Boeing 2013 Annual Report Download - page 80

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68
Note 4 – Income Taxes
The components of earnings before income taxes were:
Years ended December 31, 2013 2012 2011
U.S. $5,946 $5,647 $5,083
Non-U.S. 286 263 310
Total $6,232 $5,910 $5,393
Income tax expense/(benefit) consisted of the following:
Years ended December 31, 2013 2012 2011
Current tax expense
U.S. federal ($82) $657 ($605)
Non-U.S. 76 52 93
U.S. state 11 19 (22)
Total current 5728 (534)
Deferred tax expense
U.S. federal 1,531 1,209 1,856
Non-U.S. 41 (13) (8)
U.S. state 69 83 68
Total deferred 1,641 1,279 1,916
Total income tax expense $1,646 $2,007 $1,382
Net income tax payments were $209, $410, and $57 in 2013, 2012 and 2011, respectively.
Our effective income tax rates were 26.4%, 34.0% and 25.6% for the years ended December 31, 2013,
2012 and 2011, respectively. Our 2013 effective tax rate is lower than 2012 primarily due to the inclusion
of the U.S. research and development tax credit (research tax credit) in 2013, which was not available in
2012, and the recognition of previously unrecognized tax benefits as a result of new regulations described
below. In 2013, President Obama signed into law the American Taxpayer Relief Act of 2012 that retroactively
renewed the research tax credit for 2012 and extended the credit through December 31, 2013. As tax law
changes are recognized in the period in which new legislation is enacted, the 2012 research tax credit of
$145 was recorded in the first quarter of 2013. Our 2012 effective tax rate was higher than 2011, primarily
due to tax benefits of $397 recorded in 2011 as a result of federal income tax audit settlements in addition
to research tax credits which were not available in 2012. The research tax credit expired on December
31, 2013. If the research tax credit is not extended there would be an unfavorable impact to our 2014
effective income tax rate.
On September 5, 2013, the Internal Revenue Service (IRS) issued proposed regulations that amend the
definition of research and experimental (R&E) expenditures. The regulations provided clarity regarding
the categories of expense that can be considered when computing the research tax credit. Based upon
our analysis of the regulations, $212 of previously unrecognized tax benefits related to research tax credits
were recorded as a reduction to tax expense in the fourth quarter of 2013.