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INCOME TAXES | 12 Months Ended
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Dec. 31, 2014
INCOME TAXES |
INCOME TAXES | S. INCOME TAXES
|  |  |  | (In Millions) |
|  | 2014 |  | 2013 |  | 2012 |
Income (loss) from continuing operations before income taxes: |  |  |  |  |  |  |  |  |  |
U.S. |  | $ | 338 |  | $ | 295 |  | $ | (84 | )
Foreign |  |  | 237 |  |  | 155 |  |  | 157 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
|  | $ | 575 |  | $ | 450 |  | $ | 73 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Income tax (benefit) expense on income (loss) from continuing operations: |  |  |  |  |  |  |  |  |  |
Currently payable: |  |  |  |  |  |  |  |  |  |
U.S. Federal |  | $ | 3 |  | $ | 3 |  | $ | — |
State and local |  |  | 2 |  |  | 4 |  |  | (2 | )
Foreign |  |  | 67 |  |  | 58 |  |  | 51 |
Deferred: |  |  |  |  |  |  |  |  |  |
U.S. Federal |  |  | (377 | ) |  | 41 |  |  | 31 |
State and local |  |  | (18 | ) |  | 7 |  |  | 7 |
Foreign |  |  | (10 | ) |  | (2 | ) |  | 4 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
|  | $ | (333 | ) | $ | 111 |  | $ | 91 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Deferred tax assets at December 31: |  |  |  |  |  |  |  |  |  |
Receivables |  | $ | 9 |  | $ | 12 |  |  |  |
Inventories |  |  | 25 |  |  | 23 |  |  |  |
Other assets, principally stock-based compensation |  |  | 77 |  |  | 95 |  |  |  |
Accrued liabilities |  |  | 102 |  |  | 118 |  |  |  |
Long-term liabilities |  |  | 284 |  |  | 234 |  |  |  |
Net operating loss carryforward |  |  | 194 |  |  | 317 |  |  |  |
Tax credit carryforward |  |  | 44 |  |  | 38 |  |  |  |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
|  |  | 735 |  |  | 837 |  |  |  |
Valuation allowance |  |  | (66 | ) |  | (662 | ) |  |  |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
|  |  | 669 |  |  | 175 |  |  |  |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Deferred tax liabilities at December 31: |  |  |  |  |  |  |  |  |  |
Property and equipment |  |  | 118 |  |  | 148 |  |  |  |
Intangibles |  |  | 387 |  |  | 342 |  |  |  |
Investment in foreign subsidiaries |  |  | 4 |  |  | 5 |  |  |  |
Other |  |  | 13 |  |  | 4 |  |  |  |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
|  |  | 522 |  |  | 499 |  |  |  |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net deferred tax (asset) liability at December 31 |  | $ | (147 | ) | $ | 324 |  |  |  |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
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At December 31, 2014 and 2013, the net deferred tax (asset) liability consisted of net short-term deferred tax assets of $244 million and $73 million, respectively, and net long-term deferred tax liabilities of $106 million and $397 million, respectively, and net long-term deferred tax assets included in other assets of $9 million and $ – million, respectively. The current portion of the state and local income tax includes an $8 million, $8 million and $14 million tax benefit from the reversal of an accrual for uncertain tax positions resulting primarily from the expiration of applicable statutes of limitations and favorable settlements on state audits in 2014, 2013 and 2012, respectively. The deferred portion of the state and local taxes includes a $(35) million, $13 million and $26 million tax (benefit) expense resulting from a change in the valuation allowance against state and local deferred tax assets in 2014, 2013 and 2012, respectively. The deferred portion of the 2014 foreign taxes includes $(6) million tax benefit from a change in the valuation allowance against foreign deferred tax assets. The accounting guidance for income taxes requires that the future realization of deferred tax assets depends on the existence of sufficient taxable income in future periods. Possible sources of taxable income include taxable income in carryback periods, the future reversal of existing taxable temporary differences recorded as a deferred tax liability, tax-planning strategies that generate future income or gains in excess of anticipated losses in the carryforward period and projected future taxable income. If, based upon all available evidence, both positive and negative, it is more likely than not (more than 50 percent likely) such deferred tax assets will not be realized, a valuation allowance is recorded. Significant weight is given to positive and negative evidence that is objectively verifiable. A company's three-year cumulative loss position is significant negative evidence