Northrop Grumman 2010 Annual Report Download - page 91

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Income tax expense, both federal and foreign, consisted of the following:
$ in millions 2010 2009 2008
Year Ended December 31
Income Taxes on Continuing Operations
Currently payable
Federal income taxes $500 $527 $728
Foreign income taxes 11 34 35
Total federal and foreign income taxes currently payable 511 561 763
Change in deferred federal and foreign income taxes 46 132 96
Total federal and foreign income taxes $557 $693 $859
The geographic source of earnings (loss) from continuing operations before income taxes is as follows:
$ in millions 2010 2009 2008
Year Ended December 31
Domestic income (loss) $2,548 $2,140 $(622)
Foreign income 47 126 102
Earnings (loss) from continuing operations before income taxes $2,595 $2,266 $(520)
Income tax expense differs from the amount computed by multiplying the statutory federal income tax rate times
the earnings (loss) from continuing operations before income taxes due to the following:
$ in millions 2010 2009 2008
Year Ended December 31
Income tax expense (benefit) on continuing operations at statutory rate $ 908 $793 $ (183)
Goodwill impairment 1,071
Manufacturing deduction (34) (24) (19)
Research tax credit (15) (17) (13)
Settlement of IRS appeals cases, net of additional uncertain tax position accruals (296) (75) (35)
Other, net (6) 16 38
Total federal and foreign income taxes $ 557 $693 $ 859
Uncertain Tax Positions – In 2010, the company reached a final settlement with the IRS and Joint Committee
with respect to the IRS’ examination of the company’s tax returns for the years 2004 through 2006. As a result
of this settlement, the company reduced its liability for uncertain tax positions, including previously accrued
interest, by $311 million, which was recorded as a reduction to the company’s effective tax rate.
In 2009, the company reached a final settlement agreement with the IRS and Joint Committee with respect to
the IRS’ examination of the company’s tax returns for the years 2001 through 2003. As a result of this
settlement, the company reduced its liability for uncertain tax positions by $60 million, which was recorded as a
reduction to the company’s effective tax rate.
In 2008, the company reached a final settlement agreement with the IRS and Joint Committee with respect to
the IRS’ audit of the TRW tax returns for the years 1999 through 2002. As a result of this settlement, the
company reduced its liability for uncertain tax positions by $126 million (including accrued interest of
$44 million), $95 million of which was recorded as a reduction of goodwill.
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NORTHROP GRUMMAN CORPORATION