Bunge operates globally and is subject to the tax laws and regulations of numerous tax jurisdictions and authorities, as well as tax agreements and treaties among these jurisdictions. Bunge's tax provision is impacted by, among other factors, changes in tax laws, regulations, agreements and treaties, currency exchange rates and Bunge's profitability in each taxing jurisdiction.

Bunge records valuation allowances when it is more likely than not that some portion or all of its deferred tax assets might not be realized. The ultimate realization of deferred tax assets depends primarily on Bunge's ability to generate sufficient timely future income of the appropriate character in the appropriate tax jurisdiction.

Bunge has elected to use the U.S. federal income tax rate to reconcile its provision for income taxes.

	Year Ended December 31,

(US$ in millions)	2010		2009			2008
United States	$	42	$	184		$	126
Non-United States		3,008		(39	)		1,411

Total	$	3,050	$	145		$	1,537

	Year Ended December 31,

(US$ in millions)	2010			2009			2008
Current:
United States	$	(33	)	$	(58	)	$	(12	)
Non-United States		(499	)		(39	)		(511	)

		(532	)		(97	)		(523	)

Deferred:
United States		(12	)		(13	)		(22	)
Non-United States		(148	)		217			273

		(160	)		204			251

Uncertain:
United States		(1	)		(2	)		(1	)
Non-United States		4			5			28

		3			3			27

Total	$	(689	)	$	110		$	(245	)

Reconciliation of the income tax (expense) benefit if computed at the U.S. Federal income tax rate to Bunge's reported income tax (expense) benefit is as follows:

		Year Ended December 31,

(US$ in millions)		2010			2009			2008
Income from operations before income tax		$	3,050		$	145		$	1,537
Income tax rate			35	%		35	%		35	%

Income tax expense at the U.S. Federal tax rate			(1,068	)		(51	)		(538	)
Adjustments to derive effective tax rate:
	Foreign earnings taxed at different statutory rates		515			163			166
	Changes in valuation allowances		(129	)		(17	)		(47	)
	Goodwill amortization		44			31			23
	Benefit from interest on capital dividends paid by Brazilian companies		2			1			14
	Investment tax credits		27			22			45
	Foreign exchange on monetary items		(9	)		(11	)		69
	Non-deductible expenses		(68	)		(35	)		(35	)
	Uncertain tax positions		3			3			27
	Other		(6	)		4			31

Income tax (expense) benefit		$	(689	)	$	110		$	(245	)

Bunge's subsidiaries had undistributed earnings amounting to $6,808 million at December 31, 2010. These amounts are considered to be permanently reinvested and, accordingly, no provision for income taxes has been made. If these earnings were distributed in the form of dividends or otherwise, Bunge would be subject to income taxes on some of these distributions in various jurisdictions and also to foreign withholding taxes; however, it is not practicable to estimate the amount of taxes that would be payable upon remittance of these earnings.

The primary components of deferred tax assets and liabilities and related valuation allowances are as follows:

	December 31,

(US$ in millions)	2010			2009
Deferred income tax assets:
Net operating loss carryforwards	$	1,098		$	1,072
Excess of tax basis over financial statement basis of property, plant and equipment		34			17
Accrued retirement costs (pension and postretirement healthcare cost) and other accrued employee compensation		115			136
Tax credit carryforwards		12			21
Inventories		—			3
Other accruals and reserves not currently deductible for tax purposes		625			499

Total deferred tax assets		1,884			1,748
Less valuation allowances		(245	)		(116	)

Deferred tax assets, net of valuation allowance		1,639			1,632

Deferred tax liabilities:
Excess of financial statement basis over tax basis of long-lived assets		179			255
Undistributed earnings of affiliates not considered permanently reinvested		30			31
Inventories		11			20
Other temporary differences		332			124

Total deferred tax liabilities		552			430

Net deferred tax assets	$	1,087		$	1,202

Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to the years in which those temporary differences are expected to be recovered or settled.

At December 31, 2010, Bunge's pretax loss carryforwards totaled $3,485 million, of which $2,694 million have no expiration, including loss carryforwards of $2,361 million in Brazil. While loss carryforwards in Brazil can be carried forward indefinitely, annual utilization is limited to 30% of taxable income. The remaining tax loss carryforwards expire at various periods beginning in 2011 through the year 2027.

Income Tax Valuation Allowances—Bunge continually assesses the adequacy of its valuation allowances and recognizes tax benefits only when it is more likely than not that the benefits will be realized. The utilization of deferred tax assets depends on the generation of future income during the period in which the related temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in this assessment.

