benefit of $104 million.
As of January 1, 2010, our unrecognized tax benefits were $829 million. If we had recognized all of these benefits, the net impact on our income tax provision
would have been $661 million. Our unrecognized tax benefits were $1,281 million at December 31, 2010, and if we had recognized all of these benefits, the
net impact on our income tax provision would have been $1,062 million. The amount of unrecognized tax benefits could decrease by approximately $50
million during the next 12 months due to the potential resolution of certain foreign, U.S. federal and state examinations. Furthermore, we recorded $357
million of unrecognized tax benefits and $47 million of accrued interest and penalties as part of our purchase price allocations for Cadbury. We include
accrued interest and penalties related to uncertain tax positions in our tax provision. We had accrued interest and penalties of $210 million as of January 1,
2010 and $246 million as of December 31, 2010. Our 2010 provision for income taxes included a $3 million net benefit for interest and penalties as reversals
exceeded expense accruals during the year, due to the resolution of a federal tax audit, settlements with various foreign and state tax authorities and the
expiration of the statutes of limitations in various jurisdictions. We also paid interest and penalties of $11 million during 2010.
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