UPS 2006 Annual Report Download - page 100

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Deferred tax liabilities and assets are comprised of the following at December 31 (in millions):
2006 2005
Property, plant and equipment ......................................... $2,802 $2,572
Goodwill and intangible assets ......................................... 578 491
Pension plans ....................................................... 579 1,722
Other ............................................................. 343 251
Gross deferred tax liabilities ........................................... 4,302 5,036
Other postretirement benefits .......................................... 789 681
Loss and credit carryforwards (non-U.S. and state) ......................... 130 113
Insurance reserves ................................................... 586 543
Vacation pay accrual ................................................. 171 154
Other ............................................................. 659 649
Gross deferred tax assets .............................................. 2,335 2,140
Deferred tax assets valuation allowance .................................. (43) (54)
Netdeferredtaxassets................................................ 2,292 2,086
Net deferred tax liability .............................................. $2,010 $2,950
Amounts recognized in the balance sheet:
Current deferred tax asset ............................................. $ 414 $ 475
Non-current deferred tax asset ......................................... $ 105 $ —
Non-current deferred tax liabilities ...................................... $2,529 $3,425
The valuation allowance decreased by $11, $32, and $31 million during the years ended December 31, 2006,
2005 and 2004, respectively.
As of December 31, 2006, we have U.S. state & local operating loss and credit carryforwards of
approximately $937 million and $54 million, respectively. The operating loss carryforwards expire at varying
dates through 2026. The majority of the credit carryforwards may be carried forward indefinitely. We also have
non-U.S. loss carryforwards of approximately $874 million as of December 31, 2006, the majority of which may
be carried forward indefinitely. As indicated in the table above, we have established a valuation allowance for
certain non-U.S. and state loss carryforwards, due to the uncertainty resulting from a lack of previous taxable
income within the applicable tax jurisdictions.
Undistributed earnings of our non-U.S. subsidiaries amounted to approximately $1.225 billion at
December 31, 2006. Those earnings are considered to be indefinitely reinvested and, accordingly, no U.S. federal
or state deferred income taxes have been provided thereon. Upon distribution of those earnings in the form of
dividends or otherwise, we would be subject to U.S. income taxes and withholding taxes payable in various
non-U.S. jurisdictions, which could potentially be offset by foreign tax credits. Determination of the amount of
unrecognized deferred U.S. income tax liability is not practicable because of the complexities associated with its
hypothetical calculation.
The American Jobs Creation Act of 2004, which provided for a temporary 85% dividends received
deduction on certain foreign earnings repatriated during a one-year period (expired in December 2005), did not
have an impact on UPS as we did not repatriate any earnings subject to the Act.
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