Waste Management 2015 Annual Report Download - page 164

WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The U.S. federal statutory income tax rate is reconciled to the effective income tax rate as follows:
Years Ended December 31,
2015 2014 2013
Income tax expense at U.S. federal statutory rate ............. 35.00% 35.00% 35.00%
Federal tax credits ..................................... (5.49) (3.21) (11.74)
Taxing authority audit settlements and other tax adjustments . . . (2.67) (1.59) (3.56)
Noncontrolling interests ................................ 0.04 (0.81) (2.28)
State and local income taxes, net of federal income tax
benefit ............................................ 3.20 1.77 9.81
Tax rate differential on foreign income .................... (0.99) (0.46) 1.63
Tax impact of impairments .............................. 0.23 0.46 41.95
Tax impact of divestitures ............................... (0.34) (7.89) —
Other ............................................... 0.13 0.34 2.94
Provision for income taxes .......................... 29.11% 23.61% 73.75%
The comparability of our provision for income taxes for the reported periods has been primarily affected by
(i) variations in our income before income taxes; (ii) federal tax credits; (iii) adjustments to our accruals and
related deferred taxes; (iv) the realization of state net operating losses and credits; (v) tax audit settlements and
(vi) the tax implications of divestitures and impairments.
For financial reporting purposes, income (loss) before income taxes by source was as follows (in millions):
Years Ended December 31,
2015 2014 2013
Domestic ........................................... $ 922 $1,601 $548
Foreign ............................................ 138 150 (54)
Income before income taxes ........................ $1,060 $1,751 $494
Investment in Refined Coal Facility — In 2011, we acquired a noncontrolling interest in a limited liability
company established to invest in and manage a refined coal facility in North Dakota. The facility’s refinement
processes qualify for federal tax credits that are expected to be realized through 2019 in accordance with
Section 45 of the Internal Revenue Code.
We account for our investment in this entity using the equity method of accounting, recognizing our share of
the entity’s results of operations and other reductions in the value of our investment in “Equity in net losses of
unconsolidated entities,” within our Consolidated Statement of Operations. We recognized $7 million, $7 million
and $8 million of net losses resulting from our share of the entity’s operating losses during the years ended
December 31, 2015, 2014 and 2013, respectively. Our tax provision was reduced by $23 million, $21 million and
$20 million for the years ended December 31, 2015, 2014 and 2013, respectively, primarily as a result of federal
tax credits realized from this investment. See Note 20 for additional information related to this investment.
Investment in Low-Income Housing Properties — In 2010, we acquired a noncontrolling interest in a limited
liability company established to invest in and manage low-income housing properties. The entity’s low-income
housing investments qualify for federal tax credits that are expected to be realized through 2020 in accordance
with Section 42 of the Internal Revenue Code.
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