All other taxes and duties include taxes reported in production and manufacturing and selling, general and administrative (SG&A) expenses. The above provisions for deferred income taxes include net credits of $330 million in 2011 and $9 million in 2009 and a net charge of $175 million in 2010 for the effect of changes in tax laws and rates.

Income taxes (charged)/credited directly to equity were:

 

		2011				2010				2009
		(millions of dollars)
Cumulative foreign exchange translation adjustment		$	89			$	(42	)		$	(247	)
Postretirement benefits reserves adjustment:
Net actuarial loss/(gain)			2,016				553				(94	)
Amortization of actuarial loss/(gain)			(503	)			(609	)			(649	)
Prior service cost			47				92				20
Amortization of prior service cost			(41	)			(45	)			(43	)
Foreign exchange rate changes			(24	)			44				175
Total postretirement benefits reserves adjustment			1,495				35				(591	)
Other components of equity			236				246				140

The reconciliation between income tax expense and a theoretical U.S. tax computed by applying a rate of 35 percent for 2011, 2010 and 2009 is as follows:

 

		2011				2010				2009
		(millions of dollars)
Income before income taxes
United States		$	11,511			$	7,711			$	2,576
Non-U.S.			61,746				45,248				32,201
Total		$	73,257			$	52,959			$	34,777
Theoretical tax		$	25,640			$	18,536			$	12,172
Effect of equity method of accounting			(5,351	)			(3,737	)			(2,500	)
Non-U.S. taxes in excess of theoretical U.S. tax			10,385				7,293				5,948
U.S. tax on non-U.S. operations			15				46				32
State taxes, net of federal tax benefit			312				221				72
Other U.S.			50				(798	)			(605	)
Total income tax expense		$	31,051			$	21,561			$	15,119
Effective tax rate calculation
Income taxes		$	31,051			$	21,561			$	15,119
ExxonMobil share of equity company income taxes			5,603				4,058				2,489
Total income taxes			36,654				25,619				17,608
Net income including noncontrolling interests			42,206				31,398				19,658
Total income before taxes		$	78,860			$	57,017			$	37,266
Effective income tax rate			46%				45%				47%

 

Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes.

Deferred tax liabilities/(assets) are comprised of the following at December 31:

 

Tax effects of temporary differences for:		2011				2010
		(millions of dollars)
Property, plant and equipment		$	45,951			$	42,657
Other liabilities			4,281				4,278
Total deferred tax liabilities		$	50,232			$	46,935
Pension and other postretirement benefits		$	(7,930	)		$	(5,634	)
Asset retirement obligations			(5,302	)			(4,461	)
Tax loss carryforwards			(3,166	)			(3,243	)
Other assets			(7,079	)			(6,070	)
Total deferred tax assets		$	(23,477	)		$	(19,408	)
Asset valuation allowances			1,304				1,183
Net deferred tax liabilities		$	28,059			$	28,710

Deferred income tax (assets) and liabilities are included in the balance sheet as shown below. Deferred income tax (assets) and liabilities are classified as current or long term consistent with the classification of the related temporary difference – separately by tax jurisdiction.

 

Balance sheet classification		2011				2010
		(millions of dollars)
Other current assets		$	(4,549	)		$	(3,359	)
Other assets, including intangibles, net			(4,218	)			(3,527	)
Accounts payable and accrued liabilities			208				446
Deferred income tax liabilities			36,618				35,150
Net deferred tax liabilities		$	28,059			$	28,710

The Corporation had $47 billion of indefinitely reinvested, undistributed earnings from subsidiary companies outside the U.S. Unrecognized deferred taxes on remittance of these funds are not expected to be material.

Unrecognized Tax Benefits

The Corporation is subject to income taxation in many jurisdictions around the world. Unrecognized tax benefits reflect the difference between 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 through negotiations with the relevant tax authorities or through litigation will take many years to complete. It is difficult to predict the timing of resolution for tax positions since such timing is not entirely within the control of the Corporation. It is reasonably possible that the total amount of unrecognized tax benefits could increase by up to 50 percent in the next 12 months, with no material impact on near-term earnings. Given the long time periods involved in resolving tax positions, the Corporation does not expect that the recognition of unrecognized tax benefits will have a material impact on the Corporation's effective income tax rate in any given year.

The following table summarizes the movement in unrecognized tax benefits.

 

Gross unrecognized tax benefits		2011				2010				2009
		(millions of dollars)
Balance at January 1		$	4,148			$	4,725			$	4,976
Additions based on current year's tax positions			822				830				547
Additions for prior years' tax positions			451				620				262
Reductions for prior years' tax positions			(329	)			(505	)			(594	)
Reductions due to lapse of the statute of limitations			–				(534	)			–
Settlements with tax authorities			(145	)			(999	)			(592	)
Foreign exchange effects/other			(25	)			11				126
Balance at December 31		$	4,922			$	4,148			$	4,725

The additions and reductions in unrecognized tax benefits shown above include effects related to net income and equity, and timing differences for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. The 2011, 2010 and 2009 changes in unrecognized tax benefits did not have a material effect on the Corporation's net income or cash flow.

The following table summarizes the tax years that remain subject to examination by major tax jurisdiction:

 

Country of Operation		Open Tax Years
Abu Dhabi		2000 - 2011
Angola		2007 - 2011
Australia		2000 - 2011
Canada		1994 - 2011
Equatorial Guinea		2006 - 2011
Germany		1999 - 2011
Japan		2004 - 2011
Malaysia		2005 - 2011
Nigeria		1998 - 2011
Norway		2000 - 2011
United Kingdom		2009 - 2011
United States		2004 - 2011

The Corporation classifies interest on income tax-related balances as interest expense or interest income and classifies tax-related penalties as operating expense.

The Corporation incurred $62 million in interest expense on income tax reserves in 2011. For 2010, interest expense was a credit of $39 million, reflecting the effect of credits from the net favorable resolution of prior year tax positions. The Corporation incurred approximately $135 million in interest expense on income tax reserves in 2009. The related interest payable balances were $662 million and $636 million at December 31, 2011, and 2010, respectively.