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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

Income (loss) from continuing operations before income tax expense (benefit) from domestic and international operations

Income (loss) from continuing operations before income tax expense from U.S. and international operations was as follows (in millions):



	Year Ended December 31,
	2012			2011		2010
U.S. operations	$	4,015		$	3,190	$	1,436
International operations	(309		)	132		62
Income from continuing operations before income tax expense	$	3,706		$	3,322	$	1,498

Reconciliation of income tax expense (benefit) related to income (loss) from continuing operations before income tax expense (benefit)

The following is a reconciliation of income tax expense related to continuing operations to income taxes computed by applying the U.S. statutory federal income tax rate (35 percent for all years presented) to income from continuing operations before income tax expense (in millions):



	Year Ended December 31,
	2012			2011			2010
Federal income tax expense at the U.S. statutory rate	$	1,297		$	1,163		$	524
U.S. state income tax expense (benefit), net of U.S. federal income tax effect	64			29			(21		)
U.S. manufacturing deduction	(33		)	(28		)	5
International operations	266			46			27
Permanent differences	20			8			8
Change in tax law	—			—			16
Other, net	12			8			16
Income tax expense	$	1,626		$	1,226		$	575

Components of income tax expense (benefit) related to continuing operations

Components of income tax expense related to continuing operations were as follows (in millions):



	Year Ended December 31,
	2012		2011			2010
Current:
U.S. federal	$	515	$	562		$	(75	)
U.S. state	22		13			(13		)
International	126		186			22
Total current	663		761			(66		)

Deferred:
U.S. federal	854		527			634
U.S. state	77		32			(19		)
International	32		(94		)	26
Total deferred	963		465			641
Income tax expense	$	1,626	$	1,226		$	575

Deferred income tax assets and liabilities

The tax effects of significant temporary differences representing deferred income tax assets and liabilities were as follows (in millions):



	December 31,
	2012			2011
Deferred income tax assets:
Tax credit carryforwards	$	61		$	158
Net operating losses (NOL)	247			300
Compensation and employee benefit liabilities	383			324
Environmental liabilities	83			78
Inventories	258			273
Property, plant and equipment	78			14
Other	157			160
Total deferred income tax assets	1,267			1,307
Less: Valuation allowance	(304		)	(295		)
Net deferred income tax assets	963			1,012

Deferred income tax liabilities:
Turnarounds	(300		)	(310		)
Property, plant and equipment	(6,143		)	(5,292		)
Inventories	(381		)	(274		)
Other	(103		)	(119		)
Total deferred income tax liabilities	(6,927		)	(5,995		)
Net deferred income tax liabilities	$	(5,964	)	$	(4,983	)

Income tax credit and loss carryforwards

We had the following income tax credit and loss carryforwards as of December 31, 2012 (in millions):



	Amount		Expiration
U.S. state income tax credits	$	79	2013 through 2027
U.S. state income tax credits	12		Unlimited
U.S. state NOL (gross amount)	4,806		2013 through 2032
International NOL	518		Unlimited

Subsequently recognized tax benefits related to the valuation allowance for deferred income tax assets

Subsequently recognized tax benefits related to the valuation allowance for deferred income tax assets as of December 31, 2012 will be allocated as follows (in millions):



Income tax benefit	$	297
Additional paid-in capital	7
Total	$	304

Reconciliation of the change in unrecognized tax benefits, excluding the effect of related penalties and interest and the U.S. federal tax effect of U.S. state unrecognized tax benefit

The following is a reconciliation of the change in unrecognized tax benefits, excluding the effect of related penalties and interest and the U.S. federal tax effect of U.S. state unrecognized tax benefits (in millions):



	Year Ended December 31,
	2012			2011			2010
Balance as of beginning of year	$	326		$	330		$	484
Additions based on tax positions related to the current year	11			14			4
Additions for tax positions related to prior years	40			55			49
Reductions for tax positions related to prior years	(36		)	(66		)	(203		)
Reductions for tax positions related to the lapse of applicable statute of limitations	—			(3		)	(4		)
Settlements	—			(4		)	—
Balance as of end of year	$	341		$	326		$	330

- Definition

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

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- Definition

Tabular disclosure of valuation allowances to reduce deferred tax assets to net realizable value, including identification of the deferred tax asset more likely than not will not be fully realized and the corresponding amount of the valuation allowance.

+ References+ Details