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2013 Annual Report 58
Baker Hughes Incorporated
Notes to Consolidated Financial Statements
NOTE 3. INCOME TAXES
The provision for income taxes is comprised of the following for the years ended December 31:
2013 2012 2011
Current:
U.S. $159$251$609
Foreign 452 528 479
Total current 611 779 1,088
Deferred:
U.S. (54) (57) (315)
Foreign 55 (57) (177)
Total deferred 1 (114) (492)
Provision for income taxes $ 612 $ 665 $ 596
The geographic sources of income before income taxes are as follows for the years ended December 31:
2013 2012 2011
U.S. $ 512 $ 700 $ 1,466
Foreign 1,203 1,282 873
Income before income taxes $ 1,715 $ 1,982 $ 2,339
The provision for income taxes differs from the amount computed by applying the U.S. statutory income tax rate
to income before income taxes for the reasons set forth below for the years ended December 31:
2013 2012 2011
U.S. statutory income tax rate 35.0% 35.0% 35.0%
Effect of foreign operations (8.7) (2.0) (0.5)
Change in valuation allowances related to foreign losses 8.9 0.9 2.2
Adjustments of prior years’ tax positions 0.9 (2.9) (2.2)
State income taxes - net of U.S. tax benefit 0.8 1.8 1.7
Impact of reorganization of certain foreign subsidiaries (1.0) — (9.1)
Other - net (0.2) 0.8 (1.6)
Total effective tax rate 35.7% 33.6% 25.5%
During the fourth quarter of 2013, we recognized a net tax benefit of $18 million as a result of the reorganization
of certain of our foreign subsidiaries. This included a $360 million tax benefit resulting from the reversal of a
deferred tax liability related to our decision to indefinitely reinvest the earnings of certain foreign subsidiaries which
was made in conjunction with the reorganization that occurred during the fourth quarter of 2013. Due to the fact
that these undistributed foreign earnings are no longer a source of future income against which the foreign tax
credits will be utilized, we also recognized a tax charge of $342 million to record a valuation allowance against
certain foreign tax credit carryforwards.
During 2011, we reorganized certain of our foreign subsidiaries. As a result of the reorganization, previously
accrued U.S. deferred income taxes related to those subsidiaries were reduced by $214 million to account for
certain foreign tax credits that existed prior to the acquisition of BJ Services and are now available to offset future
U.S. taxes.