Occidental Petroleum 2008 Annual Report Download - page 68

During the course of its operations, Occidental is subject to audit by tax authorities for varying periods in various federal, state, local
and foreign tax jurisdictions. While the audits for taxable years through 2007 have concluded for U.S. federal income tax purposes, the 2008
taxable year is currently under audit by the U.S. Internal Revenue Service pursuant to its compliance assurance program (CAP). Foreign
government tax authorities are in various stages of auditing Occidental, and income taxes for taxable years from 2000 through 2008 remain
subject to examination in certain jurisdictions. During the course of such audits, disputes have arisen and other disputes may arise as to
facts and matters of law.
Occidental has entered into agreements providing for future payments to secure terminal and pipeline capacity, drilling rigs and
services, electrical power, steam and certain chemical raw materials. Occidental has certain other commitments under contracts, guarantees
and joint ventures, including purchase commitments for goods and services at market-related prices and certain other contingent liabilities. At
December 31, 2008, commitments for major fixed and determinable capital expenditures during 2009 and thereafter were approximately
$1.1 billion.
Occidental has indemnified various parties against specified liabilities that those parties might incur in the future in connection with
purchases and other transactions that they have entered into with Occidental. These indemnities usually are contingent upon the other party
incurring liabilities that reach specified thresholds. As of December 31, 2008, Occidental is not aware of circumstances that it believes would
reasonably be expected to lead to future indemnity claims against it in connection with these transactions that would result in payments
materially in excess of reserves.
The ultimate amount of losses and the timing of any such losses that OPC and its subsidiaries may incur resulting from currently
outstanding lawsuits, claims and proceedings, audits, commitments, contingencies and related matters cannot be determined reliably at this
time. If these matters were ultimately resolved unfavorably at amounts substantially exceeding Occidental’s reserves, an outcome not
currently expected, it is possible that such outcome could have a material adverse effect upon Occidental’s consolidated financial position or
results of operations. However, after taking into account reserves, management does not expect the ultimate resolution of any of these
matters to have a material adverse effect upon Occidental’s consolidated financial position or results of operations.
NOTE 10 DOMESTIC AND FOREIGN INCOME TAXES
The domestic and foreign components of income from continuing operations before domestic and foreign income taxes were as
follows:
For the years ended December 31, (in millions) Domestic Foreign Total
2008 $5,923 $5,545 $11,468
2007 $4,604 $3,981 $8,585
2006 $4,281 $3,275 $7,556
The provisions (credits) for domestic and foreign income taxes on continuing operations consisted of the following:
For the years ended December 31, (in millions)
U.S.
Federal
State
and Local Foreign Total
2008
Current $1,558 $166 $2,637 $4,361
Deferred 435 29 (196) 268
$1,993 $195 $2,441 $4,629
2007
Current $1,371 $125 $1,976 $3,472
Deferred 48 14 (27) 35
$1,419 $139 $1,949 $3,507
2006
Current $1,370 $114 $1,772 $3,256
Deferred 154 (13) (43) 98
$1,524 $101 $1,729 $3,354
As a result of changes in compensation programs in 2006, Occidental wrote off approximately $40 million of the related deferred tax
asset that had been recognized in the financial statements prior to the changes.
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The following is a reconciliation, stated as a percentage of pre-tax income, of the United States statutory federal income tax rate to