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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes |
Income Taxes
Income before provision for income taxes, classified by source of income, was as follows:
In millions | 2019 |  |  | 2018 |  |  | 2017 |
U.S. | $ | 2,159.1 |  |  | $ | 2,218.0 |  |  | $ | 2,242.0 |
Outside the U.S. | 5,859.0 |  |  | 5,598.1 |  |  | 6,331.5 |
Income before provision for income taxes | $ | 8,018.1 |  |  | $ | 7,816.1 |  |  | $ | 8,573.5 |
In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory.” The goal of this update was to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. The Company adopted this standard on January 1, 2018 using a modified retrospective method, resulting in a cumulative catch up adjustment of $57 million, the majority of which was recorded within Miscellaneous other assets on the Consolidated Balance Sheet. The adoption of this standard did not have a material impact on the consolidated statements of income and cash flows. The Tax Act was enacted in the U.S. on December 22, 2017. The Tax Act reduced the U.S. federal corporate income tax rate to 21% from 35% and required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred. In 2017, the Company recorded provisional amounts for certain enactment-date effects of the Tax Act by applying the guidance in SAB 118. In 2018, the Company recorded adjustments to the provisional amounts and completed its accounting for all of the enactment-date income tax effects of the Tax Act. SAB 118 measurement period At December 31, 2017, the Company had not completed its accounting for all of the enactment-date income tax effects of the Act under ASC 740, Income Taxes, primarily for the following aspects: remeasurement of deferred tax assets and liabilities, one-time transition tax, and its accounting position related to indefinite reinvestment of unremitted foreign earnings. One-time transition tax: The one-time transition tax is based on the Company's total post-1986 earnings and profits ("E&P"), the tax on which it previously deferred from U.S. income taxes under U.S. law. The Company recorded a provisional amount for its one-time transition tax liability of approximately $1.2 billion at December 31, 2017. Upon further analysis of the Tax Act and notices and regulations issued and proposed by the U.S. Department of the Treasury and the IRS, the Company increased its December 31, 2017 provisional amount by approximately $75 million during 2018. The Company has elected to pay its transition tax over the eight-year period provided in the Tax Act. Deferred tax assets and liabilities: As of December 31, 2017, the Company remeasured certain deferred tax assets and liabilities based on the rates at which they were expected to reverse in the future (generally 21%), by recording a provisional amount of approximately $500 million. No adjustment to the provisional amount was made in 2018. The provision for income taxes, classified by the timing and location of payment, was as follows:
In millions | 2019 |  |  | 2018 |  |  | 2017 |
U.S. federal | $ | 521.8 |  |  | $ | 292.9 |  |  | $ | 2,030.8 |
U.S. state | 194.7 |  |  | 183.9 |  |  | 169.8 |
Outside the U.S. | 1,126.5 |  |  | 1,312.4 |  |  | 1,217.0 |
Current tax provision | 1,843.0 |  |  | 1,789.2 |  |  | 3,417.6 |
U.S. federal | 38.5 |  |  | 145.7 |  |  | (120.1 | )
U.S. state | 20.0 |  |  | 18.7 |  |  | 12.8 |
Outside the U.S. | 91.2 |  |  | (61.8 | ) |  | 70.9 |
Deferred tax provision | 149.7 |  |  | 102.6 |  |  | (36.4 | )
Provision for income taxes | $ | 1,992.7 |  |  | $ | 1,891.8 |  |  | $ | 3,381.2 |
Net deferred tax liabilities consisted of:
In millions | December 31, 2019 |  |  | 2018 |
Lease right-of-use asset |  |  | $ | 3,296.8 |  |  | $ | — |
Property and equipment |  |  | 1,316.4 |  |  | 1,288.9 |
Intangible assets |  |  | 334.8 |  |  | 312.3 |
Other |  |  | 511.1 |  |  | 347.9 |
Total deferred tax liabilities |  |  | 5,459.1 |  |  | 1,949.1 |
Lease liability |  |  | (3,331.1 | ) |  | — |
Intangible assets |  |  | (1,051.0 | ) |  | (1,081.5 | )
Property and equipment |  |  | (585.6 | ) |  | (658.9 | )
Deferred foreign tax credits |  |  | (311.2 | ) |  | (216.6 | )
Employee benefit plans |  |  | (192.3 | ) |  | (213.3 | )
Deferred revenue |  |  | (145.5 | ) |  | (138.9 | )
Operating loss carryforwards |  |  | (81.5 | ) |  | (45.7 | )
Other |  |  | (323.6 | ) |  | (269.2 | )
Total deferred tax assets before valuation allowance |  |  | (6,021.8 | ) |  | (2,624.1 | )
Valuation allowance |  |  | 741.9 |  |  | 671.1 |
Net deferred tax (assets) liabilities |  |  | $ | 179.2 |  |  | $ | (3.9 | )
Balance sheet presentation: |  |  |  |  |
Deferred income taxes |  |  | $ | 1,318.1 |  |  | $ | 1,215.5 |
Other assets-miscellaneous |  |  | (1,138.9 | ) |  | (1,219.4 | )
Net deferred tax (assets) liabilities |  |  | $ | 179.2 |  |  | $ | (3.9 | )
At December 31, 2019, the Company had net operating loss carryforwards of $360.3 million, of which $232.7 million has an indefinite carryforward. The remainder will expire at various dates from 2020 to 2038. Prior to 2018, the Company's effective income tax rate was generally lower than the U.S. statutory tax rate primarily because foreign income was generally subject to local statutory country tax rates that were below the 35% U.S. statutory tax rate and reflected the impact of global transfer pricing. Beginning in 2018, the Tax Act reduced the U.S. statutory tax rate to 21%. As a result, the Company’s 2019 and 2018 effective income tax rates are higher than the U.S. statutory tax rate of 21% primarily due to the impact of state income taxes and foreign income that is subject to local statutory country tax rates that are above the 21% U.S. statutory tax rate. The statutory U.S. federal income tax rate reconciles to the effective income tax rates as follows:
