Old COPPER Company, Inc. - 10-Q filing on 2014-12-09

Income Taxes	9 Months Ended
Income Taxes	Nov. 01, 2014
Income Tax Disclosure [Abstract]
Income Taxes	Income Taxes Income taxes for the three months ended November 1, 2014 was a benefit of $3 million compared to a benefit of $11 million for the three months ended November 2, 2013. The effective tax rate for the three months ended November 1, 2014 was (1.6)% as compared to (2.2)% for the three months ended November 2, 2013. Income taxes for the nine months ended November 1, 2014 was an expense of $1 million compared to a benefit of $228 million for the nine months ended November 2, 2013. The effective tax rate for the nine months ended November 1, 2014 was 0.1% as compared to (13.8)% for the nine months ended November 2, 2013. Our effective tax rate for the nine months ended November 1, 2014 was impacted by a net increase to the tax valuation allowance for deferred tax assets of $255 million. In assessing the need for the valuation allowance, we considered both positive and negative evidence related to the likelihood of realization of the deferred tax assets. As a result of our assessment, we concluded that, beginning in the second quarter of 2013, our estimate of the realization of deferred tax assets would be based solely on the future reversals of existing taxable temporary differences and tax planning strategies that we would make use of to accelerate taxable income to utilize expiring carryforwards. Accordingly, in the third quarter of 2014, the valuation allowance was increased to offset the net deferred tax assets created in the quarter relating primarily to the increase in net operating loss (NOL) carryforwards. A valuation allowance of $559 million has been recorded against our deferred tax assets as of November 1, 2014, which resulted in an increase to the valuation allowance during the quarter ended November 1, 2014 of $107 million. The net tax benefit of $3 million for the third quarter of 2014 consisted of state and foreign tax expenses of $1 million and $2 million of expense related to the deferred tax asset change arising from the tax amortization of indefinite-lived intangible assets, offset by a $6 million non-cash benefit relating to other comprehensive income. In accordance with accounting standards, we are required to allocate a portion of our tax provision between operating losses and accumulated other comprehensive income. Application of this guidance required the recognition of a non-cash income tax benefit of $6 million in operating results, offset by a $6 million charge to other comprehensive income for the quarter. The net tax expense of $1 million for the nine months ended November 1, 2014 consisted of a federal audit adjustment of $12 million, state and foreign tax expenses of $6 million and $6 million of expense related to the deferred tax asset change arising from the tax amortization of indefinite-lived intangible assets, offset by a $19 million non-cash benefit relating to other comprehensive income and a $4 million benefit on settlement of certain state audits. In accordance with accounting standards, we are required to allocate a portion of our tax provision between operating losses and accumulated other comprehensive income. Application of this guidance required the recognition of a non-cash income tax benefit of $19 million in operating results, offset by a $19 million charge to other comprehensive income for the quarter. As of November 1, 2014, we have approximately $2.7 billion of net operating losses available for U.S. federal income tax purposes, which expire in 2032 through 2034 and $46 million of tax credit carryforwards that expire at various dates through 2034. For these NOL and tax credit carryforwards a net deferred tax asset of $567 million has been recorded, net of a valuation allowance of $393 million. A valuation allowance of $166 million fully offsets the deferred tax assets resulting from the state NOL carryforwards that expire at various dates through 2034.