XML 95 R23.htm IDEA: XBRL DOCUMENT
v2.4.0.8

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2013
Income Tax Disclosure [Abstract] |
INCOME TAXES |
16. | INCOME TAXES
Income Tax Expense Income from continuing operations before income tax expense from U.S. and international operations was as follows (in millions):
| Year Ended December 31,
| 2013 |  | 2012 |  | 2011
U.S. operations | $ | 3,531 |  |  | $ | 4,015 |  |  | $ | 3,190 |
International operations | 451 |  |  | (309 | ) |  | 132 |
Income from continuing operations before income tax expense | $ | 3,982 |  |  | $ | 3,706 |  |  | $ | 3,322 |
The following is a reconciliation of income tax expense computed by applying the U.S. federal statutory income tax rate (35 percent for all years presented) to actual income tax expense related to continuing operations (in millions):
| Year Ended December 31,
| 2013 |  | 2012 |  | 2011
Federal income tax expense at the U.S. federal statutory rate | $ | 1,394 |  |  | $ | 1,297 |  |  | $ | 1,163 |
U.S. state income tax expense, net of U.S. federal income tax effect | 62 |  |  | 64 |  |  | 29 |
U.S. manufacturing deduction | (36 | ) |  | (33 | ) |  | (28 | )
International operations | (71 | ) |  | 266 |  |  | 46 |
Permanent differences | (104 | ) |  | 20 |  |  | 8 |
Change in tax law | (32 | ) |  | — |  |  | — |
Other, net | 41 |  |  | 12 |  |  | 8 |
Income tax expense | $ | 1,254 |  |  | $ | 1,626 |  |  | $ | 1,226 |
The variation in the customary relationship between income tax expense and income from continuing operations before income tax expense for the year ended December 31, 2013 was primarily due to the $325 million nontaxable gain on the disposition of our retained interest in CST as described in Notes 3 and 11. For the year ended December 31, 2012, the variation in the customary relationship between income tax expense and income from continuing operations before income tax expense was primarily due to not recognizing the tax benefit associated with the asset impairment loss of $928 million related to the Aruba Refinery, as described in Note 4, as we do not expect to realize this tax benefit. There were no discontinued operations or related income tax benefit for the years ended December 31, 2013 and 2012. The income tax benefit related to discontinued operations for the year ended December 31, 2011 was $4 million. Components of income tax expense related to continuing operations were as follows (in millions):
| Year Ended December 31,
| 2013 |  | 2012 |  | 2011
Current: |  |  |  |  |
U.S. federal | $ | 635 |  |  | $ | 515 |  |  | $ | 562 |
U.S. state | 36 |  |  | 22 |  |  | 13 |
International | 82 |  |  | 126 |  |  | 186 |
Total current | 753 |  |  | 663 |  |  | 761 |
Deferred: |  |  |  |  |
U.S. federal | 459 |  |  | 854 |  |  | 527 |
U.S. state | 59 |  |  | 77 |  |  | 32 |
International | (17 | ) |  | 32 |  |  | (94 | )
Total deferred | 501 |  |  | 963 |  |  | 465 |
Income tax expense | $ | 1,254 |  |  | $ | 1,626 |  |  | $ | 1,226 |
Deferred Income Tax Assets and Liabilities The tax effects of significant temporary differences representing deferred income tax assets and liabilities were as follows (in millions):
| December 31,
| 2013 |  | 2012
Deferred income tax assets: |  |  |
Tax credit carryforwards | $ | 48 |  |  | $ | 61 |
Net operating losses (NOLs) | 338 |  |  | 247 |
Inventories | 264 |  |  | 258 |
Property, plant, and equipment | 8 |  |  | 78 |
Compensation and employee benefit liabilities | 178 |  |  | 383 |
Environmental liabilities | 92 |  |  | 83 |
Other | 187 |  |  | 157 |
Total deferred income tax assets | 1,115 |  |  | 1,267 |
Less: Valuation allowance | (347 | ) |  | (304 | )
Net deferred income tax assets | 768 |  |  | 963 |
Deferred income tax liabilities: |  |  |
Property, plant, and equipment | 6,536 |  |  | 6,143 |
Deferred turnaround costs | 331 |  |  | 300 |
Inventories | 310 |  |  | 381 |
Investments, primarily in VLP and DGD | 94 |  |  | — |
Other | 81 |  |  | 103 |
Total deferred income tax liabilities | 7,352 |  |  | 6,927 |
Net deferred income tax liabilities | $ | 6,584 |  |  | $ | 5,964 |
We had the following income tax credit and loss carryforwards as of December 31, 2013 (in millions):
| Amount |  | Expiration
U.S. state income tax credits | $ | 71 |  |  | 2014 through 2027
U.S. state NOLs (gross amount) | 5,609 |  |  | 2014 through 2033
International NOLs | 1,289 |  |  | Unlimited
We have recorded a valuation allowance as of December 31, 2013 and 2012 due to uncertainties related to our ability to utilize some of our deferred income tax assets, primarily consisting of certain U.S. state income tax credits and NOLs, 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. During 2013, the valuation allowance increased by $43 million, primarily due to increases in U.S. state NOLs. The realization of net deferred income tax assets recorded as of December 31, 2013 is primarily dependent upon our ability to generate future taxable income in certain U.S. states and international jurisdictions. Should we ultimately recognize tax benefits related to the valuation allowance for deferred income tax assets as of December 31, 2013, such amounts will be allocated as follows (in millions):
