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Note 18 - Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | NOTE 18: INCOME TAXES The components of Loss from continuing operations before income taxes and the related provision (benefit) for U.S. and other income taxes were as follows (in millions):
|  | Year Ended December 31, |
|  | 2019 |  |  | 2018 |
(Loss) earnings from continuing operations before income taxes: |  |  |  |  |  |  |  |
U.S. |  | $ | (68 | ) |  | $ | (46 | )
Outside the U.S. |  |  | 8 |  |  |  | 33 |
Total |  | $ | (60 | ) |  | $ | (13 | )
U.S. income taxes: |  |  |  |  |  |  |  |
Current benefit |  | $ | — |  |  | $ | (30 | )
Deferred provision |  |  | — |  |  |  | 1 |
Income taxes outside the U.S.: |  |  |  |  |  |  |  |
Current provision |  |  | 7 |  |  |  | 4 |
Deferred provision |  |  | 24 |  |  |  | 21 |
Total provision |  | $ | 31 |  |  | $ | (4 | )
The differences between income taxes computed using the U.S. federal income tax rate and the provision (benefit) for income taxes for continuing operations were as follows (in millions):
|  | Year Ended December 31, |
|  | 2019 |  |  | 2018 |
Amount computed using the statutory rate |  | $ | (13 | ) |  | $ | (3 | )
Increase (reduction) in taxes resulting from: |  |  |  |  |  |  |  |
Unremitted foreign earnings |  |  | (1 | ) |  |  | 2 |
Operations outside the U.S. |  |  | 22 |  |  |  | 28 |
Legislative tax law and rate changes |  |  | 1 |  |  |  | 7 |
Valuation allowance |  |  | 11 |  |  |  | (18 | )
Tax settlements and adjustments, including interest |  |  | 2 |  |  |  | (33 | )
Discharge of debt and other reorganization related items |  |  | — |  |  |  | 13 |
Embedded derivative liability |  |  | 9 |  |  |  | — |
Provision (benefit) from income taxes |  | $ | 31 |  |  | $ | (4 | )
IRS and Korean National Tax Service Agreement In June 2012, Kodak filed a Request for Competent Authority Assistance with the United States Internal Revenue Service (IRS). The request related to a potential double taxation issue with respect to patent licensing royalty payments received by Kodak in 2010. In October 2018, an agreement was reached by the IRS and Korean National Tax Service, resulting in a partial refund of Korean withholding taxes in the amount of $32 million. Kodak had previously agreed with the licensee that made the royalty payments that any refunds of the related Korean withholding taxes would be shared equally between Kodak and the licensee. Kodak received the $16 million net payment in the fourth quarter of 2018. The full $32 million refund was reflected as an income tax benefit in the fourth quarter of 2018. The $16 million payment to the licensee was reported in other operating expenses, resulting in a net benefit to net income of $16 million. The significant components of deferred tax assets and liabilities were as follows (in millions):
|  | As of December 31, |
|  | 2019 |  |  | 2018 |
Deferred tax assets |  |  |  |  |  |  |  |
Pension and postretirement obligations |  | $ | 39 |  |  | $ | 62 |
Restructuring programs |  |  | 2 |  |  |  | 1 |
Leasing |  |  | 1 |  |  |  | — |
Foreign tax credit |  |  | 355 |  |  |  | 357 |
Inventories |  |  | 8 |  |  |  | 10 |
Investment tax credit |  |  | 46 |  |  |  | 48 |
Employee deferred compensation |  |  | 24 |  |  |  | 23 |
Depreciation |  |  | 41 |  |  |  | 64 |
Research and development costs |  |  | 56 |  |  |  | 67 |
Tax loss carryforwards |  |  | 325 |  |  |  | 338 |
Other deferred revenue |  |  | 2 |  |  |  | 1 |
Other |  |  | 86 |  |  |  | 67 |
Total deferred tax assets |  | $ | 985 |  |  | $ | 1,038 |
Deferred tax liabilities |  |  |  |  |  |  |  |
Leasing |  | $ | — |  |  | $ | 2 |
Goodwill/intangibles |  |  | 11 |  |  |  | 16 |
Unremitted foreign earnings |  |  | 19 |  |  |  | 22 |
Total deferred tax liabilities |  |  | 30 |  |  |  | 40 |
Net deferred tax assets before valuation allowance |  |  | 955 |  |  |  | 998 |
Valuation allowance |  |  | 821 |  |  |  | 853 |
Net deferred tax assets |  | $ | 134 |  |  | $ | 145 |
Deferred tax assets (liabilities) are reported in the following components within the Consolidated Statement of Financial Position (in millions):
|  | As of December 31, |
|  | 2019 |  |  | 2018 |
Deferred income taxes |  | $ | 147 |  |  | $ | 160 |
Other long-term liabilities |  |  | (13 | ) |  |  | (15 | )
Net deferred tax assets |  | $ | 134 |  |  | $ | 145 |
As of December 31, 2019, Kodak had available domestic and foreign NOL carry-forwards for income tax purposes of approximately $1,452 million, of which approximately $639 million have an indefinite carry-forward period. The remaining $813 million expire between the years 2020 and 2038. As of December 31, 2019, Kodak had unused foreign tax credits and investment tax credits of $355 million and $46 million, respectively, with various expiration dates through 2035. Utilization of NOL carry-forwards and tax credits may be subject to limitations in the event of significant changes in stock ownership of the Company in the future. Section 382 of the Internal Revenue Code of 1986, as amended, imposes annual limitations on the utilization of NOL carryforwards, other tax carryforwards, and certain built-in losses as defined under that Section, upon an ownership change. In general terms, an ownership change may result from transactions that increase the aggregate ownership of certain stockholders in Kodak’s stock by more than 50 percentage points over a three-year testing period. Kodak had deferred tax liabilities of $19 million and $22 million for potential taxes on the undistributed earnings, including foreign withholding taxes, as of December 31, 2019 and 2018, respectively. Kodak’s valuation allowance as of December 31, 2019 was $821 million. Of this amount, $168 million was attributable to Kodak’s net deferred tax assets outside the U.S. of $322 million, and $653 million related to Kodak’s net deferred tax assets in the U.S. of $633 million, for which Kodak believes it is not more likely than not that the assets will be realized. Kodak’s valuation allowance as of December 31, 2018 was $853 million. Of this amount, $155 million was attributable to Kodak’s net deferred tax assets outside the U.S. of $322 million, and $698 million related to Kodak’s net deferred tax assets in the U.S. of $676 million, for which Kodak believes it is not more likely than not that the assets will be realized. During 2019 and 2018, Kodak determined that it was more likely than not that a portion of the deferred tax assets outside the U.S. would not be realized due to reduced sales volumes and profits in locations outside the U.S. and accordingly recorded a provision of $19 million and $15 million, respectively, associated with the establishment of a valuation allowance on those deferred tax assets. Additionally, during 2018, Kodak determined that it was more likely than not that a portion of the deferred tax assets outside the U.S. would be realized as a result of increased profits in a location outside the U.S. and accordingly recorded a benefit $4 million associated with the release of a valuation allowance on those deferred tax assets. The net deferred tax assets in excess of the valuation allowance of approximately $134 million and $145 million as of December 31, 2019 and 2018, respectively, relate primarily to NOL carry-forwards, certain tax credits, and pension related tax benefits for which Kodak believes it is more likely than not that the assets will be realized. Accounting for Uncertainty in Income Taxes A reconciliation of the beginning and ending amount of Kodak’s liability for income taxes associated with unrecognized tax benefits is as follows (in millions):
|  | Year Ended December 31, |
|  | 2019 |  |  | 2018 |
Balance as of January 1 |  | $ | 57 |  |  | $ | 61 |
Tax positions related to the current year: |  |  |  |  |  |  |  |
Additions |  |  | — |  |  |  | — |
Tax positions related to prior years: |  |  |  |  |  |  |  |
Additions |  |  | 1 |  |  |  | 1 |
Reductions |  |  | (1 | ) |  |  | (5 | )
Settlements with taxing jurisdictions |  |  | (3 | ) |  |  | — |
Balance as of December 31 |  | $ | 54 |  |  | $ | 57 |
Kodak’s policy regarding interest and/or penalties related to income tax matters is to recognize such items as a component of income tax (benefit) expense. Kodak had approximately $14 million and $16 million of interest and penalties associated with uncertain tax benefits accrued as of December 31, 2019 and 2018, respectively. Kodak had uncertain tax benefits of approximately $20 million and $26 million as of December 31, 2019 and 2018, respectively, that, if recognized, would affect the effective income tax rate. Kodak has classified certain income tax liabilities as current or noncurrent based on management’s estimate of when these liabilities will be settled. The current liabilities are recorded in Other current liabilities in the Consolidated Statement of Financial Position. Noncurrent income tax liabilities are recorded in Other long-term liabilities in the Consolidated Statement of Financial Position. It is reasonably possible that the liability associated with Kodak’s unrecognized tax benefits will increase or decrease within the next twelve months. These changes may be the result of settling ongoing audits or the expiration of statutes of limitations. Such changes to the unrecognized tax benefits could range from $40 million to $50 million based on current estimates, which includes a U.S. federal audit issue related to years 2013 and 2014. Audit outcomes and the timing of audit settlements are subject to significant uncertainty. Although management believes that adequate provision has been made for such issues, there is the possibility that the ultimate resolution of such issues could have an adverse effect on the earnings of Kodak. Conversely, if these issues are resolved favorably in the future, the related provision would be reduced, thus having a positive impact on earnings. During 2019, Kodak reached a settlement outside of the U.S. and settled an audit for calendar years 2005-2008. Kodak originally recorded liabilities for uncertain tax positions (“UTPs”) totaling $3 million (plus interest of approximately $3 million). Kodak paid $2 million in 2019 as result of this settlement and will pay the remaining $4 million by April 2020. During 2018, Kodak agreed to terms with a tax authority outside of the U.S. and settled audit issues related to calendar years 2006-2007. Kodak originally recorded liabilities for UTPs totaling $1 million (plus interest of approximately $1 million). The settlement resulted in a reduction in Other current liabilities in the Consolidated Statement of Financial Position and other taxes and the recognition of a $2 million tax benefit. Kodak is subject to taxation and files income tax returns in the U.S. federal jurisdiction and in many state and foreign jurisdictions. Kodak has substantially concluded all U.S. federal and state income tax matters for years through 2012 with respective tax authorities. Kodak is currently under examination by the Internal Revenue Service (‘IRS”) for years 2013 and 2014. With respect to countries outside the U.S., Kodak has substantially concluded all material foreign income tax matters through 2012 with respective foreign tax jurisdiction authorities. On February 21, 2020, Kodak agreed to terms with the IRS and settled the federal audit for calendar years 2013 and 2014. For these years, Kodak originally recorded a federal UTP totaling $41 million, which was fully offset by tax attributes. This settlement will result in an increase in net deferred tax assets and will be fully offset by a corresponding increase in Kodak’s U.S. valuation allowance, resulting in no net tax benefit.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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