Northrop Grumman 2011 Annual Report Download - page 87

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NORTHROP GRUMMAN CORPORATION
Federal and foreign income tax expense consisted of the following:
Year Ended December 31
$ in millions 2011 2010 2009
Income Taxes on Continuing Operations
Currently payable
Federal income taxes $ 592 $ 394 $ 390
Foreign income taxes 18 11 34
Total federal and foreign income taxes currently payable 610 405 424
Change in deferred federal and foreign income taxes 387 57 212
Total federal and foreign income taxes $ 997 $ 462 $ 636
The geographic source of earnings from continuing operations before income taxes is as follows:
Year Ended December 31
$ in millions 2011 2010 2009
Domestic $2,998 $2,319 $1,944
Foreign 85 47 126
Earnings from continuing operations before income taxes $3,083 $2,366 $2,070
Income tax expense differs from the amount computed by multiplying the statutory federal income tax rate times
the earnings from continuing operations before income taxes due to the following:
Year Ended December 31
$ in millions 2011 2010 2009
Income tax expense on continuing operations at statutory rate $1,079 $ 828 $725
Manufacturing deduction (32) (33) (18)
Research tax credit (17) (12) (15)
Settlement of IRS appeals cases, net of additional uncertain tax position accruals (298) (77)
ESOP dividends (13) (14) (13)
Other, net (20) (9) 34
Total federal and foreign income taxes $ 997 $ 462 $636
Uncertain Tax Positions – As of December 31, 2011, the amount recorded for uncertain tax positions was a liability
of $135 million, which includes accrued interest and penalties of $17 million. This liability is included in other
long-term liabilities in the consolidated statements of financial position. If the income tax benefits from these tax
positions are ultimately realized, $95 million of federal benefits would affect the company’s effective tax rate. The
remaining $40 million relates to state taxes and would be realized through operating income.
In 2010, in connection with the settlement agreement with IRS for years 2004 through 2006, the company
reduced its liability for uncertain tax positions by $311 million, including previously accrued interest, which was
recorded as a reduction to the company’s effective tax rate.
In 2009, in connection with the settlement agreement with IRS for years 2001 through 2003, 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.
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