UPS 2013 Annual Report Download - page 116

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
104
We also have non-U.S. loss carryforwards of approximately $956 million as of December 31, 2013, 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 carryforwards, due to the uncertainty resulting from a lack of previous taxable income within the applicable tax
jurisdictions.
Undistributed earnings of foreign subsidiaries amounted to approximately $4.130 billion at December 31, 2013. Those
earnings are considered to be indefinitely reinvested and, accordingly, no deferred income taxes have been provided thereon.
Upon distribution of those earnings in the form of dividends or otherwise, we would be subject to income taxes and
withholding taxes payable in various jurisdictions, which could potentially be offset by foreign tax credits. Determination of the
amount of unrecognized deferred income tax liability is not practicable because of the complexities associated with its
hypothetical calculation.
The following table summarizes the activity related to our unrecognized tax benefits (in millions):
Tax Interest Penalties
Balance at January 1, 2011 $ 284 $ 95 $ 7
Additions for tax positions of the current year 13 — —
Additions for tax positions of prior years 17 6 —
Reductions for tax positions of prior years for:
Changes based on facts and circumstances (50)(9)(2)
Settlements during the period (11)(19)(1)
Lapses of applicable statute of limitations (1) — (1)
Balance at December 31, 2011 252 73 3
Additions for tax positions of the current year 13 — —
Additions for tax positions of prior years 7 9 1
Reductions for tax positions of prior years for:
Changes based on facts and circumstances (22)(18) —
Settlements during the period (3)(7) —
Lapses of applicable statute of limitations (15)(4) —
Balance at December 31, 2012 232 53 4
Additions for tax positions of the current year 15 — —
Additions for tax positions of prior years 20 9 2
Reductions for tax positions of prior years for:
Changes based on facts and circumstances (67)(23)(1)
Settlements during the period (8) 1 —
Lapses of applicable statute of limitations (1) — (1)
Balance at December 31, 2013 $ 191 $ 40 $ 4
The total amount of gross unrecognized tax benefits as of December 31, 2013, 2012 and 2011 that, if recognized, would
affect the effective tax rate was $185, $224 and $247 million, respectively. We also had gross recognized tax benefits of $281,
$280 and $291 million recorded as of December 31, 2013, 2012 and 2011, respectively, associated with outstanding refund
claims for prior tax years. Therefore, we had a net receivable recorded with respect to prior years’ income tax matters in the
accompanying consolidated balance sheets. Additionally, we have recognized a receivable for interest of $25, $23 and $27
million for the recognized tax benefits associated with outstanding refund claims as of December 31, 2013, 2012 and 2011,
respectively. Our continuing practice is to recognize interest and penalties associated with income tax matters as a component
of income tax expense.
We file income tax returns in the U.S. federal jurisdiction, most U.S. state and local jurisdictions, and many non-U.S.
jurisdictions. We have substantially resolved all U.S. federal income tax matters for tax years prior to 2005.