Abbott Laboratories 2013 Annual Report Download - page 54

ABBOTT 2013 ANNUAL REPORT
52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. income taxes are provided on those earnings of foreign
subsidiaries which are intended to be remitted to the parent
company. Abbott does not record deferred income taxes
on earnings reinvested indefinitely in foreign subsidiaries.
Undistributed earnings reinvested indefinitely in foreign
subsidiaries as working capital and plant and equipment
aggregated $24.0 billion at December 31, 2013. It is not practi-
cable to determine the amount of deferred income taxes not
provided on these earnings. In the U.S., Abbott’s federal income
tax returns through 2010 are settled except for three items, and
the income tax returns for years after 2010 are open. There are
numerous other income tax jurisdictions for which tax returns
are not yet settled, none of which are individually significant.
Reserves for interest and penalties are not significant.
Earnings from continuing operations before taxes, and the
related provisions for taxes on earnings from continuing operations,
were as follows:
(in millions) 2013 2012 2011
Earnings (Loss) From
Continuing Operations Before Taxes:
Domestic $ 529 $(1,515) $ (593)
Foreign 1,992 1,820 1,829
Total $2,521 $ 305 $1,236
2013 2012 2011
Taxes on Earnings From
Continuing Operations:
Current:
Domestic $ 16 $ (21) $ (888)
Foreign 555 979 797
Total current 571 958 (91)
Deferred:
Domestic (308) (572) 360
Foreign (125) (660) (159)
Total deferred (433) (1,232) 201
Total $ 138 $ (274) $ 110
Differences between the effective income tax rate and the
U.S. statutory tax rate were as follows:
2013 2012 2011
Statutory tax rate on earnings
from continuing operations 35.0% 35.0% 35.0%
Benefit of lower tax rates and
tax exemptions on foreign income (18.0) (75.7) (14.9)
Resolution of certain tax positions
pertaining to prior years (9.3) (69.4) (14.0)
Effect of retroactive legislation (4.1) — —
State taxes, net of federal benefit 1.7 3.4 (0.3)
All other, net 0.2 17.0 3.1
Effective tax rate on earnings
from continuing operations 5.5% (89.7)% 8.9%
Abbott funds its domestic pension plans according to IRS funding
limitations. International pension plans are funded according
to similar regulations. Abbott funded $724 million in 2013 and
$379 million in 2012 to defined pension plans. Abbott expects
to contribute approximately $400 million to its pension plans
in 2014, of which approximately $300 million relates to its main
domestic pension plan.
Total benefit payments expected to be paid to participants, which
includes payments funded from company assets, as well as paid
from the plans, are as follows:
Defined Medical and
(in millions) Benefit Plans Dental Plans
2014 $ 186 $ 71
2015 198 73
2016 213 74
2017 229 76
2018 249 77
2019 to 2023 1,578 417
The Abbott Stock Retirement Plan is the principal defined
contribution plan. Abbott’s contributions to this plan were
$86 million in 2013, $150 million in 2012 and $151 million in 2011.
The contribution amounts in 2012 and 2011 include amounts
associated with the businesses transferred to AbbVie.
NOTE 13 — TAXES ON EARNINGS FROM
CONTINUING OPERATIONS
Taxes on earnings from continuing operations reflect the annual
effective rates, including charges for interest and penalties.
Deferred income taxes reflect the tax consequences on future
years of differences between the tax bases of assets and liabilities
and their financial reporting amounts.
In 2013, taxes on earnings from continuing operations reflect
the recognition of $234 million of tax benefits as a result of the
favorable resolution of various tax positions pertaining to prior
years. Earnings from discontinued operations in 2013 include
the recognition of $193 million of tax benefits as a result of the
resolution of various tax positions related to AbbVie’s operations
prior to the separation. In addition, as a result of the American
Taxpayer Relief Act of 2012 signed into law in January 2013,
Abbott recognized a tax benefit in the tax provision related
to continuing operations of approximately $103 million for the
retroactive extension of the research tax credit and the look‑
through rules of section 954(c)(6) of the Internal Revenue Code
to the beginning of 2012. The $1.515 billion domestic loss before
taxes in 2012 includes $1.29 billion of net loss on the early
extinguishment of debt.