Honeywell 2013 Annual Report Download - page 92

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There were approximately $62 million of U.S. federal tax credits available for carryforward at
December 31, 2013 with various expiration dates through 2032. All of these carryforwards were
generated by subsidiaries prior to their acquisition. The use of pre-acquisition tax credit carryforwards
are subject to limitations imposed by Section 382 of the Internal Revenue Code. We do not anticipate
that these limitations will affect the utilization of these carryforwards prior to their expiration. We also
have state tax credit carryforwards of $46 million at December 31, 2013, including carryforwards of $40
million with various expiration dates through 2028 and tax credits of $6 million which are not subject to
expiration. There were approximately $173 million of tax credits available for carryforward in foreign
jurisdictions, primarily in Canada, at December 31, 2013 with various expiration dates through 2032.
The valuation allowance against deferred tax assets increased by $16 million in 2013 and
increased by $7 million and decreased by $45 million in 2012 and 2011, respectively. The 2013
increase in the valuation allowance was primarily due to decreased earnings in France and
Luxembourg. This is partially offset by a decrease in the valuation allowance in Germany and the
United Kingdom. The 2012 increase in the valuation allowance was primarily due to decreased
earnings in France and Luxembourg. This is partially offset by a decrease in the valuation allowance
related to purchase accounting for various acquisitions and audit resolutions for various countries. The
2011 decrease in the valuation allowance was primarily due to decreased foreign net operating losses
related to the Netherlands and Germany, partially offset by the increase in the valuation allowance of
France, Luxembourg and Canada.
Federal income taxes have not been provided on undistributed earnings of the majority of our
international subsidiaries as it is our intention to reinvest these earnings into the respective
subsidiaries. At December 31, 2013 Honeywell has not provided for U.S. federal income and foreign
withholding taxes on approximately $13.5 billion of such earnings of our non-U.S. operations. It is not
practicable to estimate the amount of tax that might be payable if some or all of such earnings were to
be repatriated, and the amount of foreign tax credits that would be available to reduce or eliminate the
resulting U.S. income tax liability.
We had $729 million, $722 million and $815 million of unrecognized tax benefits as of December
31, 2013, 2012, and 2011 respectively. If recognized, $729 million would be recorded as a component
of income tax expense as of December 31, 2013. For the year ended December 31, 2013, the
Company increased its unrecognized tax benefits by $7 million due to adjustments related to our
ongoing assessment of the likelihood and amount of potential outcomes of current and future
examinations, partially offset by the expiration of various statute of limitations and resolutions of audits
with tax authorities. For the year ended December 31, 2012, the Company decreased its unrecognized
tax benefits by $93 million due to the expiration of various statute of limitations and resolutions of
audits with tax authorities, partially offset by adjustments related to our ongoing assessment of the
likelihood and amount of potential outcomes of current and future examinations. The following table
summarizes the activity related to our unrecognized tax benefits:
2013 2012 2011
Change in unrecognized tax benefits:
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $722 $815 $ 757
Gross increases related to current period tax positions . . . . . . . . . . . 41 25 46
Gross increases related to prior periods tax positions. . . . . . . . . . . . . 118 44 327
Gross decreases related to prior periods tax positions . . . . . . . . . . . . (21) (62) (56)
Decrease related to resolutions of audits with tax authorities . . . . . . (92) (40) (237)
Expiration of the statute of limitations for the assessment of taxes (30) (64) (12)
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9) 4 (10)
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $729 $722 $ 815
80
HONEYWELL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS—(Continued)
(Dollars in millions, except per share amounts)