Income Taxes

12 Months Ended

Dec. 31, 2011

Notes To Condensed Consolidated Financial Statements [Abstract]

Income Tax Disclosure [Text Block]

9. Income Taxes

The provision for income taxes from continuing operations consists of the following:
	Years ended December 31,
	2011		2010		2009
U.S. Federal:
Current	$	(87,713)	$	170,175	$	188,272
Deferred		135,305		(24,632)		18,979
		47,592		145,543		207,251
U.S. State and Local:
Current		31,726		26,523		30,981
Deferred		(15,546)		(17,518)		(13,067)
		16,180		9,005		17,914
International:
Current		66,214		43,459		31,848
Deferred		(85,401)		7,763		(16,859)
		(19,187)		51,222		14,989
Total Current		10,227		240,157		251,101
Total Deferred		34,358		(34,387)		(10,947)
Total provision for income taxes	$	44,585	$	205,770	$	240,154

The components of income from continuing operations are as follows:
	Years ended December 31,
	2011		2010		2009
U.S.	$	408,934	$	390,911	$	552,636
International		5,347		143,666		140,540
Total	$	414,281	$	534,577	$	693,176

The effective tax rate for continuing operations for 2011, 2010 and 2009 was10.8%, 38.5% and 34.6%, respectively. The effective tax rate for 2011 includes $90 million of tax benefits from the IRS tax settlements (see Other Matters below), a $34 million tax benefit from the sale of non-U.S. leveraged lease assets and a $4 million charge from the write-off of deferred tax assets associated with the expiration of out-of-the-money vested stock options and the vesting of restricted stock units previously granted to our employees. In addition, the effective tax rate for 2011 was increased due to a reduced tax benefit associated with the goodwill impairment charges.

The effective tax rate for 2010 includes $16 million of tax benefits associated with previously unrecognized deferred taxes on outside basis differences, a $15 million charge for the write-off of deferred tax assets associated with the expiration of out-of-the-money vested stock options and the vesting of restricted stock units previously granted to our employees and a $9 million charge for the write-off of deferred tax assets related to the U.S. health care reform legislation that eliminated the tax deduction for retiree health care costs to the extent of federal subsidies received by companies that provide retiree prescription drug benefits equivalent to Medicare Part D coverage.

The effective rate for 2009 included a charge of $13 million for the write-off of deferred tax assets associated with the expiration of out-of-the-money vested stock options and the vesting of restricted stock, offset by $13million of tax benefits from retirement of intercompany obligations and the repricing of leveraged lease transactions.

The items accounting for the difference between income taxes computed at the federal statutory rate and our provision for income taxes consist of the following:

The items accounting for the difference between income taxes computed at the federal statutory rate and our provision for income taxes consist of the following:

	2011		2010		2009
Federal statutory provision	$	144,998	$	187,103	$	242,612
State and local income taxes		10,135		5,853		11,109
Impact of foreign operations		(41,669)		13,938		(18,037)
Tax exempt income/reimbursement		(2,674)		(2,352)		(2,748)
Federal income tax credits/incentives		(10,741)		(7,580)		(4,792)
Unrealized stock compensation benefits		3,538		15,149		12,852
U.S. health care reform tax change		-		9,070		-
Outside basis differences		-		(15,798)		-
Goodwill impairment		31,095		-		-
Settlements with the IRS		(90,227)		-		-
Other, net		130		387		(842)
Provision for income taxes	$	44,585	$	205,770	$	240,154

The components of our deferred tax liabilities and assets are as follows:
	December 31,
	2011		2010
Deferred tax liabilities:
Depreciation	$	69,092	$	49,351
Deferred profit (for tax purposes) on sale to finance subsidiary		157,397		229,364
Lease revenue and related depreciation		422,541		480,611
Amortizable intangibles		99,980		117,207
Other		49,044		43,813
Deferred tax liabilities		798,054		920,346
Deferred tax assets:
Nonpension postretirement benefits		198,379		104,847
Pension		40,956		127,042
Inventory and equipment capitalization		24,806		28,546
Restructuring charges		8,185		22,348
Long-term incentives		37,019		39,781
Net operating loss and tax credit carry forwards		180,281		153,754
Tax uncertainties gross-up		46,773		144,672
Other		99,996		116,834
Valuation allowance		(111,438)		(104,441)
Deferred tax assets		524,957		633,383
Net deferred tax liabilities		273,097		286,963
Less: amounts included in other balance sheet accounts		97,153		25,845
Deferred taxes on income	$	175,944	$	261,118

As of December 31, 2011 and 2010, approximately $286 million and $266 million, respectively, of foreign net operating loss carryforwards were available to us. Most of these losses can be carried forward indefinitely.

