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Income Taxes | 9 Months Ended
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Sep. 30, 2019
Income Taxes. |
Income Taxes | NOTE 8. Income Taxes ​ The IRS has completed its field examination of the Company’s U.S. federal income tax returns for the years 2005 to 2014, and 2016. The Company is in the process of resolving open issues identified during those examinations. The Company remains under examination by the IRS for its U.S. federal income tax returns for the years 2015, 2017 and 2018. In addition to the U.S. federal examination, there is also audit activity in several U.S. state and foreign jurisdictions. As of September 30, 2019, no taxing authority has proposed significant adjustments to the Company’s tax positions for which the Company is not adequately reserved. ​ It is reasonably possible that the amount of unrecognized tax benefits could significantly change within the next 12 months. At this time, the Company is not able to estimate the range by which these potential events could impact 3M’s unrecognized tax benefits in the next 12 months. The total amounts of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of September 30, 2019 and December 31, 2018 are $736 million and $655 million, respectively. ​ As of September 30, 2019 and December 31, 2018, the Company had valuation allowances of $70 million and $67 million on its deferred tax assets, respectively. ​ The effective tax rate for the third quarter of 2019 was 19.3 percent, compared to 21.3 percent in the third quarter of 2018, a decrease of 2.0 percentage points. Primary factors that decreased the Company’s effective tax rate included adjustments related to impacts of U.S. international tax provisions, geographical income mix, and increased benefits from the R&D tax credit. These decreases were partially offset by the tax related to the divestiture of the Company’s gas and flame detection business and decreased benefit from stock options. ​ The effective tax rate for the first nine months of 2019 was 19.7 percent, compared to 24.0 percent in the first nine months of 2018, a decrease of 4.3 percentage points. Primary factors that decreased the Company’s effective tax rate included significant events such as prior year measurement period adjustments related to 2017 Tax Cuts and Jobs Act (TCJA), prior year resolution of the NRD lawsuit (as described in Note 14), geographical income mix, and increased benefits from the R&D tax credit. These decreases were partially offset by the deconsolidation of the Venezuelan subsidiary and adjustments to uncertain tax positions. In addition, the effective tax rate decreased due to the divestiture of the Company’s gas and flame detection business. ​ The Tax Cuts and Jobs Act (TCJA) was enacted in December 2017, after which the SEC staff issued Staff Accounting Bulletin 118, which provided a measurement period of up to one year from the TCJA’s enactment date for companies to complete their accounting under ASC 740. During the first quarter of 2018, 3M recognized a measurement period adjustment resulting in an additional tax expense of $217 million to its provisional accounting. Refer to Note 10 in 3M’s 2018 Annual Report on Form 10-K for more information on the impact of TCJA. ​ The Company adopted ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, as described in Note 1, on January 1, 2019. The purpose of this ASU was to allow a reclassification to retained earnings of one-time income tax effects stranded in accumulated other comprehensive income (AOCI) arising from the change in the U.S. federal corporate tax rate as a result of TCJA. The effect of this adoption resulted in a reclassification between retained earnings and AOCI, which increased retained earnings by approximately $0.9 billion, with an offsetting increase to accumulated other comprehensive loss for the same amount. ​

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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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