Waste Management 2007 Annual Report Download - page 118

The following table summarizes the impact of our investments in the facilities on our Consolidated Statements
of Operations (in millions):
2007 2006 2005
Years Ended December 31,
Equity in net losses of unconsolidated entities(a) ..................... $42 $41 $112
Interest expense ............................................. 1 4 7
Loss before income taxes(a) .................................... 43 45 119
Benefit from income taxes(a), (b) ................................ 53 64 145
Net income(a) .............................................. $10 $19 $ 26
(a) The comparison of the impacts of our investments in the facilities during the periods presented have been
significantly affected by the phase-out of 69% of Section 45K tax credits in 2007 and 36% in 2006. In addition,
for the year ended December 31, 2006, our “Equity in net losses of unconsolidated entities” was reduced by a
cumulative adjustment recorded during the second quarter of 2006, which was necessary to appropriately
reflect our life-to-date obligations to fund the costs of operating the facilities and the value of our investment.
We determined that the recognition of the cumulative adjustment was not material to our financial statements
presented herein. Equity losses for our estimate of contractual obligations associated with the facilities’
operations and associated tax benefits were also relatively lower in 2006 due to the suspension of operations of
the facilities from May 2006 to late September 2006.
(b) The benefit from income taxes attributable to the facilities includes tax credits of $37 million, $47 million and
$99 million for the years ended December 31, 2007, 2006 and 2005, respectively.
The tax credits generated by our landfills are provided by our Renewable Energy Program, under which we
develop, operate and promote the beneficial use of landfill gas. Our recorded taxes include benefits of $13 million,
$24 million, and $34 million for the years ended December 31, 2007, 2006 and 2005, respectively, from tax credits
generated by our landfill gas-to-energy projects.
Effective state tax rate change — Our estimated effective state tax rate declined during 2006 and 2005,
resulting in a net benefit of $9 million and $16 million, respectively, related to the revaluation of net accumulated
deferred tax liabilities. Our state estimated effective tax rate did not change in 2007; therefore no revaluation of net
accumulated deferred tax liabilities was necessary in the current reporting period.
Canada statutory tax rate change — During 2007, the Canadian federal government enacted tax rate
reductions, which resulted in a $30 million tax benefit for the revaluation of our deferred tax balances. During
2006, both the Canadian federal government and several provinces enacted tax rate reductions. The revaluation of
our deferred tax balances for these rate changes resulted in a $20 million tax benefit for the year ended December 31,
2006. Additionally, during 2005 a provincial tax rate change in Quebec resulted in additional income tax expense of
$4 million.
Repatriation of earnings in foreign subsidiaries — The American Jobs Creation Act of 2004 allowed
U.S. companies to repatriate earnings from their foreign subsidiaries at a reduced tax rate during 2005. We
repatriated net accumulated earnings and capital from certain of our Canadian subsidiaries in accordance with this
provision, which were previously accounted for as permanently reinvested in accordance with APB Opinion No. 23,
Accounting for Income Taxes — Special Areas. During 2005, our Chief Executive Officer and Board of Directors
approved a domestic reinvestment plan under which we repatriated $496 million of our accumulated foreign
earnings and capital through cash on hand as well as debt borrowings. During 2005, we accrued $34 million in tax
expense for these repatriations. The repatriation of earnings from our Canadian subsidiaries increased our 2005
effective tax rate by approximately 3.1%, which has been reflected as a component of the “Tax rate differential on
foreign income” line item of the effective tax rate reconciliation provided above. During 2006, we repatriated an
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WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)