Boeing 2006 Annual Report Download - page 57

The Boeing Company and Subsidiaries 55
Notes to Consolidated Financial Statements
Significant components of our deferred tax assets, net of
deferred tax liabilities, at December 31 were as follows:
2006 2005
Retiree health care accruals $«3,257 $«2,314
Inventory and long-term contract methods
of income recognition 640 1,368
Other employee benefits accruals 1,473 1,363
In-process research and development
related to acquisitions 124 137
Net operating loss, credit, and charitable
contribution carryovers (net of valuation
allowance of $2 and $0) 319 494
Pension benefit accruals (397)(3,688)
Customer and commercial financing (1,517)(1,442)
Unremitted earnings of non-U.S. subsidiaries (48)(32)
Other net unrealized losses 37 8
Net deferred tax assets* $«3,888 $««««522
*Of the deferred tax asset for net operating loss and credit carryovers, $172
expires in years ending from December 31, 2007 through December 31, 2026
and $147 may be carried over indefinitely.
Net deferred tax assets at December 31 were as follows:
2006 2005
Deferred tax assets $12,174 $8,168
Deferred tax liabilities (8,284)(7,646)
Valuation allowance (2)
Net deferred tax assets $««3,888 $«««522
As a result of acquisitions in 2006, primarily related to Aviall, a
net deferred tax liability of $171 was recorded.
As required under SFAS No.123R, a deferred tax liability of
$306 was reclassified to Additional paid in capital. This repre-
sents the tax effect of the net excess tax pool created during
2006 due to share awards paid with a fair market value in
excess of the book accrual for those awards.
Net income tax payments/(refunds) were $28, ($344) and
($903) in 2006, 2005 and 2004, respectively.
We have provided for U.S. deferred income taxes and foreign
withholding tax in the amount of $48 on undistributed earnings
not considered permanently reinvested in our non-U.S. sub-
sidiaries. We have not provided for U.S. deferred income taxes
or foreign withholding tax on the remainder of undistributed
earnings from our non-U.S. subsidiaries because such earnings
are considered to be permanently reinvested and it is not
practicable to estimate the amount of tax that may be payable
upon distribution.
Within the Consolidated Statements of Operations, Other
income included interest of $16 in 2006, $100 in 2005 and
$219 in 2004 related to federal income tax settlements for
prior years.
Contingencies
We are subject to income taxes in the U.S. and numerous
non-U.S. jurisdictions.
Amounts accrued for potential tax assessments recorded in
current tax liabilities total $960 and $900 at December 31, 2006
and 2005. Accruals relate to tax issues for U.S. federal, U.S.
state, and taxation of non-U.S. earnings as follows:
RThe accruals associated with U.S. federal tax issues
such as the tax benefits from the Foreign Sales
Corporation/Extraterritorial Income (FSC/ETI) tax rules, the
amount of research and development tax credits claimed,
U.S. taxation of non-U.S. earnings, and valuation issues
regarding charitable contributions claimed were $841 at
December 31, 2006, and $771 at December 31, 2005. IRS
examinations have been completed through 2001. We have
filed an appeal with the IRS for 1998-2001. During 2006,
we settled the McDonnell Douglas Corporation appeal for
1993-1997 which had the effect of decreasing federal
income tax expense by $46.
RThe accruals for domestic state tax issues such as the
allocation of income among various state tax jurisdictions
and the amount of state tax credits claimed were $88 at
December 31, 2006 and $98 at December 31, 2005, net
of federal benefit.
RThe accruals associated with taxation of non-U.S. earnings
were $31 at December 31, 2006 and 2005.
We believe adequate provisions for all outstanding issues have
been made for all jurisdictions and all open years.
Legislative Update
On May 17, 2006, the Tax Increase Prevention and
Reconciliation Act of 2005 was enacted, which repealed the
FSC/ETI exclusion tax benefit binding contract provisions of
the American Jobs Creation Act of 2004. Therefore, 2006 will
be the final year for recognizing any export tax benefits. The
2006 effective tax rate was reduced by 5.8% due to export
tax benefits.
Effective December 31, 2005, the U.S. research tax credit
expired. On December 20, 2006, President Bush signed into
law, the Tax Relief and Health Care Act of 2006 that retroac-
tively renews the research tax credit for 2006 and extends
the credit through December 31, 2007.