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72 CHEVRON CORPORATION 2005 ANNUAL REPORT
NOTE 16. TAXES – Continued
The overall valuation allowance relates to foreign tax
credit carry forwards, tax loss carryforwards and temporary
differences for which no benefi t is expected to be realized. Tax
loss carry forwards exist in many foreign jurisdictions. Whereas
some of these tax loss carry forwards do not have an expiration
date, others expire at various times from 2006 through 2013.
Foreign tax credit carryforwards of $1,145 will expire in 2015.
At December 31, 2005 and 2004, deferred taxes were
classifi ed in the Consolidated Balance Sheet as follows:
At December 31
2005 2004
Prepaid expenses and other current assets $ (892) $ (1,532)
Deferred charges and other assets (547) (769)
Federal and other taxes on income 1 6
Noncurrent deferred income taxes 11,262 7,268
Total deferred income taxes, net $ 9,824 $ 4,973
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 fi le separately, with the parent
recording the adjustment 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 indefi nitely. Undistributed earnings of inter-
national consolidated subsidiaries and affiliates for which
no deferred income tax provision has been made for possible
future remittances totaled $14,317 at December 31, 2005.
A signifi cant 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 anticipate incurring signifi -
cant additional taxes on remittances of earnings that are not
indefi nitely reinvested.
American Jobs Creation Act of 2004 In October 2004, the
Amer ican Jobs Creation Act of 2004 was passed into law.
The Act provides a deduction for income from qualifi ed
domestic refi ning and upstream production activities, which
will be phased in from 2005 through 2010. For that 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
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 annual effective tax
rate to about 32 percent for that category of income, based
on current earnings levels.
Notes to the Consolidated Financial Statements
Millions of dollars, except per-share amounts Taxes other than on income were as follows:
Year ended December 31
2005 2004 2003
United States
Excise taxes on products
and merchandise $ 4,521 $ 4,147 $ 3,744
Import duties and other levies 8 5 11
Property and other
miscellaneous taxes 392 359 309
Payroll taxes 149 137 138
Taxes on production 323 257 244
Total United States 5,393 4,905 4,446
International
Excise taxes on products
and merchandise 4,198 3,821 3,351
Import duties and other levies 10,466 10,542 9,652
Property and other
miscellaneous taxes 535 415 320
Payroll taxes 52 52 54
Taxes on production 138 86 83
Total International 15,389 14,916 13,460
Total taxes other than on income* $ 20,782 $ 19,821 $ 17,906
* Includes taxes on discontinued operations of $3 and $5 in 2004 and 2003, respectively.
NOTE 17.
SHORT-TERM DEBT
At December 31
2005 2004
Commercial paper* $ 4,098 $ 4,068
Notes payable to banks and others with
originating terms of one year or less 170 310
Current maturities of long-term debt 467 333
Current maturities of long-term
capital leases 70 55
Redeemable long-term obligations
Long-term debt 487 487
Capital leases 297 298
Subtotal 5,589 5,551
Reclassifi ed to long-term debt (4,850) (4,735)
Total short-term debt $ 739 $ 816
* Weighted-average interest rates at December 31, 2005 and 2004, were 4.18 percent and
1.98 percent, respectively.
Redeemable long-term obligations consist primarily of
tax-exempt variable-rate put bonds that are included as cur-
rent liabilities because they become redeemable at the option
of the bondholders during the year following the balance
sheet date.
The company periodically enters into interest rate swaps
on a portion of its short-term debt. See Note 7, beginning on
page 63, for information concerning the company’s debt-
related derivative activities.
At December 31, 2005, the company had $4,850 of com-
mitted credit facilities with banks worldwide, which permit
the company to refi nance short-term obligations on a long-
term basis. The facilities support the company’s commercial
paper borrowings. Interest on borrowings under the terms of
specifi c agreements may be based on the London Interbank
Offered Rate or bank prime rate. No amounts were outstand-
ing under these credit agreements during 2005 or at year-end.