Crucial 2011 Annual Report Download - page 79

We have a valuation allowance against substantially all U.S. net deferred tax assets. As of September 1, 2011, our federal, state and foreign
net operating loss carryforwards were $2.9 billion , $2 billion and $529 million , respectively. If not utilized, substantially all of our federal and
state net operating loss carryforwards will expire in 2022 to 2031 and the foreign net operating loss carryforwards will begin to expire in 2015. As
of September 1, 2011, our federal and state tax credit carryforwards were $206 million and $215 million , respectively. If not utilized,
substantially all of our federal and state tax credit carryforwards will expire in 2013 to 2031. As a consequence of prior business acquisitions,
utilization of the tax benefits for some of the tax carryforwards is subject to limitations imposed by Section 382 of the Internal Revenue Code and
some portion or all of these carryforwards may not be available to offset any future taxable income.
The changes in valuation allowance of $(181) million and $(379) million in 2011 and 2010, respectively, are primarily due to utilization of
U.S. net operating losses and certain tax credit carryforwards. The decrease in the valuation allowance in 2010 was offset with an increase in the
valuation allowance of $64 million related to deferred tax assets of Numonyx consisting primarily of net operating losses in foreign jurisdictions.
Provision has been made for deferred taxes on undistributed earnings of non-U.S. subsidiaries to the extent that dividend payments from such
companies are expected to result in additional tax liability. Remaining undistributed earnings of $631 million as of September 1, 2011 have been
indefinitely reinvested; therefore, no provision has been made for taxes due upon remittance of these earnings. Determination of the amount of
unrecognized deferred tax liability on these unremitted earnings is not practicable.
Below is a reconciliation of the beginning and ending amount of unrecognized tax benefits:
Included in the unrecognized tax benefits balance as of September 1, 2011, September 2, 2010 and September 3, 2009 were $113 million ,
$87 million , and $1 million , respectively, of unrecognized income tax benefits, which if recognized, would affect our effective tax rate. In
connection with the acquisition of Numonyx in fiscal 2010, we accrued a $66 million liability related to uncertain tax positions on the tax years of
Numonyx open to examination. We recorded an indemnification asset for a significant portion of these unrecognized income tax benefits related
to uncertain tax positions. We recognize interest and penalties related to income tax matters within income tax expense. As of September 1, 2011
and September 2, 2010, accrued interest and penalties related to uncertain tax positions was $16 million and $6 million .
We are unable to reasonably estimate possible increases or decreases in uncertain tax positions that may occur within the next 12 months due
to the uncertainty of the timing of the resolution and/or closure on audits. However, we do not anticipate any such change would be material.
We currently operate in several tax jurisdictions where we have arrangements that allow us to compute our tax provision at rates below the
local statutory rates that expire in whole or in part at various dates through 2026. These arrangements benefitted our tax provision in 2011 and
2010 by approximately $72 million (approximately $0.07 per diluted share) and approximately $69 million (approximately $0.07 per diluted
share), respectively.
76
2011 2010 2009
Beginning unrecognized tax benefits
$
88
$
1
$
1
Increases related to tax positions taken during current year
28
11
—
Foreign currency translation increases (decreases) to tax positions
6
— —
Increases related to tax positions from prior years
4
14
—
Decreases related to tax positions from prior years
(3
)
— —
Settlements with tax authorities
(2
)
(1
)
—
Unrecognized tax benefits acquired in current year —
63
—
Expiration of foreign statutes of limitations — — (
1
)
Other
— —
1
Ending unrecognized tax benefits
$
121
$
88
$
1