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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes
NOTE 11. Income Taxes
Income (loss) from continuing operations before income taxes consisted of the following:
(Millions)202420232022
United States$2,300 $(13,272)$2,173 
International2,519 2,001 2,031 
Total$4,819 $(11,271)$4,204 
Provision (benefit) for income taxes consisted of the following:
(Millions)202420232022
Currently payable
Federal$(75)$302 $295 
State(6)38 55 
International583 494 503 
Deferred
Federal328 (3,084)(593)
State1 (495)(76)
International(27)(122)4 
Total$804 $(2,867)$188 
Components of deferred tax assets and (liabilities) are comprised of the following:
(Millions)20242023
Deferred tax assets:
Employee benefit costs$241 $202 
Product and other claims3,154 3,977 
Investments333 — 
Miscellaneous accruals143 116 
Stock-based compensation267 249 
Advanced payments14 76 
Net operating/capital loss/tax credit carryforwards130 91 
Foreign tax credits143 117 
Research and experimentation capitalization 720 595 
Lease liabilities150 176 
Intangible amortization104 99 
Other56 55 
Gross deferred tax assets5,455 5,753 
Valuation allowance(1,061)(689)
Total deferred tax assets4,394 5,064 
Deferred tax liabilities:
Accelerated depreciation(263)(422)
Right-of-use asset(151)(178)
Other(188)— 
Total deferred tax liabilities(602)(600)
Net deferred tax assets$3,792 $4,464 
As displayed in the table above, as of December 31, 2024, the Company has provided $1,061 million of valuation allowance against certain of these deferred tax assets, including the difference in basis of the retained ownership interest in Solventum, based on management’s determination that it is more-likely-than-not that the tax benefits related to these assets will not be realized.
The net deferred tax assets are included as components of Other Assets and Other Liabilities within the Consolidated Balance Sheet. See Note 8 “Supplemental Balance Sheet Information” for further details.
As of December 31, 2024, the Company had tax effected operating losses, capital losses, and tax credit carryovers for federal (approximately $153 million), state (approximately $68 million), and international (approximately $52 million), with all amounts before limitation impacts and valuation allowances. Federal tax attribute carryovers will expire after 5 years to 20 years, the state after 5 years to an indefinite carryover period, and the international after 1 year to an indefinite carryover period.
A reconciliation of the U.S. federal statutory income tax rate to 3M's worldwide effective income tax rate is provided below:
Note: A positive rate reconciliation percent for the year ended 2023 is a tax benefit on a pretax loss.
202420232022
Statutory U.S. tax rate21.0 %21.0 %21.0 %
Food Safety divestiture— — (12.8)
State income taxes - net of federal benefit0.6 3.2 (0.5)
International income taxes - net3
2.1 0.6 (0.2)
Global Intangible Low Taxed Income (GILTI)0.6 (0.3)0.9 
Foreign Derived Intangible Income (FDII)(0.3)0.6 (2.2)
U.S. research and development credit(0.7)0.4 (0.9)
Reserves for tax contingencies0.6 (0.4)(0.1)
Employee share-based payments0.4 — (0.3)
Change in valuation allowance on Solventum ownership(7.7)— — 
All other - net0.1 0.3 (0.4)
Effective worldwide tax rate16.7 %25.4 %4.5 %
3 International income taxes includes tax expense associated with international earnings no longer considered permanently reinvested.
The effective tax rates for 2024, 2023, and 2022 were 16.7 percent on pre-tax income, 25.4 percent on pre-tax loss and 4.5 percent on pre-tax income, respectively. The primary factors that impacted 2024 were the effective tax rate benefit on the change in value of 3M's retained ownership interest in Solventum offset by the effective tax rate on the PWS Settlement and the CAE Settlement (as discussed in Note 19), including 3M’s related decision in the fourth quarter of 2024 to defer certain deductions and accelerate income for tax purposes. The primary factors that impacted the 2023 rate were the charges related to the PWS Settlement and the CAE Settlement (as discussed in Note 19).