in considering whether deferred tax assets are realizable and the accounting guidance restricts the amount of reliance the company can place on projected taxable income to support the recovery of the deferred tax assets. In the fourth quarter of 2010, we recorded a $372 million valuation allowance against our U.S. Federal deferred tax assets as a non-cash charge to income tax expense. In reaching this conclusion, we considered the weaker retail sales of certain of our building products and the slower than anticipated recovery in the U.S. housing market which led to U.S. operating losses and significant U.S. goodwill impairment charges, that primarily occurred in the fourth quarter of 2010, causing us to be in a three-year cumulative U.S. loss position. During 2012 and 2011, objective and verifiable negative evidence, such as U.S. operating losses and significant impairment charges for U.S. goodwill in 2011 and other intangible assets, continued to outweigh positive evidence necessary to reduce the valuation allowance. As a result, we recorded increases of $65 million and $87 million in the valuation allowance against our U.S. Federal deferred tax assets as a non-cash charge to income tax expense in 2012 and 2011, respectively. Although new home construction activity and retail sales of builder products strengthened during 2013 resulting in profitability in our U.S. operations, we continued to record a full valuation allowance against the U.S. Federal deferred tax assets as we remained in the three-year cumulative loss position throughout 2013. In the third quarter of 2014, we recorded a $517 million tax benefit from the release of the valuation allowance against our U.S. Federal and certain state deferred tax assets due primarily to a return to sustainable profitability in our U.S. operations. In reaching this conclusion, we considered the continued improvement in both the new home construction market and repair and remodel activity in the U.S. and our progress on strategic initiatives to reduce costs and expand our product leadership positions which contributed to the continued improvement in our U.S. operations over the past few years. Additionally, by the fourth quarter of 2014, we achieved a cumulative three-year income position in the U.S. due to eight consecutive quarters of U.S. pre-tax earnings resulting in our anticipation of sufficient future taxable income to realize a significant portion of our U.S. deferred tax assets. In the fourth quarter of 2014, we recorded an additional $12 million tax benefit from the release of the valuation allowances against certain U.K. and Mexican deferred tax assets primarily resulting from a return to sustainable profitability in these jurisdictions. We continue to maintain a valuation allowance on certain state and foreign deferred tax assets as of December 31, 2014. Should we determine that we would not be able to realize our remaining deferred tax assets in these jurisdictions in the future, an adjustment to the valuation allowance would be recorded in the period such determination is made. It is reasonably possible that the continued improvements in certain of our businesses located in the U.S. could result in the objective positive evidence necessary to warrant the additional reversal of all or a portion of the valuation allowance, up to approximately $27 million, by the end of 2015. Of the $238 million and $355 million deferred tax asset related to the net operating loss and tax credit carryforwards at December 31, 2014 and December 31, 2013, $233 million and $345 million will expire between 2020 and 2032 and $5 million and $10 million are unlimited, respectively. The tax benefit from certain stock-based compensation is not recognized as a deferred tax asset until the tax deduction reduces cash taxes. Accordingly, as of December 31, 2014, we have not recorded a $53 million deferred tax asset on additional net operating losses that, when realized, will be recorded to paid-in capital. A tax provision has not been provided at December 31, 2014 for U.S. income taxes or additional foreign withholding taxes on approximately $12 million of undistributed earnings of certain foreign subsidiaries that are considered to be permanently reinvested. It is not practicable to determine the amount of deferred tax liability on such earnings as the actual U.S. tax would depend on income tax laws and circumstances at the time of distribution. A reconciliation of the U.S. Federal statutory tax rate to the income tax (benefit) expense on income from continuing operations was as follows:
