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Income Taxes
9 Months Ended
Sep. 30, 2014
Notes to Condensed Consolidated Financial Statements [Abstract]  
Income Tax Disclosure [Text Block]
We conduct business globally and, as a result, UTC or one or more of our subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business we are subject to examination by taxing authorities throughout the world, including such major jurisdictions as Australia, Belgium, Canada, China, France, Germany, Hong Kong, Italy, Japan, South Korea, Singapore, Spain, the United Kingdom and the United States. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations for years before 2000.
In the ordinary course of business, there is inherent uncertainty in quantifying our income tax positions. We assess our income tax positions and record tax benefits for all years subject to examination based upon management's evaluation of the facts, circumstances, and information available at the reporting date. It is reasonably possible that over the next 12 months the amount of unrecognized tax benefits may change within a range of a net increase of $30 million to a net decrease of $150 million as a result of additional worldwide uncertain tax positions, the revaluation of current uncertain tax positions arising from developments in examinations, in appeals, or in the courts, or the closure of tax statutes. See Note 14, Contingent Liabilities, for discussion regarding uncertain tax positions which are not included in this range related to previously disclosed German tax litigation.
The Company is engaged in litigation with the Internal Revenue Service (IRS) with respect to an issue involving the proper timing of deductions taken by Goodrich Corporation in its tax years 2005 and 2006, prior to its acquisition by UTC. This is a recurring issue, and the IRS may continue to challenge it in subsequent tax years until the issue is resolved. Goodrich Corporation tax years 2007 through 2010 are currently before the Appeals Division of the IRS (IRS Appeals) for resolution discussions regarding certain proposed adjustments with which UTC does not agree, including the recurring timing issue described above. Both the 2005 - 2006 litigation and the 2007 - 2010 appeals proceedings, together with all final computations for open tax years through 2010, are expected to be resolved during the fourth quarter of 2014. As a result, we currently expect to recognize non-cash gains of approximately $90 million during the fourth quarter of 2014, primarily comprised of pre-tax interest. IRS examination activity for Goodrich Corporation tax years 2011 and 2012, prior to its acquisition by UTC, commenced during the third quarter of 2014.
UTC tax years 2006 through 2008 have been before IRS Appeals for resolution of certain proposed adjustments with which UTC did not agree. These proceedings were completed and resolution was achieved during the quarter ended September 30, 2014. IRS examination activity for UTC tax years 2011 and 2012 commenced during the third quarter of 2014. Additionally, during the quarter ended September 30, 2014, an agreement was reached between the Company and the Canada Revenue Agency (CRA) with respect to the amount of the research credits to which the Company was entitled for tax years 2006 through 2012. As a result of the completed IRS Appeals activity and agreement with the CRA, the Company recognized non-cash gains in the quarter ended September 30, 2014 of approximately $141 million, including a pre-tax interest adjustment of $23 million.
During the quarter ended June 30, 2014, the Examination Division of the IRS completed a review of UTC tax years 2009 and 2010 and the Examination Division of the Connecticut Department of Revenue Services completed a review of UTC's 2010 - 2012 tax years. As a result of the completion of these examinations, the Company recognized non-cash gains of approximately $274 million, including a pre-tax interest adjustment of $21 million, during the second quarter of 2014. Additionally, the Company reached an agreement with a state taxing authority during the second quarter of 2014 for the monetization of tax credits resulting in a gain of approximately $220 million through Other Income in the quarter ended June 30, 2014.
During the quarter ended June 30, 2014, the Company also settled a dispute with the French Tax Authority related to the proposed disallowance of certain recurring deductions claimed in France for tax years 2008 through 2011.