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Income Taxes (Tables) | 12 Months Ended
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Jan. 02, 2022
Income Tax Disclosure [Abstract] |
Provision for Income Taxes | The provision for taxes on income consists of:
(Dollars in Millions) | 2021 |  | 2020 |  | 2019 |
Currently payable: |  |  |  |  |  |
U.S. taxes | $ | 1,525 |  |  | 1,026 |  |  | 1,941 |  |
International taxes | 2,452 |  |  | 1,898 |  |  | 2,744 |  |
Total currently payable | 3,977 |  |  | 2,924 |  |  | 4,685 |  |
Deferred: |  |  |  |  |  |
U.S. taxes | 583 |  |  | (76) |  |  | (814) |  |
International taxes | (2,662) |  |  | (1,065) |  |  | (1,662) |  |
Total deferred | (2,079) |  |  | (1,141) |  |  | (2,476) |  |
Provision for taxes on income | $ | 1,898 |  |  | 1,783 |  |  | 2,209 |  |
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 2021, 2020 and 2019, to the Company’s effective tax rate is as follows:
(Dollars in Millions) |  | 2021 |  | 2020 |  | 2019 |
U.S. |  | $ | 6,110 |  |  | 4,312 |  |  | 3,543 |  |
International |  | 16,666 |  |  | 12,185 |  |  | 13,785 |  |
Earnings before taxes on income: |  | $ | 22,776 |  |  | 16,497 |  |  | 17,328 |  |
Tax rates: |  |  |  |  |  |  |
U.S. statutory rate |  | 21.0 | % |  | 21.0 |  |  | 21.0 |  |
International operations (1) |  | (16.4) |  |  | (9.9) |  |  | (5.9) |  |
U.S. taxes on international income (2) |  | 6.7 |  |  | 2.7 |  |  | 1.8 |  |
Tax benefits from loss on capital assets |  | (1.3) |  |  | (1.2) |  |  | (0.3) |  |
Tax benefits on share-based compensation |  | (1.0) |  |  | (1.5) |  |  | (0.5) |  |
TCJA and related impacts |  | (0.5) |  |  | 0.7 |  |  | (3.9) |  | (3)
All other |  | (0.2) |  |  | (1.0) |  |  | 0.5 |  |
Effective Rate |  | 8.3 | % |  | 10.8 |  |  | 12.7 |  |
(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 2021 amounts include the reorganization of international subsidiaries; the 2020 and 2019 amounts include the impact of the new tax legislation enactment in Switzerland, both of which are 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. The 2021 amounts include the reorganization of international subsidiaries; the 2020 and 2019 amounts include the impact of the new tax legislation enactment in Switzerland, both of which is further described below. (3) Represents impact of adjustments to balances originally recorded as part of the 2017 TCJA provisional tax charge. Further information provided below.
Temporary Differences and Carryforwards | Temporary differences and carryforwards at the end of fiscal years 2021 and 2020 were as follows:
|  | 2021 Deferred Tax |  | 2020 Deferred Tax(1)
(Dollars in Millions) |  | Asset |  | Liability |  | Asset |  | Liability
Employee related obligations |  | $ | 1,244 |  |  |  |  | 2,434 |  |  |
Stock based compensation |  | 679 |  |  |  |  | 627 |  |  |
Depreciation of property, plant and equipment |  |  |  | (876) |  |  |  |  | (823) |
Goodwill and intangibles |  |  |  | (2,659) |  | (2) |  |  | (5,023) |
R&D capitalized for tax |  | 1,664 |  |  |  |  | 1,517 |  |  |
Reserves & liabilities |  | 2,882 |  |  |  |  | 3,466 |  |  |
Income reported for tax purposes |  | 2,566 |  |  |  |  | 1,777 |  |  |
Net realizable operating loss carryforward |  | 1,073 |  |  |  |  | 990 |  |  |
Undistributed foreign earnings |  | 1,015 |  |  | (1,461) |  |  | 812 |  |  | (1,435) |
Global intangible low-taxed income |  |  |  | (4,853) |  |  |  |  | (3,606) |
Miscellaneous international |  | 1,006 |  |  | (39) |  |  | 854 |  |  | (211) |
Miscellaneous U.S. |  | 495 |  |  |  |  |  |  | (59) |
Total deferred income taxes |  | $ | 12,624 |  |  | (9,888) |  |  | 12,477 |  |  | (11,157) |
(1)Certain prior year amounts have been reclassified to conform to current year presentation (2)Amount is inclusive of the $2.3 billion deferred tax asset established as part of the reorganized ownership structure of certain wholly-owned international subsidiaries, as previously described.
Summary of Activity Related to Unrecognized Tax Benefits | The following table summarizes the activity related to unrecognized tax benefits:
(Dollars in Millions) |  | 2021 |  | 2020 |  | 2019 |
Beginning of year |  | $ | 3,373 |  |  | 3,853 |  |  | 3,326 |  |
Increases related to current year tax positions |  | 242 |  |  | 265 |  |  | 249 |  |
Increases related to prior period tax positions |  | 23 |  |  | 668 |  |  | 408 |  |
Decreases related to prior period tax positions |  | (128) |  |  | (551) |  |  | (105) |  |
Settlements |  | (187) |  |  | (839) |  |  | (9) |  |
Lapse of statute of limitations |  | 0 |  |  | (23) |  |  | (16) |  |
End of year |  | $ | 3,323 |  |  | 3,373 |  |  | 3,853 |  |

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