|  | 2014 |  | 2013 |  | 2012 |
U.S. Federal statutory tax rate – expense |  |  | 35 | % |  | 35 | % |  | 35 | %
State and local taxes, net of U.S. Federal tax benefit |  |  | (2 | ) |  | 2 |  |  | 4 |
Lower taxes on foreign earnings |  |  | (4 | ) |  | — |  |  | (9 | )
U.S. and foreign taxes on distributed and undistributed foreign earnings |  |  | — |  |  | — |  |  | 1 |
Goodwill and other intangible assets impairment charges providing no tax benefit |  |  | — |  |  | — |  |  | 2 |
U.S. Federal valuation allowance |  |  | (87 | ) |  | (12 | ) |  | 89 |
Other, net |  |  | — |  |  | — |  |  | 3 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Effective tax rate – (benefit) expense |  |  | (58 | )% |  | 25 | % |  | 125 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Income taxes paid were $80 million, $77 million and $57 million in 2014, 2013 and 2012, respectively. A reconciliation of the beginning and ending liability for uncertain tax positions, including related interest and penalties, is as follows:
|  | (In millions) |
|  | Uncertain Tax Positions |  | Interest and Penalties |  | Total |
Balance at January 1, 2013 |  | $ | 51 |  | $ | 17 |  | $ | 68 |
Current year tax positions: |  |  |  |  |  |  |  |  |  |
Additions |  |  | 9 |  |  |  |  |  | 9 |
Prior year tax positions: |  |  |  |  |  |  |  |  |  |
Additions |  |  | 1 |  |  |  |  |  | 1 |
Reductions |  |  | (2 | ) |  |  |  |  | (2 | )
Settlements with tax authorities |  |  | (1 | ) |  |  |  |  | (1 | )
Lapse of applicable statute of limitations |  |  | (12 | ) |  |  |  |  | (12 | )
Interest and penalties recognized in income tax expense |  |  |  |  |  | (4 | ) |  | (4 | )
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Balance at December 31, 2013 |  | $ | 46 |  | $ | 13 |  | $ | 59 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
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Current year tax positions: |  |  |  |  |  |  |  |  |  |
Additions |  | $ | 9 |  | $ |  |  | $ | 9 |
Reductions |  |  | (1 | ) |  |  |  |  | (1 | )
Prior year tax positions: |  |  |  |  |  |  |  |  |  |
Additions |  |  | 1 |  |  |  |  |  | 1 |
Reductions |  |  | (5 | ) |  |  |  |  | (5 | )
Settlements with tax authorities |  |  | (1 | ) |  |  |  |  | (1 | )
Lapse of applicable statute of limitations |  |  | (10 | ) |  |  |  |  | (10 | )
Interest and penalties recognized in income tax expense |  |  | — |  |  | (4 | ) |  | (4 | )
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Balance at December 31, 2014 |  | $ | 39 |  | $ | 9 |  | $ | 48 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
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If recognized, $26 million and $31 million of the liability for uncertain tax positions at December 31, 2014 and 2013, respectively, net of any U.S. Federal tax benefit, would impact our effective tax rate. Of the $48 million and $59 million total liability for uncertain tax positions including related interest and penalties, at December 31, 2014 and 2013, $48 million and $65 million are recorded in other liabilities, $4 million and $ – million are recorded in liabilities for deferred income taxes and $4 million and $6 million are recorded in other assets, respectively. We file income tax returns in the U.S. Federal jurisdiction, and various local, state and foreign jurisdictions. We continue to participate in the Compliance Assurance Program ("CAP"). CAP is a real-time audit of the U.S. Federal income tax return that allows the Internal Revenue Service ("IRS"), working in conjunction with us, to determine tax return compliance with the U.S. Federal tax law prior to filing the return. This program provides us with greater certainty about our tax liability for a given year within months, rather than years, of filing our annual tax return and greatly reduces the need for recording a liability for U.S. Federal uncertain tax positions. The IRS has completed their examination of our consolidated U.S. Federal tax returns through 2013. With few exceptions, we are no longer subject to state or foreign income tax examinations on filed returns for years before 2005. As a result of tax audit closings, settlements and the expiration of applicable statutes of limitations in various jurisdictions within the next 12 months, we anticipate that it is reasonably possible the liability for uncertain tax positions could be reduced by approximately $6 million.

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- 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
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