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SEC Filings

8-K
ALTRIA GROUP, INC. filed this Form 8-K on 02/01/2018
Entire Document
 

Altria Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
_________________________


A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2017, 2016 and 2015 was as follows: 
(in millions)
2017

 
2016

 
2015

Balance at beginning of year
$
169

 
$
158

 
$
258

Additions based on tax positions
related to the current year

 
15

 
15

Additions for tax positions of
prior years
129

 
29

 
57

Reductions for tax positions due to
lapse of statutes of limitations
(4
)
 
(4
)
 
(4
)
Reductions for tax positions of
prior years
(208
)
 
(28
)
 
(86
)
Settlements
(20
)
 
(1
)
 
(82
)
Balance at end of year
$
66

 
$
169

 
$
158

     Unrecognized tax benefits and Altria Group, Inc.’s consolidated liability for tax contingencies at December 31, 2017 and 2016 were as follows:
(in millions)
2017

 
2016

Unrecognized tax benefits
$
66

 
$
169

Accrued interest and penalties
9

 
23

Tax credits and other indirect benefits
(1
)
 
(6
)
Liability for tax contingencies
$
74

 
$
186

The amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate at December 31, 2017 was $43 million, along with $23 million affecting deferred taxes. The amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate at December 31, 2016 was $67 million, along with $102 million affecting deferred taxes.
Altria Group, Inc. recognizes accrued interest and penalties associated with uncertain tax positions as part of the tax provision.
For the years ended December 31, 2017, 2016 and 2015, Altria Group, Inc. recognized in its consolidated statements of earnings $(13) million, $9 million and $(36) million, respectively, of gross interest (income) expense associated with uncertain tax positions.
Altria Group, Inc. is subject to income taxation in many jurisdictions. Uncertain tax positions reflect the difference between tax positions taken or expected to be taken on income tax returns and the amounts recognized in the financial statements. Resolution of the related tax positions with the relevant tax authorities may take many years to complete, and such timing is not entirely within the control of Altria Group, Inc. It is reasonably possible that within the next 12 months certain examinations will be resolved, which could result in a decrease in unrecognized tax benefits of approximately $5 million.
 
The effective income tax rate on pre-tax earnings differed from the U.S. federal statutory rate for the following reasons for the years ended December 31, 2017, 2016 and 2015:
 
2017

 
2016

 
2015

U.S. federal statutory rate
35.0
 %
 
35.0
 %
 
35.0
 %
Increase (decrease) resulting from:
 
 
 
 
 
State and local income taxes, net
of federal tax benefit
3.5

 
1.2

 
3.7

Re-measurement of net deferred tax liabilities
(31.2
)
 

 

Tax basis in foreign investments
(7.8
)
 

 

Deemed repatriation tax
4.2

 

 

Uncertain tax positions
(0.9
)
 

 
(0.8
)
AB InBev/SABMiller dividend
benefit
(5.9
)
 
(0.6
)
 
(0.5
)
Domestic manufacturing deduction
(1.8
)
 
(0.8
)
 
(2.0
)
Other
0.8

 

 
(0.3
)
Effective tax rate
(4.1
)%
 
34.8
 %
 
35.1
 %
The tax benefit in 2017 included net tax benefits of $3,367 million related to the Tax Reform Act recorded in the fourth quarter of 2017 as follows: (i) a tax benefit of $3,017 million to re-measure Altria Group, Inc. and its consolidated subsidiaries’ net deferred tax liabilities based on the new U.S. federal statutory rate; and (ii) a net tax benefit of $763 million for a tax basis adjustment associated with the deemed repatriation tax, partially offset by tax expense of $413 million for the deemed repatriation tax.
The amounts above related to the tax basis adjustment and the deemed repatriation tax were based on provisional estimates as of January 18, 2018, substantially all of which are related to Altria Group, Inc.’s share of AB InBev’s accumulated earnings and associated taxes. Altria Group, Inc. may be required to adjust these provisional estimates based on (i) additional guidance related to, or interpretation of, the Tax Reform Act and associated tax laws and (ii) additional information to be received from AB InBev, including information regarding AB InBev’s accumulated earnings and associated taxes for the 2016 and 2017 tax years. This additional guidance and information could result in increases or decreases to the provisional estimates, which may be significant in relation to these estimates. Altria Group, Inc. will record any such adjustments in 2018.
The tax benefit in 2017 also included tax benefits of $232 million for the release of a valuation allowance in the third quarter of 2017 related to deferred income tax assets for foreign tax credit carryforwards, which is included in AB InBev/SABMiller dividend benefit in the table above; and tax benefits of $152 million related primarily to the effective settlement in the second quarter of 2017 of the IRS audit of Altria Group, Inc. and its consolidated subsidiaries’ 2010-2013 tax years, partially offset by tax expense of $114 million in the third quarter of 2017 for tax reserves related to the calculation of certain foreign tax credits.
The tax provision in 2016 included increased tax benefits associated with the cumulative SABMiller and AB InBev


23