Note 12 - Income Taxes

6 Months Ended

Jun. 30, 2013

The following table reflects changes in unrecognized tax benefits for the six months ended June 30, 2013:



	(In millions)
Gross amounts of unrecognized tax benefits as of January 1, 2013	$	340
Increases related to prior period tax positions	14
Decreases related to prior period tax positions	(7		)
Increases related to current period tax positions	22
Settlements	(2		)
Gross amounts of unrecognized tax benefits as of June 30, 2013	$	367

As of June 30, 2013, our liabilities for unrecognized tax benefits were included in accrued expenses and other current liabilities and deferred and other tax liabilities, net. The increase in liabilities for unrecognized tax benefits for the six months ended June 30, 2013 relates primarily to the point in time at which certain foreign earnings became subject to U.S. taxation and the enactment of the federal research and development credit retroactive to 2012.

We recognize interest and/or penalties related to uncertain tax positions in income tax expense. The amount of interest and penalties accrued as of June 30, 2013 and December 31, 2012 was approximately $71 million and $117 million, respectively. The decrease in the amount of interest and penalties accrued is due primarily to the settlement of multiple uncertain tax positions during the six months ended June 30, 2013.

We are subject to both direct and indirect taxation in the U.S. and various states and foreign jurisdictions. We are under examination by certain tax authorities for the 2003 to 2009 tax years. We are in the process of settlement discussions with various tax authorities that could reasonably be expected to result in a significant change to the existing tax reserve balance within the next 12 months. We believe that adequate amounts have been reserved for any adjustments that may ultimately result from these examinations or changes. The material jurisdictions where we are subject to potential examination by tax authorities for tax years after 2002 include, among others, the U.S. (Federal and California), France, Germany, Italy, Korea, Israel, Switzerland, Singapore and Canada.

Although the timing of the resolution and/or closure of audits is highly uncertain, it is reasonably possible that the balance of gross unrecognized tax benefits could significantly change in the next 12 months as a result of various tax audit settlements. However, given the number of years remaining subject to examination and the number of matters being examined, we are unable to estimate the full range of possible adjustments to the balance of gross unrecognized tax benefits.

Our effective tax rate differs from the U.S. federal statutory rate due primarily to lower tax rates associated with certain earnings from our operations outside the U.S. We have not provided for U.S. income and foreign withholding tax on certain foreign earnings as we intend to indefinitely reinvest these earnings outside the U.S. We consider projected cash needs for, among other things, investments in our existing businesses, potential acquisitions and capital transactions, including repurchases of our common stock and debt repayments. We estimate the amount of cash available or needed in the jurisdictions where these investments are expected, as well as our ability to generate cash in those jurisdictions and our access to capital markets. This analysis enables us to conclude whether or not we will indefinitely reinvest the current period's foreign earnings.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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