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Income Taxes (Tables) | 12 Months Ended
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Jan. 03, 2021
Income Tax Disclosure [Abstract] |
Provision for Income Taxes | The provision for taxes on income consists of:
(Dollars in Millions) |  | 2020 |  | 2019 |  | 2018 |
Currently payable: |  |  |  |  |  |  |
U.S. taxes |  | $ | 1,026 |  |  | 1,941 |  |  | 1,284 |  |
International taxes |  | 1,898 |  |  | 2,744 |  |  | 2,434 |  |
Total currently payable |  | 2,924 |  |  | 4,685 |  |  | 3,718 |  |
Deferred: |  |  |  |  |  |  |
U.S. taxes |  | (76) |  |  | (814) |  |  | 1,210 |  | (1)
International taxes |  | (1,065) |  |  | (1,662) |  |  | (2,226) |  |
Total deferred |  | (1,141) |  |  | (2,476) |  |  | (1,016) |  |
Provision for taxes on income |  | $ | 1,783 |  |  | 2,209 |  |  | 2,702 |  |
(1) Includes $1.4 billion of deferred tax expense for the adoption of the deferred method to account for GILTI.
Comparison of Income Taxes at Statutory Rate and Company's Effective Tax Rate | A comparison of income tax expense at the U.S. statutory rate of 21% in fiscal years 2020, 2019 and 2018, to the Company’s effective tax rate is as follows:
(Dollars in Millions) |  | 2020 |  | 2019 |  | 2018 |
U.S. |  | $ | 4,312 |  |  | 3,543 |  |  | 5,575 |  |
International |  | 12,185 |  |  | 13,785 |  |  | 12,424 |  |
Earnings before taxes on income: |  | $ | 16,497 |  |  | 17,328 |  |  | 17,999 |  |
Tax rates: |  |  |  |  |  |  |
U.S. statutory rate |  | 21.0 | % |  | 21.0 |  |  | 21.0 |  |
International operations (1) |  | (9.9) |  |  | (5.9) |  |  | (3.7) |  |
U.S. taxes on international income (2) |  | 2.7 |  |  | 1.8 |  |  | 1.4 |  |
Tax benefits on Capital Loss |  | (1.2) |  |  | (0.3) |  | (4) | — |  |
Tax benefits on share-based compensation |  | (1.5) |  |  | (0.5) |  |  | (1.5) |  |
TCJA and related impacts |  | 0.7 |  |  | (3.9) |  | (3) | (1.9) |  | (3)
All other |  | (1.0) |  |  | 0.5 |  | (4) | (0.3) |  |
Effective Rate |  | 10.8 | % |  | 12.7 |  |  | 15.0 |  |
(1) For all periods presented the Company has subsidiaries operating in Puerto Rico under various tax incentives. International operations reflects the impacts of operations in jurisdictions with statutory tax rates different than the U.S., particularly Ireland, Switzerland and Puerto Rico, which is a favorable impact on the effective tax rate as compared with the U.S. statutory rate. The 2020 and 2019 amounts include the impact of the new tax legislation enactment in Switzerland, which is further described below. (2) Includes the impact of the GILTI tax, the Foreign-Derived Intangible Income deduction and other foreign income that is taxable under the U.S. tax code. (3) Represents impact of adjustments to balances originally recorded as part of the 2017 TCJA provisional tax charge. Further information provided below. (4) Certain prior year amounts have been reclassified to conform to current year presentation.
Temporary Differences and Carryforwards | Temporary differences and carryforwards at the end of fiscal years 2020 and 2019 were as follows:
|  | 2020 Deferred Tax |  | 2019 Deferred Tax*
(Dollars in Millions) |  | Asset |  | Liability |  | Asset |  | Liability
Employee related obligations |  | $ | 2,434 |  |  |  |  | 2,473 |  |  |
Stock based compensation |  | 627 |  |  |  |  | 595 |  |  |
Depreciation & amortization |  | 721 |  |  |  |  | 1,122 |  |  |
Non-deductible intangibles |  |  |  | (6,567) |  |  |  |  | (5,835) |
International R&D capitalized for tax |  | 1,517 |  |  |  |  | 1,189 |  |  |
Reserves & liabilities |  | 3,466 |  |  |  |  | 2,337 |  |  |
Income reported for tax purposes |  | 1,705 |  |  |  |  | 1,605 |  |  |
Net operating loss carryforward international |  | 990 |  |  |  |  | 838 |  |  |
Undistributed foreign earnings |  | 812 |  |  | (1,435) |  |  | 765 |  |  | (1,289) |
Global intangible low-taxed income |  |  |  | (3,606) |  |  |  |  | (2,965) |
Miscellaneous international |  | 854 |  |  | (211) |  |  | 696 |  |  | (81) |
Miscellaneous U.S. |  | 12 |  |  |  |  | 411 |  |  |
Total deferred income taxes |  | $ | 13,138 |  |  | (11,819) |  |  | 12,031 |  |  | (10,170) |
*Certain prior year amounts have been reclassified to conform to current year presentation
Summary of Activity Related to Unrecognized Tax Benefits | The following table summarizes the activity related to unrecognized tax benefits:
(Dollars in Millions) |  | 2020 |  | 2019 |  | 2018 |
Beginning of year |  | $ | 3,853 |  |  | 3,326 |  |  | 3,151 |  |
Increases related to current year tax positions |  | 265 |  |  | 249 |  |  | 242 |  |
Increases related to prior period tax positions |  | 668 |  |  | 408 |  |  | 145 |  |
Decreases related to prior period tax positions |  | (551) |  |  | (105) |  |  | (137) |  |
Settlements |  | (839) |  |  | (9) |  |  | (40) |  |
Lapse of statute of limitations |  | (23) |  |  | (16) |  |  | (35) |  |
End of year |  | $ | 3,373 |  |  | 3,853 |  |  | 3,326 |  |

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