XML 91 R23.htm IDEA: XBRL DOCUMENT
v2.4.0.6

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2012
Income Tax Disclosure [Abstract] |
INCOME TAXES |
16. | INCOME TAXES
Income (loss) from continuing operations before income tax expense from U.S. and international operations was as follows (in millions):
| Year Ended December 31,
| 2012 |  | 2011 |  | 2010
U.S. operations | $ | 4,015 |  |  | $ | 3,190 |  |  | $ | 1,436 |
International operations | (309 | ) |  | 132 |  |  | 62 |
Income from continuing operations before income tax expense | $ | 3,706 |  |  | $ | 3,322 |  |  | $ | 1,498 |
The following is a reconciliation of income tax expense related to continuing operations to income taxes computed by applying the U.S. statutory federal income tax rate (35 percent for all years presented) to income from continuing operations before income tax expense (in millions):
| Year Ended December 31,
| 2012 |  | 2011 |  | 2010
Federal income tax expense at the U.S. statutory rate | $ | 1,297 |  |  | $ | 1,163 |  |  | $ | 524 |
U.S. state income tax expense (benefit), net of U.S. federal income tax effect | 64 |  |  | 29 |  |  | (21 | )
U.S. manufacturing deduction | (33 | ) |  | (28 | ) |  | 5 |
International operations | 266 |  |  | 46 |  |  | 27 |
Permanent differences | 20 |  |  | 8 |  |  | 8 |
Change in tax law | — |  |  | — |  |  | 16 |
Other, net | 12 |  |  | 8 |  |  | 16 |
Income tax expense | $ | 1,626 |  |  | $ | 1,226 |  |  | $ | 575 |
The Aruba Refinery’s profits through June 1, 2010 were non-taxable in Aruba due to a tax holiday granted by the GOA. The tax holiday, which expired on June 1, 2010, had an immaterial effect on our results of operations for the year ended December 31, 2010. The variation in the customary relationship between income tax expense and income from continuing operations before income tax expense related to our international operations for the year ended December 31, 2012 was primarily due to not recognizing the tax benefit associated with the asset impairment loss of $928 million related to the Aruba Refinery as we do not expect to realize this tax benefit. There were no discontinued operations or related income tax benefit for the year ended December 31, 2012. The income tax benefit related to discontinued operations for the years ended December 31, 2011 and 2010 was $4 million and $370 million, respectively. Components of income tax expense related to continuing operations were as follows (in millions):
| Year Ended December 31,
| 2012 |  | 2011 |  | 2010
Current: |  |  |  |  |
U.S. federal | $ | 515 |  |  | $ | 562 |  |  | $ | (75 | )
U.S. state | 22 |  |  | 13 |  |  | (13 | )
International | 126 |  |  | 186 |  |  | 22 |
Total current | 663 |  |  | 761 |  |  | (66 | )
Deferred: |  |  |  |  |
U.S. federal | 854 |  |  | 527 |  |  | 634 |
U.S. state | 77 |  |  | 32 |  |  | (19 | )
International | 32 |  |  | (94 | ) |  | 26 |
Total deferred | 963 |  |  | 465 |  |  | 641 |
Income tax expense | $ | 1,626 |  |  | $ | 1,226 |  |  | $ | 575 |
The tax effects of significant temporary differences representing deferred income tax assets and liabilities were as follows (in millions):
| December 31,
| 2012 |  | 2011
Deferred income tax assets: |  |  |
Tax credit carryforwards | $ | 61 |  |  | $ | 158 |
Net operating losses (NOL) | 247 |  |  | 300 |
Compensation and employee benefit liabilities | 383 |  |  | 324 |
Environmental liabilities | 83 |  |  | 78 |
Inventories | 258 |  |  | 273 |
Property, plant and equipment | 78 |  |  | 14 |
Other | 157 |  |  | 160 |
Total deferred income tax assets | 1,267 |  |  | 1,307 |
Less: Valuation allowance | (304 | ) |  | (295 | )
Net deferred income tax assets | 963 |  |  | 1,012 |
Deferred income tax liabilities: |  |  |
Turnarounds | (300 | ) |  | (310 | )
Property, plant and equipment | (6,143 | ) |  | (5,292 | )
Inventories | (381 | ) |  | (274 | )
Other | (103 | ) |  | (119 | )
Total deferred income tax liabilities | (6,927 | ) |  | (5,995 | )
Net deferred income tax liabilities | $ | (5,964 | ) |  | $ | (4,983 | )
We had the following income tax credit and loss carryforwards as of December 31, 2012 (in millions):
| Amount |  | Expiration
U.S. state income tax credits | $ | 79 |  |  | 2013 through 2027
