Motorola 2010 Annual Report Download - page 100

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The Company evaluates its permanent reinvestment assertions with respect to foreign earnings at each
reporting period and, except for certain earnings that the Company intends to reinvest indefinitely due to the capital
requirements of the foreign subsidiaries or due to local country restrictions, accrues for the U.S. federal income taxes
applicable to the earnings. Undistributed earnings that the Company intends to reinvest indefinitely, and for which
no U.S. federal income taxes have been provided, aggregate to $1.3 billion, $2.4 billion and $2.9 billion at
December 31, 2010, 2009 and 2008, respectively. The portion of earnings not reinvested indefinitely may be
distributed without an additional U.S. federal income tax charge given the U.S. federal tax accrued on undistributed
earnings and the utilization of available foreign tax credits. In 2010, the Company recognized deferred income tax
expense of $298 million related to undistributed foreign earnings; including a charge for certain prior foreign
earnings the Company concluded are no longer considered to be permanently reinvested and for a reduction of the
invested capital of certain of its foreign subsidiaries. The capital reduction is part of the Company’s plan to realign
its investment in foreign subsidiaries and is pending approval by certain governmental agencies.
In the first quarter of 2010, the Patient Protection and Affordable Care Act and the Health Care and Education
Reconciliation Act of 2010 were signed into law, which eliminated the favorable income tax treatment of Medicare
Part D Subsidy receipts effective for tax years starting in 2013. As a result of the tax law change, the Company
recorded an $18 million non-cash tax charge to reduce its deferred tax asset associated with Medicare Part D
subsidies currently estimated to be received after 2012.
Differences between income tax expense (benefit) computed at the U.S. federal statutory tax rate of 35% and
income tax expense (benefit) as reflected in the Consolidated Statements of Operations are as follows:
Years Ended December 31 2010 2009 2008
Income tax expense (benefit) at statutory rate $ 237 $(176) $(1,000)
Taxes on non-U.S. earnings 11 11 144
State income taxes (34) (30) (43)
Valuation allowances (18) (28) 2,321
Goodwill impairment —— 555
Tax on undistributed non-U.S. earnings 298 86 17
Other provisions (104) (25) (422)
Research credits (16) (16) (9)
Non-deductible transaction costs 30 13 —
Tax law changes 18 ——
Other non-deductible costs 511 —
Section 199 deduction (20) (7) —
Other (1) 221
$ 406 $(159) $ 1,584
Gross deferred tax assets were $8.2 billion and $8.9 billion at December 31, 2010 and 2009, respectively.
Deferred tax assets, net of valuation allowances, were $5.4 billion and $6.0 billion at December 31, 2010 and 2009,
respectively. Gross deferred tax liabilities were $2.5 billion and $2.7 billion at December 31, 2010 and 2009,
respectively.