In 2010, income tax expense increased $128 million for net valuation allowances. There is an increase in the valuation allowance for tax carryforwards in Russia and Italy due to an uncertain economic environment in those countries combined with 10 and 5 year carryforward limitations, respectively. In addition, the valuation allowance increased in Brazil as a result of losses in companies with no source of income and the decision to liquidate one of Bunge's Brazilian finance subsidiaires.

Uncertain Tax Liabilities—FASB issued a standard on income taxes that requires applying a "more likely than not" threshold to the recognition and de-recognition of tax benefits. At December 31, 2010 and 2009, respectively, Bunge had recorded tax liabilities of $98 million and $104 million in other non-current liabilities and $4 million and $7 million in current liabilities in its consolidated balance sheets, of which $42 million and $40 million relates to accrued penalties and interest. During 2010, 2009 and 2008, respectively, Bunge recognized $(2) million, $8 million and $13 million in interest and penalties in income tax (expense) benefit in the consolidated statements of income. A reconciliation of the beginning and ending amount of unrecognized tax benefits follows:

(US$ in millions)	2010			2009			2008

Balance at January 1	$	111		$	138		$	197
Additions based on tax positions related to the current year		1			1			3
Additions based on tax positions related to prior years		7			42			11
Reductions for tax positions of prior years		—			—			(40	)
Settlement or clarification from tax authorities		(2	)		(81	)		(2	)
Expiration of statute of limitations		(7	)		(3	)		(1	)
Sale of Brazilian fertilizer nutrients assets		(6	)		—			—
Foreign currency translation		(2	)		14			(30	)

Balance at December 31	$	102		$	111		$	138

Substantially all of the unrecognized tax benefits balance, if recognized, would affect Bunge's effective income tax rate. There are no positions at December 31, 2010 with respect to which the unrecognized tax benefit is expected to increase or decrease significantly within the next 12 months.

The net reduction of $27 million in 2009 included settlements of $39 million under a Brazilian tax amnesty program, a reversal of $7 million due to a favorable ruling from applicable tax authorities, $14 million of currency translation adjustments and various smaller items totaling $4 million.

Bunge, through its subsidiaries, files income tax returns in the United States (federal and various states) and non-United States jurisdictions. The table below reflects the tax years for which Bunge is subject to income tax examinations by tax authorities:

During 2010, the Brazilian IRS commenced an examination of the income tax returns of one of Bunge's Brazilian subsidiaries for the years 2005 to 2007. As of December 31, 2010, the Brazilian IRS has proposed certain significant adjustments to the subsidiary filed tax returns. Management, in consultation with external legal advisors, has reviewed and responded to the proposed adjustments and believes that it is more likely than not that it will prevail and therefore, has not recorded an uncertain tax liability.

Bunge paid income taxes, net of refunds received, of $398 million, $205 million and $394 million during the years ended December 31, 2010, 2009 and 2008, respectively. These net payments include payments of interim estimated income and withholding taxes in accordance with applicable tax laws, primarily in Brazil. For 2009 and 2008, estimated tax payments exceeded the annual amounts ultimately determined to be owed by $168 million and $42 million, respectively. In accordance with applicable tax laws, these overpayments may be recoverable from future income taxes or certain non-income taxes payable. For 2010, income tax payments in Europe included the use of $13 million of recoverable value-added taxes in accordance with applicable regulations. Bunge had $27 million, $38 million and $75 million withheld by third-parties and remitted to applicable governments on its behalf during the years ended December 31, 2010, 2009 and 2008, respectively.

Brazil Tax Law Changes—Brazil enacted new "thin capitalization" tax legislation in June 2010. This legislation denies income tax deductions for interest payments with respect to certain debt to the extent a company's debt-to-equity ratio exceeds a certain threshold or the debt is with related parties located in a tax haven jurisdiction as defined under the law. The thin capitalization legislation provides for an effective date of January 1, 2010 with respect to both the income tax and social contribution tax on income (25% and 9%, respectively, which are reported together as income tax expense in Bunge's consolidated statements of income). However, based on external legal advice, Bunge has concluded that under Brazil's Constitution, the new law cannot apply to the income tax portion until January 1, 2011 and the social contribution portion can only apply from March 15, 2010. Because Bunge believes that it is more likely than not that this position will be sustained, it has not accrued any income tax with respect to this new legislation at December 31, 2010, but has accrued the social contribution portion only of $15 million from March 15, 2010.