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Income Taxes | 12 Months Ended
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Dec. 31, 2013
Income Taxes |
Income Taxes | Note 14 Income Taxes The change in our unrecognized tax benefits during 2013, 2012 and 2011 were as follows:
|  | Year Ended December 31, |
--- | --- | --- | ---
|  | 2013 |  | 2012 |  | 2011 |
|  | (In thousands) |
Balance as of January 1 |  | $ | 83,950 |  | $ | 68,848 |  | $ | 81,174 |
Additions based on tax positions related to the current year |  |  | 145 |  |  | 922 |  |  | 1,850 |
Additions for tax positions of prior years |  |  | 3,360 |  |  | 16,372 | (2) |  | 11,748 |
Reductions for tax positions for prior years |  |  | (30,320 | )(1) |  | (1,174 | ) |  | (11,082 | )
Settlements |  |  | (9,583 | ) |  | (1,018 | ) |  | (14,842 | )
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Balance as of December 31 |  | $ | 47,552 |  | $ | 83,950 |  | $ | 68,848 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(1) Includes $21.6 million related to settlements in Mexico, Canada and Algeria and $8.7 million due to the expiration of statutes. (2) Includes an unrecognized tax benefit of $10.4 million related to a Mexico audit assessment. The balance also represents the amount of unrecognized tax benefits that, if recognized, would favorably impact the effective income tax rate in future periods. As of December 31, 2013, 2012 and 2011, we had approximately $20.6 million, $42.8 million and $28.2 million, respectively, of interest and penalties related to our total gross unrecognized tax benefits. During 2013, 2012 and 2011 we accrued and recognized estimated interest related to unrecognized tax benefits and penalties of approximately $5.2 million, $2.7 million and $4.6 million, respectively. We recognize interest and penalties related to income tax matters in the income tax expense (benefit) line item in our consolidated statements of income (loss). We are subject to income taxes in the United States and numerous other jurisdictions. A number of our United States and non-United States income tax returns from 1998 through 2012 are currently under audit examination. We anticipate that several of these audits could be finalized within the next 12 months. It is possible that the benefit relating to our unrecognized tax positions could significantly increase or decrease within the next 12 months. However, based on the current status of examinations, and the protocol for finalizing audits with the relevant tax authorities, which could include formal legal proceedings, it is not possible to estimate the future impact of the amount of changes, if any, to recorded uncertain tax positions at December 31, 2013. Income (loss) from continuing operations before income taxes was comprised of the following:
|  | Year Ended December 31, |
--- | --- | --- | ---
|  | 2013 |  | 2012 |  | 2011 |
|  |  |  | Revised |  | Revised |
|  | (In thousands) |
United States and Other Jurisdictions |  |  |  |  |  |  |  |  |  |
United States |  | $ | (84,032 | ) | $ | 193,125 |  | $ | 205,754 |
Other jurisdictions |  |  | 190,192 |  |  | 83,835 |  |  | 309,499 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Income (loss) before income taxes from continuing operations |  | $ | 106,160 |  | $ | 276,960 |  | $ | 515,253 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Income taxes have been provided based upon the tax laws and rates in the countries where we operate. We are a Bermuda exempted company. Bermuda does not impose corporate income taxes. Our U.S. subsidiaries are subject to a U.S. federal tax rate of 35%. Income tax expense (benefit) from continuing operations consisted of the following:
|  | Year Ended December 31, |
--- | --- | --- | ---
|  | 2013 |  | 2012 |  | 2011 |
|  |  |  | Revised |  | Revised |
|  | (In thousands) |
Current: |  |  |  |  |  |  |  |  |  |
U.S. federal |  | $ | (16,934 | ) | $ | 25,802 |  | $ | 27,649 |
Outside the U.S. |  |  | 50,866 |  |  | 82,950 |  |  | 43,732 |
State |  |  | 5,933 |  |  | 34,242 |  |  | 38,321 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
|  | $ | 39,865 |  | $ | 142,994 |  | $ | 109,702 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Deferred: |  |  |  |  |  |  |  |  |  |