As described in Note 2, the Company completed the spin-off of its Health Care business through a pro rata distribution of 80.1% of the outstanding shares of Solventum Corporation to 3M stockholders. The Company determined that the spin-off, and certain internal business separation transactions, qualified as tax-free transactions under the applicable sections of the United States Internal Revenue Code. In making this determination, management applied U.S. federal tax law to relevant facts and circumstances and obtained a private letter ruling from the Internal Revenue Service, third party tax opinions, and other external tax advice related to the concluded tax treatment. The applicable facts and circumstances that existed at the time of the transactions may be reviewed as part of an audit by the Internal Revenue Service. If the completed transactions were later determined to fail to qualify for tax-free treatment for U.S. federal income tax purposes, the Company could be subject to significant liabilities, and there could be material adverse impacts on the Company’s business, financial condition, results of operations and cash flows in future reporting periods. The determination of the tax consequences of these transactions required management to make judgments about the application of tax laws and regulations.
The 2017 Tax Cuts and Jobs Act (TCJA) involved a transition tax that is payable over eight years beginning in 2018. As of December 31, 2024, 3M reflected $211 million payable within one year associated with the transition tax and had no long term income taxes payable associated with the transition tax. As of December 31, 2023, 3M reflected $189 million and $218 million within one year associated with the transition tax and in long term income taxes payable, respectively.
The IRS completed its field examination of the Company’s U.S. federal income tax returns through 2018, but the years 2005 through 2018 have not closed as the Company is in the process of resolving issues identified during those examinations. Currently, the Company is under examination by the IRS for its U.S. federal income tax returns for the years ended 2019 through 2022. In addition to the U.S. federal examination, there is also audit activity in several U.S. state and foreign jurisdictions where the Company is subject to ongoing tax examinations and governmental assessments, which could be impacted by evolving political environments in those jurisdictions. As of December 31, 2024, no taxing authority 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. The Company has ongoing federal, state and international income tax audits in various jurisdictions and evaluates uncertain tax positions that may be challenged by local tax authorities and not fully sustained. These uncertain tax positions are reviewed on an ongoing basis and adjusted in light of facts and circumstances including progression of tax audits, developments in case law and closing statutes of limitation. At this time, the Company is not able to estimate the range by which these potential events could impact 3M’s unrecognized tax benefits within the next 12 months.
The Company recognizes the amount of tax benefit that has a greater than 50 percent likelihood of being ultimately realized upon settlement. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits (UTB) is as follows:
(Millions)202420232022
Gross UTB Balance at January 1$590 $632 $770 
Additions based on tax positions related to the current year13 11 114 
Additions for tax positions of prior years57 63 36 
Reductions for tax positions of prior years(16)(42)(132)
Settlements(17)(33)(118)
Reductions due to lapse of applicable statute of limitations(36)(42)(32)
Foreign currency translation(17)1 (6)
Gross UTB Balance at December 31$574 $590 $632 
The total amount of net UTB, if recognized, would affect the effective tax rate by $686 million as of December 31, 2024. The ending net UTB results from adjusting the gross balance for deferred items, interest and penalties, and deductible taxes. The net UTB is included as components of Other Assets, Accrued Income Taxes, and Other Liabilities within the Consolidated Balance Sheet.
The Company recognizes interest and penalties accrued related to UTB in tax expense. The Company recognized in the consolidated statement of income on a gross basis approximately $25 million of expense, $83 million of expense, and $2 million of benefit in 2024, 2023, and 2022, respectively. The amount of interest and penalties recognized may be an expense or benefit due to new or remeasured UTB accruals. At December 31, 2024, and December 31, 2023, accrued interest and penalties in the consolidated balance sheet on a gross basis were $207 million and $183 million, respectively.
As a result of certain employment commitments and capital investments made by 3M, income from certain foreign operations in the following countries is subject to reduced tax rates or, in some cases, is exempt from tax for years through the following: China (2025), Switzerland (2026), Brazil (2029) and Singapore (2032). The continuing income tax benefits attributable to the tax status of these subsidiaries are estimated to be $87 million (16 cents per diluted share) in 2024, $100 million (18 cents per diluted share) in 2023, and $142 million (25 cents per diluted share) in 2022.
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. As of December 31, 2024, the Company has not provided deferred taxes on approximately $1.2 billion of undistributed earnings from non-U.S. subsidiaries 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 2024 results.