It has not been necessary to provide for income taxes on $940 million of cumulative undistributed earnings of subsidiaries outside the United States. These earnings will be either indefinitely reinvested or remitted substantially free of additional tax. Determination of the liability that would be incurred if all of these earnings were remitted to the U.S. is not practicable. However, we estimate that withholding taxes on such remittances would approximate $17million.

Uncertain Tax Positions

A reconciliation of the amount of unrecognized tax benefits at December 31, 2011, 2010 and 2009 is as follows:

	2011		2010		2009
Balance at beginning of year	$	531,790	$	515,565	$	434,164
Increases from prior period positions		67,065		17,775		65,540
Decreases from prior period positions		(140,107)		(27,669)		(7,741)
Increases from current period positions		28,686		43,804		42,696
Decreases from current period positions		-		(8,689)		-
Decreases relating to settlements with tax authorities		(18,204)		(1,434)		(3,173)
Reductions from lapse of applicable statute of limitations		(270,595)		(7,562)		(15,921)
Balance at end of year	$	198,635	$	531,790	$	515,565

The amount of the unrecognized tax benefits at December 31, 2011, 2010 and 2009associated with continuing operations that would affect the effective tax rate if recognized was $160 million, $249 million and $225 million, respectively.

Tax authorities continually examine our tax filings. On a regular basis, we conclude tax return examinations, statutes of limitations expire, and court decisions interpret tax law. We regularly assess tax uncertainties in light of these developments. As a result, it is reasonably possible that the amount of our unrecognized tax benefits will decrease in the next 12 months, and we expect this change could be up to one-third of our unrecognized tax benefits. We recognize interest and penalties related to uncertain tax positions in our provision for income taxes or discontinued operations as appropriate. During the years ended December 31, 2011, 2010 and 2009,we recorded $(83) million, $15 million and$32 million, respectively, in interest and penalties primarily in discontinued operations. We had $67 million and $202 million accrued for the payment of interest and penalties at December 31, 2011 and 2010, respectively.

Other Tax Matters

We regularly assess the likelihood of tax adjustments in each of the tax jurisdictions in which we have operations and account for the related financial statement implications. Tax reserves have been established which we believe to be appropriate given the possibility of tax adjustments. Determining the appropriate level of tax reserves requires us to exercise judgment regarding the uncertain application of tax law. The amount of reserves is adjusted when information becomes available or when an event occurs indicating a change in the reserve is appropriate. Future changes in tax reserve requirements could have a material impact on our results of operations.

As is the case with other large corporations, we are continually under examination by tax authorities in the United States, other countries and local jurisdictions in which we have operations. Except for a dispute arising out of a partnership investment, the IRS examination of tax years 2001-2004 is closed to audit and the examination of years 2005-2008 is estimated to be closed to audit within the next 12 months. During the year, in connection with the examinations of our 2001-2008 tax years, we entered into a series of settlements with the IRS under which we agreed upon both the tax treatment of a number of disputed issues, including issues related to our Capital Services business that was sold in 2006, and revised tax calculations. Based on these developments, we recognized $90 million of tax benefits through continuing operations and $264 million through discontinued operations.Our additional liability for tax and interest arising from the 2001-2008 IRS examinations was approximately $400 million, which was previously paid through the purchase of tax bonds.

We have other domestic and international tax filings currently under examination or subject to examination. We believe we have established tax reserves that are appropriate given the possibility of tax adjustments. However, depending upon the size of the reserve as compared to the ultimate determination of such matters, the resolution could have a material impact, positive or negative, on our results of operations, financial position and cash flows.