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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2012

Income Tax Expense (Benefit) [Abstract]

Components Of Earnings From Continuing Operations Before Income Taxes And Equity Earnings By Taxing Jurisdiction

The components of International Paper’s earnings from continuing operations before income taxes and equity earnings by taxing jurisdiction were as follows:



In millions	2012		2011		2010
Earnings (loss)
U.S.	$	478	$	874	$	198
Non-U.S.	546		584		624
Earnings (loss) from continuing operations before income taxes and equity earnings	$	1,024	$	1,458	$	822

Provision (Benefit) For Income Taxes By Taxing Jurisdiction

The provision (benefit) for income taxes (excluding noncontrolling interests) by taxing jurisdiction was as follows:



In millions	2012			2011			2010
Current tax provision (benefit)
U.S. federal	$	14		$	(78	)	$	(249	)
U.S. state and local	11			(19		)	(19		)
Non-U.S.	102			91			67
	$	127		$	(6	)	$	(201	)
Deferred tax provision (benefit)
U.S. federal	$	226		$	207		$	301
U.S. state and local	6			46			45
Non-U.S.	(28		)	64			76
	$	204		$	317		$	422
Income tax provision	$	331		$	311		$	221

Reconciliation Of Income Tax Expense Using Statutory U.S. Income Tax Rate Compared With Actual Income Tax Provision

A reconciliation of income tax expense using the statutory U.S. income tax rate compared with the actual income tax provision follows:



In millions	2012			2011			2010
Earnings (loss) from continuing operations before income taxes and equity earnings	$	1,024		$	1,458		$	822
Statutory U.S. income tax rate	35		%	35		%	35		%
Tax expense (benefit) using statutory U.S. income tax rate	358			510			288
State and local income taxes	11			16			15
Tax rate and permanent differences on non-U.S. earnings	(116		)	(34		)	(69		)
Net U.S. tax on non-U.S. dividends	48			23			16
Tax benefit on manufacturing activities	(15		)	(8		)	3
Non-deductible business expenses	7			6			8
Non-deductible goodwill	34			—			—
Sales of non-strategic businesses	—			(195		)	—
Retirement plan dividends	(5		)	(5		)	(2		)
Cellulosic bio-fuel credits	—			—			(40		)
Tax credits	—			(7		)	(25		)
Medicare subsidy	5			—			29
Other, net	4			5			(2		)
Income tax provision	$	331		$	311		$	221
Effective income tax rate	32		%	21		%	27		%

Tax Effects Of Significant Temporary Differences, Representing Deferred Tax Assets And Liabilities

The tax effects of significant temporary differences, representing deferred income tax assets and liabilities at December 31, 2012 and 2011, were as follows:



In millions	2012			2011
Deferred income tax assets:
Postretirement benefit accruals	$	229		$	242
Pension obligations	1,620			954
Alternative minimum and other tax credits	741			478
Net operating loss carryforwards	579			536
Compensation reserves	242			189
Other	302			232
Gross deferred income tax assets	3,713			2,631
Less: valuation allowance	(400		)	(424		)
Net deferred income tax asset	$	3,313		$	2,207
Deferred income tax liabilities:
Intangibles	$	(263	)	$	(59	)
Plants, properties and equipment	(3,126		)	(2,383		)
Forestlands and related installment sales	(2,511		)	(1,833		)
Gross deferred income tax liabilities	$	(5,900	)	$	(4,275	)
Net deferred income tax liability	$	(2,587	)	$	(2,068	)

Reconciliation Of Beginning And Ending Amount Of Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2012, 2011 and 2010 is as follows:



In millions	2012			2011			2010
Balance at January 1	$	(857	)	$	(199	)	$	(308	)
(Additions) reductions based on tax positions related to current year	12			(2		)	(12		)
Additions for tax positions of prior years	(140		)	(719		)	(50		)
Reductions for tax positions of prior years	6			29			97
Settlements	2			2			—
Expiration of statutes of limitations	7			25			70
Currency translation adjustment	(2		)	7			4
Balance at December 31	$	(972	)	$	(857	)	$	(199	)

Components Of Net Provisions Related To Special Items

Included in the Company’s 2012, 2011 and 2010 income tax provision (benefit) are $(85) million, $(266) million and $(143) million, respectively, related to special items. The components of the net provisions related to special items were as follows:



In millions	2012			2011			2010
Special items and other charges:
Restructuring and other charges	$	(104	)	$	(293	)	$	(149	)
Tax-related adjustments:
Internal restructurings	14			24			—
India deal costs	—			9			—
IP UK valuation allowance release	—			(13		)	—
Settlement of tax audits and legislative changes	—			5			—
Incentive plan deferred income tax write-off	—			—			14
Medicare D deferred income tax write-off	5			—			32
Cellulosic bio-fuel credits	—			—			(40		)
Other tax adjustments	—			2			—
Income tax provision (benefit) related to special items	$	(85	)	$	(266	)	$	(143	)

Scheduled Expiration Dates Of Net Operating Loss And Tax Credit Carryforwards

The following details the scheduled expiration dates of the Company’s net operating loss and income tax credit carryforwards:



In millions	2013 Through 2022		2023 Through 2032		Indefinite		Total
U.S. federal and non-U.S. NOLs	$	19	$	151	$	359	$	529
State taxing jurisdiction NOLs	167		133		—		300
U.S. federal, non- U.S. and state tax credit carryforwards	188		74		669		931
State capital loss carryforwards	24		—		—		24
Total	$	398	$	358	$	1,028	$	1,784

- 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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