DUPONT E I DE NEMOURS & CO | 2013 | FY | 3

PROVISION FOR INCOME TAXES
 
2013
2012
2011
Current tax expense (benefit) on continuing operations:
 

 

 

U.S. federal
$
160

$
121

$
353

U.S. state and local
23

16

(20
)
International
677

663

482

Total current tax expense on continuing operations
860

800

815

Deferred tax expense (benefit) on continuing operations:




 

U.S. federal
(193
)
(105
)
(143
)
U.S. state and local
(65
)
(46
)
(4
)
International
24

(33
)
(21
)
Total deferred tax (benefit) expense on continuing operations
(234
)
(184
)
(168
)
Provision for income taxes on continuing operations
$
626

$
616

$
647



The significant components of deferred tax assets and liabilities at December 31, 2013 and 2012, are as follows:
 
2013
2012
 
Asset
Liability
Asset
Liability
Depreciation
$
—

$
1,707

$
—

$
1,696

Accrued employee benefits
3,754

512

5,198

167

Other accrued expenses
818

87

723

65

Inventories
275

151

231

105

Unrealized exchange gains/losses
65

—

—

37

Tax loss/tax credit carryforwards/backs
2,615

—

2,733

—

Investment in subsidiaries and affiliates
189

245

78

92

Amortization of intangibles
109

1,372

58

1,335

Other
316

159

244

265

Valuation allowance
(1,764
)
—

(1,914
)
—

          
$
6,377

$
4,233

$
7,351

$
3,762

Net deferred tax asset
$
2,144

 

$
3,589

 



An analysis of the company's effective income tax rate (EITR) on continuing operations is as follows:
 
2013
2012
2011
Statutory U.S. federal income tax rate
35.0
 %
35.0
 %
35.0
 %
Exchange gains/losses1
0.8

0.1

(0.8
)
Domestic operations
(3.2
)
(2.3
)
(2.5
)
Lower effective tax rates on international operations-net2
(12.3
)
(10.9
)
(11.6
)
Tax settlements
(0.2
)
(2.0
)
(0.2
)
Sale of a business
—

—

(2.3
)
U.S. research & development credit 2
(2.2
)
—

(0.9
)
          
17.9
 %
19.9
 %
16.7
 %

1. 
Principally reflects the impact of non-taxable exchange gains and losses resulting from remeasurement of foreign currency-denominated monetary assets and liabilities. Further information about the company's foreign currency hedging program is included in Note 20 under the heading Foreign Currency Risk.
2. 
On January 2, 2013, U.S. tax law was enacted which extended through 2013 (and retroactive to 2012) several expired or expiring temporary business tax provisions. In accordance with GAAP, this extension was taken into account in the quarter in which the legislation was enacted (i.e. first quarter 2013).

Consolidated income from continuing operations before income taxes for U.S. and international operations was as follows:
 
2013
2012
2011
U.S. (including exports)
$
962

$
640

$
718

International
2,527

2,448

3,161

          
$
3,489

$
3,088

$
3,879



The increase in pre-tax earnings from continuing operations from 2013 to 2012 is primarily driven by higher worldwide sales volume, lower Imprelis® herbicide claims, net of insurance recoveries, and lower employee separation/asset related charges in 2013, partly offset by lower local selling prices and negative currency impact. See Note 16 and Note 3 for additional information relating to Imprelis® claims and employee separation/asset related charges, respectively. In 2013 and 2012, the U.S. recorded exchange gain (loss) associated with the hedging program of $35 and $(157), respectively. While the taxation of the amounts reflected on the chart above does not correspond precisely to the jurisdiction of taxation (due to taxation in multiple countries, exchange gains/losses, etc.), it represents a reasonable approximation of the income before income taxes split between U.S. and international jurisdictions. See Note 20 for additional information regarding the company's hedging program.

Under the tax laws of various jurisdictions in which the company operates, deductions or credits that cannot be fully utilized for tax purposes during the current year may be carried forward or back, subject to statutory limitations, to reduce taxable income or taxes payable in future or prior years. At December 31, 2013, the tax effect of such carryforwards/backs, net of valuation allowance approximated $1,199. Of this amount, $1,009 has no expiration date, $19 expires after 2013 but before the end of 2018 and $171 expires after 2018.

At December 31, 2013, unremitted earnings of subsidiaries outside the U.S. totaling $15,978 were deemed to be indefinitely reinvested. No deferred tax liability has been recognized with regard to the remittance of such earnings. It is not practical to estimate the income tax liability that might be incurred if such earnings were remitted to the U.S.

Each year the company files hundreds of tax returns in the various national, state and local income taxing jurisdictions in which it operates. These tax returns are subject to examination and possible challenge by the taxing authorities. Positions challenged by the taxing authorities may be settled or appealed by the company. As a result, there is an uncertainty in income taxes recognized in the company's financial statements in accordance with accounting for income taxes and accounting for uncertainty in income taxes. It is reasonably possible that changes to the company's global unrecognized tax benefits could be significant, however, due to the uncertainty regarding the timing of completion of audits and possible outcomes, a current estimate of the range of increases or decreases that may occur within the next twelve months cannot be made.






















The company and/or its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various states and non-U.S. jurisdictions. With few exceptions, the company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2004. A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:
 
2013
2012
2011
Total unrecognized tax benefits as of January 1
$
805

$
800

$
693

Gross amounts of decreases in unrecognized tax benefits as a result of tax positions
     taken during the prior period
(28
)
(94
)
(82
)
Gross amounts of increases in unrecognized tax benefits as a result of tax positions
     taken during the prior period
76

73

170

Gross amounts of increases in unrecognized tax benefits as a result of tax positions
     taken during the current period
92

78

79

Amount of decreases in the unrecognized tax benefits relating to settlements with taxing
     authorities
(19
)
(29
)
(6
)
Reduction to unrecognized tax benefits as a result of a lapse of the applicable statute of
     limitations
(6
)
(10
)
(32
)
Exchange gain (loss)
(19
)
(13
)
(22
)
Total unrecognized tax benefits as of December 31
$
901

$
805

$
800

Total unrecognized tax benefits that, if recognized, would impact the effective tax rate
$
778

$
693

$
683

Total amount of interest and penalties recognized in the Consolidated Income Statements
$
16

$
4

$
7

Total amount of interest and penalties recognized in the Consolidated Balance Sheets
$
122

$
116

$
113

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