Lockheed Martin 2015 Annual Report Download - page 98

of 2014, which reduced income tax expense by approximately $45 million. In 2013, the R&D tax credit was temporarily
reinstated for two years, retroactive to the beginning of 2012. As a result, income tax expense for 2013 reflects the credit for
all of 2013 and 2012, which reduced income tax expense by approximately $76 million.
We receive a tax deduction for dividends paid on shares of our common stock held by certain of our defined contribution
plans with an employee stock ownership plan feature. The amount of the tax deduction has increased as we increased our
dividend over the last three years, partially offset by a decline in the number of shares in these plans.
A limited amount of the 2014 and 2013 non-cash goodwill impairment charges will be deductible for tax purposes.
Accordingly, the 2014 and 2013 non-cash goodwill impairment charges (Note 1) of $119 million and $195 million,
respectively, increased our 2014 and 2013 effective tax rates.
As a result of a decision in 2015 to divest Lockheed Martin Commercial Flight Training in 2016, we recorded an asset
impairment charge of approximately $90 million. This charge was partially offset by a net deferred tax benefit of about
$80 million. The net impact of the resulting tax benefit reduced the effective income tax rate by 1.0 percentage point in 2015.
We participate in the IRS Compliance Assurance Process program. The IRS examination of the year 2012 was
completed in the fourth quarter of 2013. The examinations of the years 2013 and 2014 remain under review.
The primary components of our federal and foreign deferred income tax assets and liabilities at December 31 were as
follows (in millions):
2015 2014
Deferred tax assets related to:
Accrued compensation and benefits $ 961 $ 965
Pensions (a) 4,462 4,317
Other postretirement benefit obligations 375 386
Contract accounting methods 1,039 989
Foreign company operating losses and credits 70 59
Other 434 198
Valuation allowance (b) (76) (9)
Deferred tax assets, net 7,265 6,905
Deferred tax liabilities related to:
Goodwill and purchased intangibles 474 454
Property, plant and equipment 457 514
Exchanged debt securities and other (c) 409 485
Deferred tax liabilities 1,340 1,453
Net deferred tax assets (d) $5,925 $5,452
(a) The increase in 2015 was primarily due to the negative investment return on postretirement plan assets (Note 11).
(b) A valuation allowance was provided against certain foreign company deferred tax assets arising from carryforwards of unused tax
benefits.
(c) Includes deferred taxes associated with the exchange of debt securities in prior years.
(d) Includes net foreign current deferred tax liabilities, which are included on the Balance Sheets in other current liabilities.
As of December 31, 2015 and 2014, our liabilities associated with unrecognized tax benefits are not material.
We and our subsidiaries file income tax returns in the U.S. federal jurisdiction and various foreign jurisdictions. With
few exceptions, the statute of limitations is no longer open for U.S. federal or non-U.S. income tax examinations for the years
before 2012, other than with respect to refunds.
U.S. income taxes and foreign withholding taxes have not been provided on earnings of $353 million, $291 million, and
$222 million that have not been distributed by our non-U.S. companies as of December 31, 2015, 2014, and 2013. Our
intention is to permanently reinvest these earnings, thereby indefinitely postponing their remittance to the U.S. If these
earnings had been remitted, we estimate that the additional income taxes after foreign tax credits would have been
approximately $48 million in 2015, $55 million in 2014, and $50 million in 2013.
Our federal and foreign income tax payments, net of refunds received, were $1.8 billion in 2015, $1.5 billion in 2014,
and $787 million in 2013. Our 2014 net payments reflect a $200 million refund from the IRS primarily attributable to our
tax-deductible discretionary pension contributions during the fourth quarters of 2013.
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