Income tax benefit | $ | 340 |
Additional paid-in capital | 7 |
Total | $ | 347 |
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, 2013, 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. Unrecognized Tax Benefits The following is a reconciliation of the change in unrecognized tax benefits, excluding related penalties, interest (net of the U.S. federal and state income tax effects) and the U.S. federal income tax effect of state unrecognized tax benefits (in millions):
| Year Ended December 31,
| 2013 |  | 2012 |  | 2011
Balance as of beginning of year | $ | 341 |  |  | $ | 326 |  |  | $ | 330 |
Additions based on tax positions related to the current year | 64 |  |  | 11 |  |  | 14 |
Additions for tax positions related to prior years | 576 |  |  | 40 |  |  | 55 |
Reductions for tax positions related to prior years | (26 | ) |  | (36 | ) |  | (66 | )
Reductions for tax positions related to the lapse of applicable statute of limitations | (4 | ) |  | — |  |  | (3 | )
Settlements | (1 | ) |  | — |  |  | (4 | )
Balance as of end of year | $ | 950 |  |  | $ | 341 |  |  | $ | 326 |
The reconciliation of the change in unrecognized tax benefits for the year ended December 31, 2013 includes $556 million of additions for tax positions related to prior years for tax refunds that we intend to claim by amending our income tax returns for 2005 through 2012 and Premcor Inc.’s separate income tax return for 2005. We intend to propose that incentive payments received from the U.S. federal government for blending biofuels into refined products be excluded from taxable income during these periods. However, due to the complexity of this matter and uncertainties with respect to the interpretation of the Internal Revenue Code, we concluded that the $556 million refund claim cannot be recognized in our financial statements as of December 31, 2013. As a result, this amount is not included in our uncertain tax position liabilities as of December 31, 2013, even though it is reflected in the table above. The following is a reconciliation of unrecognized tax benefits reflected in the table above to our uncertain tax position liabilities as of December 31, 2013 and 2012 that are reflected in Note 10 (in millions):
| December 31,
| 2013 |  | 2012
Unrecognized tax benefits | $ | 950 |  |  | $ | 341 |
Tax refund claim not recognized in our financial statements | (556 | ) |  | — |
Penalties, interest (net of U.S. federal and state income tax effect), and the U.S. federal income tax effect of state unrecognized tax benefits | 49 |  |  | 50 |
Uncertain tax position liabilities | $ | 443 |  |  | $ | 391 |
As of December 31, 2013 and 2012, there were $763 million and $144 million, respectively, of unrecognized tax benefits that if recognized would affect our annual effective tax rate. During the next 12 months, it is reasonably possible that tax audit resolutions could reduce unrecognized tax benefits by between $100 million and $180 million, either because the tax positions are sustained on audit or because we agree to their disallowance. We do not expect these reductions to have a significant impact on our financial statements because such reductions would not significantly affect our annual effective rate. During the years ended December 31, 2013, 2012, and 2011, we recognized $12 million, $23 million, and $1 million in penalties and interest, which is reflected within income tax expense. Accrued penalties and interest totaled $145 million and $133 million as of December 31, 2013 and 2012, respectively, excluding the U.S. federal and state income tax effects related to interest. Tax Returns Under Audit As of December 31, 2013, our tax years for 2002 through 2011 and Premcor Inc.’s separate tax years for 2004 and 2005 were under audit by the IRS. Premcor Inc. was merged into Valero effective 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. We are continuing to work with the IRS to resolve these matters and we believe that they will be resolved for amounts consistent with recorded amounts of unrecognized tax benefits associated with these matters. In January 2014, we paid the Premcor Inc. final IRS assessment for the tax years 2004 and 2005 and closed the audit related to all proposed adjustments. The amount paid was consistent with the recorded amount of unrecognized tax benefits associated with that audit.

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 Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 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=26873400&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 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: 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 6: 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