Waste Management 2011 Annual Report Download - page 131

When comparing 2010 with 2009, the significant increase in our interest expense was primarily due to (i) the
issuance of an additional $600 million of senior notes in November 2009 to support acquisitions and investments
made throughout 2010, (ii) significantly higher costs related to our revolving credit facility, and (iii) decreased
benefits to interest expense provided by active interest rate swaps as a result of decreases in the notional amount of
swaps outstanding. These increases in interest expense were offset, in part, by a decline in market interest rates,
which reduced the interest costs of our tax-exempt borrowings and our Canadian credit facility.
Equity in Net Losses of Unconsolidated Entities
Beginning in April 2010, our “Equity in net losses of unconsolidated entities” has been primarily related to
our noncontrolling interest in a limited liability company established to invest in and manage low-income
housing properties, as well as (i) noncontrolling investments made to support our strategic initiatives and
(ii) unconsolidated trusts for final capping, closure, post-closure or environmental obligations. In January 2011,
we acquired a noncontrolling interest in a limited liability company established to invest in and manage a refined
coal facility. The tax impacts realized as a result of our investments in low-income housing properties and the
refined coal facility are discussed below in Provision for Income Taxes. Refer to Notes 9 and 20 to the
Consolidated Financial Statements for more information related to these investments.
Provision for Income Taxes
We recorded provisions for income taxes of $511 million in 2011, $629 million in 2010 and $413 million in
2009. These tax provisions resulted in an effective income tax rate of approximately 33.6%, 38.5% and 28.1%, for
2011, 2010 and 2009, respectively. The comparability of our reported income taxes for the years ended
December 31, 2011, 2010 and 2009 is primarily affected by (i) variations in our income before income taxes; (ii) the
utilization of a capital loss carry-back; (iii) the realization of state net operating loss and credit carry-forwards;
(iv) changes in effective state and Canadian statutory tax rates; (v) tax audit settlements; and (vi) the impact of
federal low-income housing and refined coal tax credits. The impacts of these items are summarized below:
‰Capital Loss Carry-back — During 2009, we generated a capital loss from the liquidation of a foreign
subsidiary. We determined that the capital loss could be utilized to offset capital gains from 2006 and
2007, which resulted in a reduction to our 2009 “Provision for income taxes” of $65 million.
‰State Net Operating Loss and Credit Carry-forwards — During 2011, 2010 and 2009, we utilized state
net operating loss and credit carry-forwards resulting in a reduction to our “Provision for income taxes”
for those periods of $4 million, $4 million, and $35 million, respectively.
‰Canadian and State Tax Rate Changes — During 2011, our state deferred income taxes increased by
$3 million to reflect the impact of changes in the estimated tax rate at which existing temporary differences
will be realized. During 2010, our current state tax rate increased from 6.25% to 6.75% resulting in an
increase to our provision for income taxes of $5 million. In addition, our state deferred income taxes
increased $37 million to reflect the impact of changes in the estimated tax rate at which existing temporary
differences will be realized. During 2009, our current state tax rate increased from 6.0% to 6.25% and our
deferred state tax rate increased from 5.5% to 5.75%, resulting in an increase to our income taxes of
$3 million and $6 million, respectively. Also affecting 2009 was the reduction of provincial tax rates in
Ontario, which resulted in a $13 million tax benefit as a result of the revaluation of the related deferred tax
balances.
‰Tax Audit Settlements — The settlement of various tax audits resulted in reductions in income tax
expense of $12 million for the year ended December 31, 2011, $8 million for the year ended
December 31, 2010 and $11 million for the year ended December 31, 2009.
‰Federal Low-income Housing Tax Credits — Our federal low-income housing investment and the
resulting credits reduced our provision for income taxes by $38 million for the year ended December 31,
2011 and $26 million for the year ended December 31, 2010. Refer to Note 9 to the Consolidated
Financial Statements for more information related to our federal low-income housing investment.
52