U.S. federal |  | $ | (71,251 | ) | $ | (79,193 | ) | $ | 51,739 |
Outside the U.S. |  |  | (10,288 | ) |  | (9,484 | ) |  | 16,692 |
State |  |  | (13,507 | ) |  | (13,331 | ) |  | (13,050 | )
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
|  | $ | (95,046 | ) | $ | (102,008 | ) | $ | 55,381 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Income tax expense (benefit) |  | $ | (55,181 | ) | $ | 40,986 |  | $ | 165,083 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Nabors is not subject to tax in Bermuda. A reconciliation of the differences between taxes on income (loss) before income taxes computed at the appropriate statutory rate and our reported provision for income taxes follows:
|  | Year Ended December 31, |
--- | --- | --- | ---
|  | 2013 |  | 2012 |  | 2011 |
|  |  |  | Revised |  | Revised |
|  | (In thousands) |
Income tax provision at statutory (Bermuda rate of 0%) |  | $ | — |  | $ | — |  | $ | — |
Taxes on U.S. and other international earnings (losses) at greater than the Bermuda rate |  |  | (33,277 | ) |  | (39,830 | ) |  | 122,292 |
Increase (decrease) in valuation allowance |  |  | 25,592 |  |  | 33,730 |  |  | 4,785 |
Effect of change in tax rate |  |  | — |  |  | — |  |  | (258 | )
Tax reserves and interest |  |  | (39,921 | ) |  | 26,176 |  |  | 12,993 |
State income taxes |  |  | (7,575 | ) |  | 20,910 |  |  | 25,271 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Income tax expense (benefit) |  | $ | (55,181 | ) | $ | 40,986 |  | $ | 165,083 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Effective tax rate |  |  | (52.0 | )% |  | 14.8 | % |  | 32.0 | %
The changes in our effective tax rate from 2012 to 2013 and from 2011 to 2012 resulted mainly from the proportion of income generated in the United States versus other countries where we operate and settlements of tax disputes. Included in tax reserves and interest for 2013 is $10.2 million of additional interest expense for uncertain tax positions related to prior years which also impacted our effective tax rate for 2013 as compared to 2012. The Company determined these amounts were not material to any of the periods presented. In general, the effective tax rate reflects the proportion of income generated in the United States versus other countries where we operate. Income generated in the United States is generally taxed at a higher rate than other jurisdictions. The significant components of our deferred tax assets and liabilities were as follows:
|  | December 31, |
--- | --- | --- | ---
|  | 2013 |  | 2012 |
|  | (In thousands) |
Deferred tax assets: |  |  |  |  |  |  |
Net operating loss carryforwards |  | $ | 1,658,084 |  | $ | 1,826,597 |
Equity compensation |  |  | 32,219 |  |  | 29,337 |
Deferred revenue |  |  | 35,689 |  |  | 33,523 |
Tax credit and other attribute carryforwards |  |  | 109,294 |  |  | 110,563 |
Insurance loss reserves |  |  | 4,645 |  |  | 10,873 |
Accrued interest |  |  | 224,959 |  |  | 55,143 |
Other |  |  | 162,678 |  |  | 49,556 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Subtotal |  |  | 2,227,568 |  |  | 2,115,592 |
Valuation allowance |  |  | (1,547,441 | ) |  | (1,520,852 | )
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Deferred tax assets: |  | $ | 680,127 |  | $ | 594,740 |
Deferred tax liabilities: |  |  |  |  |  |  |
Depreciation and amortization for tax in excess of book expense |  | $ | 967,689 |  | $ | 945,888 |
Variable interest investments |  |  | 85,979 |  |  | 144,020 |
Other |  |  | 17,890 |  |  | — |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Deferred tax liability |  | $ | 1,071,558 |  | $ | 1,089,908 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net deferred assets (liabilities) |  | $ | (391,431 | ) | $ | (495,168 | )
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Balance Sheet Summary: |  |  |  |  |  |  |
Net current deferred asset |  | $ | 121,316 |  | $ | 110,480 |
Net noncurrent deferred asset(1) |  |  | 6,491 |  |  | 4,408 |
Net current deferred liability(2) |  |  | (3,075 | ) |  | (10,721 | )
Net noncurrent deferred liability |  |  | (516,161 | ) |  | (599,335 | )
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net deferred asset (liability) |  | $ | (391,429 | ) | $ | (495,168 | )
