Motorola 2013 Annual Report Download - page 75

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U.S. subsidiaries' earnings were permanently invested overseas. The Company intends to utilize the offshore earnings to fund
foreign investments, such as potential acquisitions and capital expenditures. In the first quarter of 2013, the Company
recorded a net tax benefit of $25 million related to reversals of deferred tax liabilities for undistributed foreign earnings due to
the change in permanent reinvestment assertion.
Undistributed earnings that the Company intends to reinvest indefinitely, and for which no income taxes have been
provided, aggregate to $1.4 billion, $1.0 billion and $1.0 billion at December 31, 2013, 2012 and 2011, respectively. The
Company currently has no plans to repatriate the foreign earnings permanently reinvested and therefore, the time and manner of
repatriation is uncertain. If circumstances change and it becomes apparent that some or all of the permanently reinvested
earnings will be remitted to the U.S. in the foreseeable future, an additional income tax charge may be necessary; however,
given the uncertain repatriation time and manner at December 31, 2013, it is not practicable to estimate the amount of any
additional income tax charge on permanently reinvested earnings. On a cash basis, these repatriations from the Company's
non-U.S. subsidiaries could require the payment of additional taxes. The portion of earnings not reinvested indefinitely may be
distributed without an additional charge given the U.S. federal and foreign income tax accrued on undistributed earnings and
the utilization of available foreign tax credits.
At December 31, 2013, the Company has approximately $500 million of foreign earnings not considered permanently
reinvested and which may be repatriated without an additional tax charge, given the U.S. federal and foreign income tax
accrued on the undistributed earnings and the utilization of available foreign tax credits. During 2013, the Company made an
$87 million withholding tax payment associated with an intercompany foreign dividend, for which we expect to realize a
foreign tax credit.
The Company recently reorganized certain of its non-U.S. subsidiaries under a holding company structure in order to
facilitate the efficient movement of non-U.S. cash and provide a platform to fund foreign investments, such as potential
acquisitions and capital expenditures. During 2013, repatriations from certain entities in the holding company structure resulted
in the realization of excess foreign tax credits associated with the repatriation of foreign earnings, which favorably impacted the
effective tax rate by $337 million.
Differences between income tax expense 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 2013 2012 2011
Income tax expense at statutory rate $ 401 $ 425 $ 258
Tax on non-U.S. earnings 20 (10)(23)
State income taxes 17 (27)(2)
Tax law changes 6— —
Other provisions (1)(7)(17)
Valuation allowances (3)(60)(237)
Section 199 deduction (14)(14)(22)
Tax on undistributed non-U.S. earnings (22)30 51
Research credits (27)—(11)
Tax benefit of repatriated non-U.S. earnings (337)— —
$ 40 $ 337 $ (3)
Gross deferred tax assets were $4.1 billion and $4.7 billion at December 31, 2013 and 2012, respectively. Deferred tax
assets, net of valuation allowances, were $3.8 billion and $4.4 billion at December 31, 2013 and 2012, respectively. Gross
deferred tax liabilities were $1.2 billion and $1.4 billion at December 31, 2013 and 2012, respectively.