Dow Chemical 2015 Annual Report Download - page 146

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The tax rate for 2014 was favorably impacted by the geographic mix of earnings, with the most notable components being
improved profitability in Europe and Asia Pacific as well as equity earnings providing additional favorable impact on the tax
rate. The tax rate was also favorably impacted by a reduction in the tax on remittances by foreign subsidiaries to the United
States. The tax rate was unfavorably impacted by a continued increase in statutory income in Latin America due to local
currency devaluations, and increases in valuation allowances, primarily in Asia Pacific. These factors resulted in an effective
tax rate of 27.1 percent for 2014.
The tax rate for 2013 was favorably impacted by increased equity earnings; the K-Dow arbitration award, due to favorable tax
treatment of certain components of the award; and changes in valuation allowances in the United States on state income tax
attributes and capital loss carryforwards. The tax rate was unfavorably impacted by adjustments to uncertain tax positions
related to court rulings on two separate tax matters as well as the establishment of valuation allowances outside the United
States. Additionally, the tax rate was unfavorably impacted by an increase in statutory taxable income in Latin America,
primarily due to local currency devaluation. These factors resulted in an effective tax rate of 29.2 percent for 2013.
Deferred Tax Balances at December 31 2015 2014
In millions
Deferred Tax
Assets (1)
Deferred Tax
Liabilities
Deferred Tax
Assets (1)
Deferred Tax
Liabilities
Property $ 48 $ 2,015 $ 63 $ 2,005
Tax loss and credit carryforwards 1,647 — 1,843 —
Postretirement benefit obligations 4,199 1,344 4,526 1,220
Other accruals and reserves 1,191 684 1,213 411
Intangibles 208 692 217 691
Inventory 306 218 412 177
Long-term debt — 440 — 673
Investments (2) 204 242 130 346
Other – net (2) 1,114 436 972 527
Subtotal $ 8,917 $ 6,071 $ 9,376 $ 6,050
Valuation allowances (1,000) — (1,106) —
Total $ 7,917 $ 6,071 $ 8,270 $ 6,050
(1) Included in current deferred tax assets are prepaid tax assets totaling $293 million in 2015 and $358 million in 2014.
(2) Prior year was adjusted to conform to current year presentation.
Gross operating loss carryforwards amounted to $10,364 million at December 31, 2015 and $11,080 million at December 31,
2014. At December 31, 2015, $1,655 million of the operating loss carryforwards were subject to expiration in 2016 through
2020. The remaining operating loss carryforwards expire in years beyond 2020 or have an indefinite carryforward period. Tax
credit carryforwards at December 31, 2015 amounted to $128 million ($130 million at December 31, 2014), net of uncertain
tax positions, of which $29 million is subject to expiration in 2016 through 2020. The remaining tax credit carryforwards expire
in years beyond 2020 or have an indefinite carryforward period.
The Company had valuation allowances that primarily related to the realization of recorded tax benefits on tax loss
carryforwards from operations in the United States, Brazil and Asia Pacific of $1,000 million at December 31, 2015 and
$1,106 million at December 31, 2014.
Undistributed earnings of foreign subsidiaries and related companies that are deemed to be permanently invested amounted to
$18,773 million at December 31, 2015, $18,037 million at December 31, 2014 and $16,139 million at December 31, 2013. It is
not practicable to calculate the unrecognized deferred tax liability on undistributed earnings.
Total Gross Unrecognized Tax Benefits
In millions 2015 2014 2013
Balance at January 1 $ 240 $ 266 $ 409
Increases related to positions taken on items from prior years 92 42 385
Decreases related to positions taken on items from prior years (6) (57) (137)
Increases related to positions taken in the current year 10 10 10
Settlement of uncertain tax positions with tax authorities (56) (13) (393)
Decreases due to expiration of statutes of limitations — (8) (8)
Balance at December 31 $ 280 $ 240 $ 266