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(1) This amount is included in other long-term assets. (2) This amount is included in accrued liabilities. For U.S. federal income tax purposes, we have net operating loss ("NOL") carryforwards of approximately $213.0 million that, if not utilized, will expire between 2018 and 2033. The NOL carryforwards for alternative minimum tax purposes are approximately $132.0 million. Additionally, we have NOL carryforwards in other jurisdictions of approximately $5.4 billion of which $492.0 million that, if not utilized, will expire at various times from 2014 to 2033. We provide a valuation allowance against NOL carryforwards in various tax jurisdictions based on our consideration of existing temporary differences and expected future earning levels in those jurisdictions. We have recorded a deferred tax asset of approximately $1.44 billion as of December 31, 2013 relating to NOL carryforwards that have an indefinite life in several non-U.S. jurisdictions. A valuation allowance of approximately $1.43 billion has been recognized because we believe it is more likely than not that substantially all of the deferred tax asset will not be realized. The NOL carryforwards by year of expiration:
|  | Total |  | U.S. Federal |  | Non-U.S. |
--- | --- | --- | --- | --- | --- | --- | ---
|  | (In thousands) |
Year Ended December 31, |  |  |  |  |  |  |  |  |  |
2014 |  | $ | 14,538 |  | $ | — |  | $ | 14,538 |
2015 |  |  | 12,052 |  |  | — |  |  | 12,052 |
2016 |  |  | 37,089 |  |  | — |  |  | 37,089 |
2017 |  |  | 46,234 |  |  | — |  |  | 46,234 |
2018 |  |  | 55,688 |  |  | 999 |  |  | 54,689 |
2019 |  |  | 27,418 |  |  | 17,722 |  |  | 9,696 |
2020 |  |  | 17,065 |  |  | — |  |  | 17,065 |
2021 |  |  | 24,020 |  |  | — |  |  | 24,020 |
2022 |  |  | 475 |  |  | — |  |  | 475 |
2023 |  |  | 5,673 |  |  | — |  |  | 5,673 |
2030 |  |  | 28,173 |  |  | — |  |  | 28,173 |
2031 |  |  | 259,630 |  |  | 189,444 |  |  | 70,186 |
2032 |  |  | 82,328 |  |  | — |  |  | 82,328 |
2033 |  |  | 94,533 |  |  | 4,778 |  |  | 89,755 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Subtotal: expiring NOLs |  | $ | 704,916 |  | $ | 212,943 |  | $ | 491,973 |
Non-expiring NOLs |  |  | 4,924,153 |  |  | — |  |  | 4,924,153 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total |  | $ | 5,629,069 |  | $ | 212,943 |  | $ | 5,416,126 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
In addition, for state income tax purposes, we have net operating loss carryforwards of approximately $304.0 million that, if not utilized, will expire at various times from 2014 to 2033. Under U.S. federal tax law, the amount and availability of loss carryforwards (and certain other tax attributes) are subject to a variety of interpretations and restrictive tests applicable to Nabors and our subsidiaries. The utilization of these carryforwards could be limited or effectively lost upon certain changes in our shareholder base. Accordingly, although we believe substantial loss carryforwards are available to us, no assurance can be given that they will be available in the future. Various bills have been introduced in the U.S. Congress that could reduce or eliminate the U.S. tax benefits associated with our 2002 reorganization as a Bermuda company. Legislation enacted by Congress in 2004 provides that a corporation that reorganized in a foreign jurisdiction on or after March 4, 2003 be treated as a domestic corporation for United States federal income tax purposes. There has been and we expect that there may continue to be legislation proposed in Congress from time to time which, if enacted, could limit or eliminate the tax benefits associated with our reorganization. Because we cannot predict whether legislation will ultimately be adopted, no assurance can be given that the tax benefits associated with our reorganization will ultimately accrue to the benefit of the Company and its shareholders. It is possible that future changes to tax laws (including tax treaties) could impact our ability to realize the tax savings recorded to date as well as future tax savings resulting from our reorganization.

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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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