eBay 2012 Annual Report Download - page 137

eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
allowance is primarily due to the tax loss on sale of Rent.com. If not utilized, the federal capital loss carryover will begin to expire in 2014.
At December 31, 2012 and 2011 , we maintained a valuation allowance with respect to certain of our deferred tax assets relating primarily
to U.S. capital losses and operating losses in certain non-U.S. jurisdictions that we believe are not likely to be realized.
We have not provided for U.S. federal income and foreign withholding taxes on $11.9 billion of our non-U.S. subsidiaries' undistributed
earnings as of December 31, 2012 . We intend to indefinitely reinvest the $11.9 billion of our non-U.S. subsidiaries’ undistributed earnings in
our international operations. Accordingly, we currently have no plans to repatriate those funds. As such, we do not know the time or manner in
which we would repatriate those funds. Because the time or manner of repatriation is uncertain, we cannot determine the impact of local taxes,
withholding taxes and foreign tax credits associated with the future repatriation of such earnings and therefore cannot quantify the tax liability.
In cases where we intend to repatriate a portion of our foreign subsidiaries’ undistributed earnings, we provide U.S. taxes on such earnings and
such taxes are included in our deferred taxes or tax payable liabilities depending upon the planned timing and manner of such repatriation.
On a regular basis, we develop cash forecasts to estimate our cash needs internationally and domestically. We consider projected cash
needs for, among other things, investments in our existing businesses, potential acquisitions and capital transactions, including repurchases of
our common stock and debt repayments. We estimate the amount of cash available or needed in the jurisdictions where these investments are
expected, as well as our ability to generate cash in those jurisdictions and our access to capital markets. Such an analysis enables us to conclude
whether or not we will indefinitely reinvest the current period’s foreign earnings. We benefit from tax rulings concluded in several different
jurisdictions, most significantly Switzerland, Singapore and Luxembourg. These rulings provide for lower rates of taxation on certain classes of
income and require various thresholds of investment and employment in those jurisdictions. These rulings resulted in a tax savings of $439
million and $697 million in 2012 and 2011 , respectively, which increased earnings per share (diluted) by approximately $0.33 and $0.53 in
2012 and 2011 , respectively. These tax rulings are currently in effect and expire over periods ranging from 2020 to the duration of business
operations in the respective jurisdictions.
The following table reflects changes in unrecognized tax benefits since January 1, 2011:
In the second quarter of 2011, we settled multiple uncertain tax positions, which resulted in an overall decrease in our unrecognized tax
benefits. As of December 31, 2012 , our liabilities for unrecognized tax benefits were included in deferred and other tax liabilities, net.
We recognize interest and/or penalties related to uncertain tax positions in income tax expense. In 2012 , we recognized interest and
penalties of $25 million (consisting of $34 million less a tax benefit of $9 million ) in income tax expense. The amount of interest and penalties
accrued as of December 31, 2012 and 2011 was approximately $117 million and $83 million , respectively.
We are subject to both direct and indirect taxation in the U.S. and various states and foreign jurisdictions. We are under examination by
certain tax authorities for the 2003 to 2009 tax years. We believe that adequate amounts have been reserved for any adjustments that may
ultimately result from these examinations. The material jurisdictions where we are subject to potential examination by tax authorities for tax
years after 2002 include, among others, the U.S. (Federal and California), France, Germany, Italy, Korea, Israel, Switzerland, Singapore and
Canada.
Although the timing of the resolution and/or closure of audits is highly uncertain, it is reasonably possible that the balance of gross
unrecognized tax benefits could significantly change in the next 12 months. However, given the number of years remaining subject to
examination and the number of matters being examined, we are unable to estimate the full range of possible adjustments to the balance of gross
unrecognized tax benefits.
F-40
2012 2011
(In millions)
Gross amounts of unrecognized tax benefits as of the beginning of the period
$
286
$
428
Increases related to prior period tax positions
60
33
Decreases related to prior period tax positions
(24
)
(139
)
Increases related to current period tax positions
19
41
Settlements
(1
)
(77
)
Gross amounts of unrecognized tax benefits as of the end of the period
$
340
$
286