| 2019 |  |  | 2018 |  |  | 2017 |
Statutory U.S. federal income tax rate | 21.0 | % |  | 21.0 | % |  | 35.0 | %
State income taxes, net of related federal income tax benefit | 1.8 |  |  | 1.8 |  |  | 1.2 |
Foreign income taxed at different rates | 1.6 |  |  | 1.5 |  |  | (4.6 | )
Transition tax | — |  |  | 1.0 |  |  | 13.7 |
US net deferred tax liability remeasurement | — |  |  | — |  |  | (6.0 | )
Foreign tax credit redetermination regulations | (1.0 | ) |  | — |  |  | — |
Other, net | 1.5 |  |  | (1.1 | ) |  | 0.1 |
Effective income tax rates | 24.9 | % |  | 24.2 | % |  | 39.4 | %
As of December 31, 2019 and 2018, the Company’s gross unrecognized tax benefits totaled $1,439.1 million and $1,342.8 million, respectively. After considering the deferred tax accounting impact, it is expected that about $880 million of the total as of December 31, 2019 would favorably affect the effective tax rate if resolved in the Company’s favor. The following table presents a reconciliation of the beginning and ending amounts of unrecognized tax benefits:
In millions | 2019 |  |  | 2018 |
Balance at January 1 | $ | 1,342.8 |  |  | $ | 1,180.4 |
Decreases for positions taken in prior years | (18.3 | ) |  | (64.1 | )
Increases for positions taken in prior years | 107.1 |  |  | 180.8 |
Increases for positions related to the current year | 88.3 |  |  | 75.1 |
Settlements with taxing authorities | (68.6 | ) |  | (24.1 | )
Lapsing of statutes of limitations | (12.2 | ) |  | (5.3 | )
Balance at December 31(1) | $ | 1,439.1 |  |  | $ | 1,342.8 |
(1) | Of this amount, $1,285.3 million and $1,313.7 million are included in Long-term income taxes for 2019 and 2018, respectively, and $138.8 million and $12.5 million are included in Prepaid expenses and other current assets for 2019 and 2018, respectively, on the Consolidated Balance Sheet. The remainder is included in Deferred income taxes on the Consolidated Balance Sheet.
In 2015, the Internal Revenue Service (“IRS”) issued a Revenue Agent Report (“RAR”) that included certain disagreed transfer pricing adjustments related to the Company’s U.S. Federal income tax returns for 2009 and 2010. Also in 2015, the Company filed a protest with the IRS related to these disagreed transfer pricing matters. During 2017, the Company received a response to its protest. In December 2018, the Company met with the IRS Appeals team and, during 2019, the Company and the IRS Appeals team continued to have a dialogue regarding these disagreed transfer pricing matters. As of December 31, 2019, the Company does not yet have a signed closing agreement with the IRS related to the settlement of these issues. In 2017, the IRS completed its examination of the Company’s U.S. Federal income tax returns for 2011 and 2012. In 2018, the IRS issued a RAR for these years. As expected, the RAR included the same disagreed transfer pricing matters as the 2009 and 2010 RAR. Also in 2018, the Company filed a protest with the IRS related to these disagreed transfer pricing matters. The transfer pricing matters for 2011 and 2012 are being addressed along with the 2009 and 2010 transfer pricing matters as part of the 2009-2010 appeals process. The Company is also under audit in multiple foreign tax jurisdictions for matters primarily related to transfer pricing, and the Company is under audit in multiple state tax jurisdictions. It is reasonably possible that the total amount of unrecognized tax benefits could decrease up to $980 million within the next 12 months, of which only an immaterial amount would favorably affect the effective tax rate. This would be due to the possible settlement of the IRS transfer pricing matters, completion of the aforementioned foreign and state tax audits and the expiration of the statute of limitations in multiple tax jurisdictions. In addition, it is reasonably possible that, as a result of audit progression in both the U.S. and foreign tax audits within the next 12 months, there may be new information that causes the Company to reassess the total amount of unrecognized tax benefits recorded. While the Company cannot estimate the impact that new information may have on our unrecognized tax benefit balance, it believes that the liabilities recorded are appropriate and adequate. The Company operates within multiple tax jurisdictions and is subject to audit in these jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations for years before 2009. The Company had $174.4 million and $152.0 million accrued for interest and penalties at December 31, 2019 and 2018, respectively. The Company recognized interest and penalties related to tax matters of $39.9 million in 2019, $13.9 million in 2018, and $34.9 million in 2017, which are included in the provision for income taxes. As of December 31, 2019, the Company has accumulated undistributed earnings generated by our foreign subsidiaries, which were predominantly taxed in the U.S. as a result of the transition tax provisions enacted under the Tax Act. Management does not assert that these previously-taxed unremitted earnings are indefinitely reinvested in operations outside the U.S. Accordingly, the Company has provided deferred taxes for the tax effects incremental to the transition tax. We have not provided for deferred taxes on outside basis differences in our investments in our foreign subsidiaries that are unrelated to these accumulated undistributed earnings, as these outside basis differences are indefinitely reinvested. A determination of the unrecognized deferred taxes related to these other components of our outside basis differences is not practicable.

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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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