As of December 31, 2008, the Company had available domestic and foreign net operating loss carryforwards for income tax
purposes of approximately $3,052 million, of which approximately $574 million have an indefinite carryforward period. The remaining
$2,478 million expire between the years 2009 and 2028. Utilization of these net operating losses may be subject to limitations in the
event of significant changes in stock ownership of the Company. As of December 31, 2008, the Company had unused foreign tax
credits and investment tax credits of $270 million and $168 million, respectively, with various expiration dates through 2028.
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The Company has been granted a tax holiday in a certain jurisdiction in China that became effective when the net operating loss
carryforwards were fully utilized. For 2007, the Company’s tax rate was 7.5%, which is 50% of the normal 15% tax rate for the
jurisdiction in which Kodak operates. As a result of new legislation effective for 2008, the corporate income rate increased to 9%,
which was 50% of the new 2008 tax rate of 18%. Thereafter, the Company’s tax rate will be phased in until ultimately reaching a rate
of 25% in 2012.
Retained earnings of subsidiary companies outside the U.S. were approximately $1,790 million and $1,675 million as of December
31, 2008 and 2007, respectively. Deferred taxes have not been provided on such undistributed earnings, as it is the Company’s
policy to indefinitely reinvest its retained earnings, and it is not practicable to determine the related deferred tax liability. However, the
Company periodically repatriates a portion of these earnings to the extent that it can do so tax-free, or at minimal cost.
The Company’s valuation allowance as of December 31, 2008 was $1,665 million. Of this amount, $378 million was attributable to
the Company’s net deferred tax assets outside the U.S. of $722 million, and $1,287 million related to the Company’s net deferred tax
assets in the U.S. of $1,522 million, which the Company believes it is not more likely than not that the assets will be realized. The net
deferred tax assets in excess of the valuation allowance of $579 million relate primarily to net operating loss carryforwards and
certain tax credits which the Company believes it is more likely than not that the assets will be realized.
For the year ended December 31, 2007, the Company recorded a tax benefit in continuing operations primarily as a result of the
realization of current year losses due to the recognition of an offsetting tax expense on the pre-tax gain on discontinued operations.
The valuation allowance as of December 31, 2007 was $1,249 million. Of this amount, $323 million related to the Company’s net
deferred tax assets outside the U.S. of $731 million, and $926 million related to the Company’s net deferred tax assets in the U.S. of
$1,165 million, which the Company believes it is not more likely than not that the assets will be realized. The net deferred tax assets
in excess of the valuation allowance of $647 million related primarily to net operating loss carryforwards and certain tax credits which
the Company believed were more likely than n
