Chevron 2004 Annual Report Download - page 69

CHEVRONTEXACO CORPORATION 2004 ANNUAL REPORT 67
anticipate฀incurring฀additional฀taxes฀on฀remittances฀of฀earnings฀
that฀are฀not฀indefinitely฀reinvested.
American฀Jobs฀Creation฀Act฀of฀2004฀ In฀October฀2004,฀the฀Ameri-
can฀Jobs฀Creation฀Act฀of฀2004฀was฀passed฀into฀law.฀The฀Act฀
provides฀a฀deduction฀for฀income฀from฀qualified฀domestic฀refin-
ing฀and฀upstream฀production฀activities,฀which฀will฀be฀phased฀in฀
from฀2005฀through฀2010.฀For฀that฀specific฀category฀of฀income,฀the฀
company฀expects฀the฀net฀effect฀of฀this฀provision฀of฀the฀Act฀to฀result฀
in฀a฀decrease฀in฀the฀federal฀effective฀tax฀rate฀for฀2005฀and฀2006฀to฀
approximately฀34฀percent,฀based฀on฀current฀earnings฀levels.฀In฀the฀
long฀term,฀the฀company฀expects฀that฀the฀new฀deduction฀will฀result฀
in฀a฀decrease฀of฀the฀federal฀effective฀tax฀rate฀to฀about฀32฀percent฀for฀
that฀category฀of฀income,฀based฀on฀current฀earnings฀levels.
Under฀the฀guidance฀in฀FASB฀Staff฀Position฀No.฀FAS฀109-1,฀
“Application฀of฀FASB฀Statement฀No.฀109,฀‘Accounting฀for฀Income฀
Taxes,’฀to฀the฀Tax฀Deduction฀on฀Qualified฀Production฀Activities฀Pro-
vided฀by฀the฀American฀Jobs฀Creation฀Act฀of฀2004,”฀the฀tax฀deduction฀
on฀qualified฀production฀activities฀provided฀by฀the฀American฀Jobs฀
Creation฀Act฀of฀2004฀will฀be฀treated฀as฀a฀“special฀deduction,”฀as฀
described฀in฀FAS฀109.฀As฀such,฀the฀special฀deduction฀has฀no฀effect฀
on฀deferred฀tax฀assets฀and฀liabilities฀existing฀at฀the฀enactment฀date.฀
Rather,฀the฀impact฀of฀this฀deduction฀will฀be฀reported฀in฀the฀period฀
in฀which฀the฀deduction฀is฀claimed฀on฀the฀company’s฀tax฀return.
The฀Act฀also฀provides฀for฀a฀limited฀opportunity฀to฀repatriate฀
earnings฀from฀outside฀the฀United฀States฀at฀a฀special฀reduced฀tax฀
rate฀that฀can฀be฀as฀low฀as฀5.25฀percent.฀In฀early฀2005,฀the฀com-
pany฀was฀in฀the฀process฀of฀reviewing฀the฀guidance฀that฀the฀IRS฀
issued฀on฀January฀13,฀2005,฀regarding฀this฀provision฀and฀also฀
considering฀other฀relevant฀information.฀The฀company฀does฀not฀
anticipate฀a฀major฀change฀in฀its฀plans฀for฀repatriating฀earnings฀
from฀international฀operations฀under฀the฀provisions฀of฀the฀Act.
Taxes฀other฀than฀on฀income฀were฀as฀follows:
Year ended December 31
 2003 2002
United States
Excise taxes on products
and merchandise   $ 3,744 $ 3,990
Import duties and other levies  11 12
Property and other
miscellaneous taxes  309 348
Payroll taxes  138 141
Taxes on production  244 179
Total United States  4,446 4,670
International
Excise taxes on products
and merchandise  3,351 3,016
Import duties and other levies  9,652 8,587
Property and other
miscellaneous taxes  320 291
Payroll taxes  54 46
Taxes on production  83 79
Total International  13,460 12,019
Total taxes other than on income*  $ 17,906 $ 16,689
* Includes taxes on discontinued operations of $3, $5 and $7 in 2004, 2003 and 2002,
respectively.
The฀reported฀deferred฀tax฀balances฀are฀composed฀of฀the฀
following:
At December 31
 2003*
Deferred tax liabilities
Properties, plant and equipment   $ 8,539
Investments and other  602
Total deferred tax liabilities  9,141
Deferred tax assets
Abandonment/environmental reserves  (1,221)
Employee benefits  (1,272)
Tax loss carryforwards  (956)
Capital losses   (264)
Deferred credits   (578)
Foreign tax credits  (352)
Inventory  (57)
Other accrued liabilities  (199)
Miscellaneous  (935)
Total deferred tax assets  (5,834)
Deferred tax assets valuation allowance  1,553
Total deferred taxes, net   $ 4,860
*2003 conformed to 2004 presentation.
The฀valuation฀allowance฀relates฀to฀foreign฀tax฀credit฀carry-
forwards,฀tax฀loss฀carryforwards฀and฀temporary฀differences฀for฀
which฀no฀benefit฀is฀expected฀to฀be฀realized.฀Tax฀loss฀carryfor-
wards฀exist฀in฀many฀foreign฀jurisdictions.฀Whereas฀some฀of฀these฀
tax฀loss฀carryforwards฀do฀not฀have฀an฀expiration฀date,฀others฀
expire฀at฀various฀times฀from฀2005฀through฀2011.฀Foreign฀tax฀
credit฀carryforwards฀of฀$93฀will฀expire฀in฀2014.
At฀December฀31,฀2004฀and฀2003,฀deferred฀taxes฀were฀classified฀
in฀the฀Consolidated฀Balance฀Sheet฀as฀follows:
At December 31
 2003
Prepaid expenses and other current assets  $ (940)
Deferred charges and other assets  (641)
Federal and other taxes on income  24
Noncurrent deferred income taxes  6,417
Total deferred income taxes, net   $ 4,860
It฀is฀the฀company’s฀policy฀for฀subsidiaries฀that฀are฀included฀in฀
the฀U.S.฀consolidated฀tax฀return฀to฀record฀income฀tax฀expense฀as฀
though฀they฀file฀separately,฀with฀the฀parent฀recording฀the฀adjust-
ment฀to฀income฀tax฀expense฀for฀the฀effects฀of฀consolidation.
Income฀taxes฀are฀not฀accrued฀for฀unremitted฀earnings฀of฀
international฀operations฀that฀have฀been฀or฀are฀intended฀to฀be฀
reinvested฀indefinitely.
Undistributed฀earnings฀of฀international฀consolidated฀subsi-
diaries฀and฀affiliates฀for฀which฀no฀deferred฀income฀tax฀provision฀
has฀been฀made฀for฀possible฀future฀remittances฀totaled฀approxi-
mately฀$10,000฀at฀December฀31,฀2004.฀A฀significant฀majority฀
of฀this฀amount฀represents฀earnings฀reinvested฀as฀part฀of฀the฀
company’s฀ongoing฀international฀business.฀It฀is฀not฀practicable฀
to฀estimate฀the฀amount฀of฀taxes฀that฀might฀be฀payable฀on฀the฀
eventual฀remittance฀of฀such฀earnings.฀The฀company฀does฀not฀
 TAXES – Continued