Boeing 2012 Annual Report Download - page 81

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Income tax expense/(benefit) consisted of the following:
Years ended December 31, 2012 2011 2010
Current tax expense
U.S. federal $657 ($605) $13
Non-U.S. 52 93 80
U.S. state 19 (22) (137)
Total current 728 (534) (44)
Deferred tax expense
U.S. federal 1,209 1,856 969
Non-U.S. (13) (8) (13)
U.S. state 83 68 284
Total deferred 1,279 1,916 1,240
Total income tax expense $2,007 $1,382 $1,196
Net income tax payments were $410, $57, and $360 in 2012, 2011 and 2010, respectively.
Our effective income tax rates were 34.0%, 25.6% and 26.5% for the years ended December 31, 2012,
2011 and 2010, respectively. Our 2012 effective tax rate was higher than prior years, primarily due to tax
benefits of $397 and $371 recorded in 2011 and 2010 as a result of federal income tax audit settlements.
The absence of research and development tax credits also contributed to the higher tax rate in 2012. Our
2011 effective tax rate was lower than 2010, primarily due to an income tax charge of $150 recorded during
the first quarter of 2010 as a result of the Patient Protection and Affordable Care Act, as modified by the
Health Care and Education Reconciliation Act of 2010.
The research and development credit expired on December 31, 2011. On January 2, 2013, President
Obama signed into law the American Taxpayer Relief Act of 2012 that retroactively renews the research
and development credit for 2012 and extends the credit through December 31, 2013. As tax law changes
are recognized in the period in which new legislation is enacted, the 2012 R&D credit of approximately
$150 will be reflected as a discrete item in our income tax rate for the first quarter of 2013.
The following is a reconciliation of the U.S. federal statutory tax rate of 35% to our effective income tax
rate:
Years ended December 31, 2012 2011 2010
U.S. federal statutory tax 35.0% 35.0% 35.0%
Research and development credits 0.8 (2.7) (3.5)
Tax on international activities (1.2) (0.6) (1.2)
Tax deductible dividends (0.7) (0.8) (0.9)
State income tax provision, net of effect on U.S. federal tax 0.8 0.7 1.8
Medicare Part D law change 3.3
Federal audit settlement (7.4) (8.2)
Other provision adjustments (0.7) 1.4 0.2
Effective income tax rate 34.0% 25.6% 26.5%
Federal income tax audits have been settled for all years prior to 2007. During the first quarter of 2012 we
filed an appeal with the IRS for the 2007-2008 tax years. The 2009-2010 IRS audit began in the second
quarter of 2012. We are also subject to examination in major state and international jurisdictions for the
2001-2012 tax years. We believe appropriate provisions for all outstanding tax issues have been made
for all jurisdictions and all open years.