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Income Taxes | 9 Months Ended
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Sep. 30, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | NOTE 9. Income Taxes The effective tax rate on a continuing operations basis for the third quarter of 2024 was 20.3 percent on pre-tax income compared to 23.5 percent on a pre-tax loss in the prior year. The effective tax rate for the first nine months of 2024 was 19.0 percent compared to 24.3 percent on a pre-tax loss in the prior year. The primary factors that impacted the comparison of these rates year-over-year were the third quarter 2023 charge related to the settlement agreement to resolve CAE litigation (see Note 17), second quarter 2023 charge related to the settlement agreement with public water systems in the United States regarding PFAS (see Note 17), and the tax rate associated with the 2024 benefit related to the change in value of the retained ownership interest in Solventum. The total amounts of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of September 30, 2024 and December 31, 2023 on a continuing operations basis are $710 million and $671 million, respectively. 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. Net deferred tax assets are included as components of Other Assets and Other Liabilities within the Consolidated Balance Sheet. As of September 30, 2024, 3M's net non current deferred tax asset balance was approximately $3.9 billion. This included a balance of approximately $3.0 billion as a result of the 2023 pre-tax charges related to the PWS Settlement and the CAE Settlement (both discussed in Note 17). As of September 30, 2024 and December 31, 2023, on a continuing operations basis, the Company had valuation allowances of $1.1 billion and $0.7 billion on its deferred tax assets, respectively, with the amounts impacted beginning in 2024 by a valuation allowance related to the difference in basis of the retained ownership interest in Solventum. In connection with the completion of the separation of Solventum in April 2024, 3M re-evaluated its global cash needs and certain unrepatriated earnings were no longer considered permanently reinvested, which resulted in a charge of approximately $100 million in the second quarter of 2024. Thereafter, 3M provides for income taxes associated with foreign earnings in certain subsidiaries that are not considered permanently reinvested. The Company has not provided deferred taxes on approximately $1.0 billion of undistributed earnings from non-U.S. subsidiaries as of September 30, 2024 which are indefinitely reinvested in operations. Because of the multiple avenues by which to repatriate the earnings to minimize tax cost, and because a large portion of these earnings are not liquid, it is not practical to determine the income tax liability that would be payable if such earnings were not reinvested indefinitely. In 2021, the Organization for Economic Cooperation and Development (OECD) published Pillar Two Model Rules defining a global minimum tax, which calls for the taxation of large corporations at a minimum rate of 15%. The OECD has since issued administrative guidance providing transition and safe harbor rules around the implementation of the Pillar Two global minimum tax. Effective January 1, 2024, a number of countries have proposed or enacted legislation to implement core elements of the Pillar Two proposal. Pillar Two did not have a significant impact on 3M's third quarter 2024 results. While 3M is monitoring developments and evaluating the potential impact on future periods, 3M does not expect Pillar Two to have a significant impact on its 2024 financial results.

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