U.S. state income tax credits | 12 |  |  | Unlimited
U.S. state NOL (gross amount) | 4,806 |  |  | 2013 through 2032
International NOL | 518 |  |  | Unlimited
We have recorded a valuation allowance as of December 31, 2012 and 2011 due to uncertainties related to our ability to utilize some of our deferred income tax assets, primarily consisting of certain U.S. state NOLs and income tax credits, and international NOLs, before they expire. The valuation allowance is based on our estimates of taxable income in the various jurisdictions in which we operate and the period over which deferred income tax assets will be recoverable. The realization of net deferred income tax assets recorded as of December 31, 2012 is primarily dependent upon our ability to generate future taxable income in certain U.S. states and international jurisdictions. Subsequently recognized tax benefits related to the valuation allowance for deferred income tax assets as of December 31, 2012 will be allocated as follows (in millions):
Income tax benefit | $ | 297 |
Additional paid-in capital | 7 |
Total | $ | 304 |
Deferred income taxes have not been provided on the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and the respective tax bases of our international subsidiaries based on the determination that such differences are essentially permanent in duration in that the earnings of these subsidiaries are expected to be indefinitely reinvested in the international operations. As of December 31, 2012, the cumulative undistributed earnings of these subsidiaries were approximately $3.5 billion. If those earnings were not considered indefinitely reinvested, deferred income taxes would have been recorded after consideration of U.S. foreign tax credits. It is not practicable to estimate the amount of additional tax that might be payable on those earnings, if distributed. The following is a reconciliation of the change in unrecognized tax benefits, excluding the effect of related penalties and interest and the U.S. federal tax effect of U.S. state unrecognized tax benefits (in millions):
| Year Ended December 31,
| 2012 |  | 2011 |  | 2010
Balance as of beginning of year | $ | 326 |  |  | $ | 330 |  |  | $ | 484 |
Additions based on tax positions related to the current year | 11 |  |  | 14 |  |  | 4 |
Additions for tax positions related to prior years | 40 |  |  | 55 |  |  | 49 |
Reductions for tax positions related to prior years | (36 | ) |  | (66 | ) |  | (203 | )
Reductions for tax positions related to the lapse of applicable statute of limitations | — |  |  | (3 | ) |  | (4 | )
Settlements | — |  |  | (4 | ) |  | — |
Balance as of end of year | $ | 341 |  |  | $ | 326 |  |  | $ | 330 |
As of December 31, 2012, 2011, and 2010, there were $144 million, $135 million, and $153 million, respectively, of unrecognized tax benefits that if recognized would affect our annual effective tax rate. We do not expect our unrecognized tax benefits to change significantly over the next 12 months. During the years ended December 31, 2012, 2011, and 2010, we recognized approximately $23 million, $1 million, and $19 million in interest and penalties, which is reflected within income tax expense (benefit). We had accrued approximately $133 million and $110 million for the payment of interest and penalties as of December 31, 2012 and 2011, respectively. Our tax years for 2002 through 2009 and Premcor Inc.’s separate tax years for 2004 and 2005 are currently under examination by the IRS. Premcor Inc. was merged into Valero effect September 1, 2005. The IRS has proposed adjustments to our taxable income for certain open years. We are protesting the proposed adjustments and do not expect that the ultimate disposition of these adjustments will result in a material change to our financial position, results of operations, or liquidity; however, as discussed in Note 12, should the IRS eventually prevail, it could result in a material amount of our deferred tax liabilities being reclassified to current liabilities, which could have a material adverse effect on our liquidity. We believe that adequate provisions for income taxes have been reflected in our financial statements.

X
- Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration