Texas Instruments 2012 Annual Report Download - page 21

ANNUAL
REPORT
TEXAS INSTRUMENTS 2012 ANNUAL REPORT • 19
Uncertain tax positions
We operate in a number of tax jurisdictions, and our income tax returns are subject to examination by tax authorities in those
jurisdictions who may challenge any item on these tax returns. Because the matters challenged by authorities are typically complex,
their ultimate outcome is uncertain. Before any benefit can be recorded in the financial statements, we must determine that it is “more
likely than not” that a tax position will be sustained by the appropriate tax authorities. We recognize accrued interest related to uncertain
tax positions and penalties as components of OI&E.
The changes in the total amounts of uncertain tax positions are summarized as follows:
2012 2011 2010
Balance, January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $210 $103 $ 56
Additions based on tax positions related to the current year . . . . . . . . . . . . . . . . . . . . . . . 12 15 12
Additions from the acquisition of National . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —132 —
Additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 3 50
Reductions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (92) (39) (12)
Settlements with tax authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 (4) (3)
Expiration of the statute of limitations for assessing taxes . . . . . . . . . . . . . . . . . . . . . . . . (30) — —
Balance, December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $184 $210 $103
Interest income (expense) recognized in the year ended December 31 . . . . . . . . . . . . . . . . . . $ 32 $ 1 $ (2)
Interest receivable (payable) as of December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8 $ (3) $ 5
The liability for uncertain tax positions is a component of Deferred credits and other liabilities on our December 31, 2012, balance sheet.
The interest receivable is a component of Other assets on our December 31, 2012, balance sheet.
Within the $184 million liability for uncertain tax positions as of December 31, 2012, are positions totaling $159 million that, if
recognized, would impact the tax rate. If these tax liabilities are ultimately realized, $78 million of existing deferred tax assets would
also be realized, primarily related to refunds from counterparty jurisdictions resulting from procedures for relief from double taxation.
Regarding the $184 million liability:
•฀ ฀About฀$60฀million฀of฀the฀liability฀represents฀uncertain฀tax฀positions฀for฀tax฀years฀in฀jurisdictions฀in฀which฀audit฀assessments฀have฀
not been made. The liability is primarily related to transfer pricing issues for which procedures for relief from double taxation will
mitigate the tax rate impact of any difference between the actual tax assessments and our estimates. The increase in the liability
for transfer pricing issues for the next 12 months is expected to be about $10 million.
•฀ ฀About฀$30฀million฀of฀the฀liability฀represents฀audit฀assessments฀subject฀to฀ongoing฀procedures฀for฀relief฀from฀double฀taxation.฀
Settlement of the $30 million is subject to timely completion of the tax treaty processes and may be settled within the next
12 months. Settlement would not have a significant tax rate impact, as the tax rates of the counterparty jurisdictions are similar.
•฀ ฀The฀balance฀of฀the฀liability฀represents฀tax฀adjustments฀that฀are฀known฀and฀currently฀before฀the฀tax฀authorities฀or฀otherwise฀
identified by the company as adjustments to filed returns. Settlement of these matters at the known amounts will not have any
additional tax rate impact. Based on the expected settlement dates of various income tax examinations, the anticipated reduction
in these uncertain tax positions during the next 12 months could range between about $30 million and $60 million.
Within the $210 million liability for uncertain tax positions as of December 31, 2011, are uncertain tax positions totaling $233 million
that, if recognized, would impact the tax rate. If these tax liabilities are ultimately realized, $83 million of deferred tax assets would also
be realized, primarily related to refunds from counterparty jurisdictions resulting from procedures for relief from double taxation.
As of December 31, 2012, the statute of limitations remains open for U.S. federal tax returns for 2000 and following years. Audit
activities related to our U.S. federal tax returns through 2008 have been completed except for certain pending tax treaty procedures for
relief from double taxation. These procedures pertain to U.S. federal tax returns for the years 2003 through 2008. U.S. federal tax returns
for National are currently under audit for tax years through fiscal year 2012.
In non-U.S. jurisdictions, the years open to audit represent the years still open under the statute of limitations. With respect to major
jurisdictions outside the U.S., our subsidiaries are no longer subject to income tax audits for years before 2005.