XML 54 R11.htm IDEA: XBRL DOCUMENT
v3.20.4

INCOME TAXES | 12 Months Ended
--- | ---
Dec. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME BEFORE TAXES
| Years Ended December 31,
2020 |  | 2019 |  | 2018
U.S. | $ | 3,318 |  |  | $ | 4,178 |  |  | $ | 2,919 |
Non-U.S. | 2,694 |  |  | 3,381 |  |  | 4,568 |
| $ | 6,012 |  |  | $ | 7,559 |  |  | $ | 7,487 |
TAX EXPENSE (BENEFIT)
| Years Ended December 31,
2020 |  | 2019 |  | 2018
Tax expense (benefit) consists of |  |  |  |  |
Current: |  |  |  |  |
U.S. Federal | $ | 475 |  |  | $ | 8 |  |  | $ | (21) |
U.S. State | 79 |  |  | 43 |  |  | 89 |
Non-U.S. | 768 |  |  | 1,099 |  |  | 1,177 |
| $ | 1,322 |  |  | $ | 1,150 |  |  | $ | 1,245 |
Deferred: |  |  |  |  |
U.S. Federal | $ | 234 |  |  | $ | 332 |  |  | $ | 396 |
U.S. State | 39 |  |  | 63 |  |  | 8 |
Non-U.S. | (448) |  |  | (216) |  |  | (990) |
| (175) |  |  | 179 |  |  | (586) |
| $ | 1,147 |  |  | $ | 1,329 |  |  | $ | 659 |
| Years Ended December 31,
2020 |  | 2019 |  | 2018
The U.S. federal statutory income tax rate is reconciled to our effective income tax rate as follows: |  |  |  |  |
U.S. federal statutory income tax rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Taxes on non-U.S. earnings(1)(2) | (0.8) |  |  | (0.5) |  |  | 0.2 |
U.S. state income taxes(1) | 1.3 |  |  | 1.1 |  |  | 1.6 |
Reserves for tax contingencies | (2.6) |  |  | 2.0 |  |  | 0.3 |
Employee share-based payments | (1.2) |  |  | (1.2) |  |  | (0.7) |
Reduction of certain receivables | 2.0 |  |  | — |  |  | — |
U.S. Tax Cuts and Jobs Act | — |  |  | (3.6) |  |  | (5.8) |
Reduction of taxes on unremitted earnings | — |  |  | — |  |  | (14.2) |
Separation tax costs | — |  |  | — |  |  | 5.5 |
All other items—net | (0.6) |  |  | (1.2) |  |  | 0.9 |
| 19.1 | % |  | 17.6 | % |  | 8.8 | %
(1)Net of changes in valuation allowance (2)Includes U.S. taxes on non-U.S. earnings The effective tax rate increased by 1.5 percentage points in 2020 compared to 2019. The increase was primarily attributable to accrued withholding taxes related to unremitted foreign earnings and non-cash charges related to the reduction of the aggregate carrying value of certain receivables with no corresponding tax benefit, offset by the favorable resolution of a foreign tax matter related to the previously completed spin-off transactions, tax impact of restructuring, tax law changes in India, and the resolution of certain U.S. tax matters. The Company’s non-U.S. effective tax rate was 11.9%, a decrease of approximately 14.2 percentage points compared to 2019. The decrease in the foreign effective tax rate was primarily attributable to the favorable resolution of a foreign tax matter related to the previously completed spin-off transactions, tax impact of restructuring, and tax law changes in India offset by accrued withholding taxes related to unremitted foreign earnings. The effective tax rate increased by 8.8 percentage points in 2019 compared to 2018. The increase was primarily attributable to a lower income tax benefit resulting from revised guidance related to the U.S. Tax Cuts and Jobs Act and internal restructuring initiatives that resulted in a $281 million reduction of accrued withholding taxes related to unremitted foreign earnings when compared to the prior year. The Company’s non-U.S. effective tax rate was 26.1%, an increase of approximately 22.0 percentage points compared to 2018. The increase in the foreign effective tax rate was primarily attributable to a lower income tax benefit related to the Company’s internal restructuring initiatives when compared to the prior year. DEFERRED TAX ASSETS (LIABILITIES) The tax effects of temporary differences and tax carryforwards which give rise to future income tax benefits and payables are as follows:
Deferred tax assets: | December 31,
2020 |  | 2019
Postretirement benefits other than pensions | $ | 85 |  |  | $ | 111 |
Asbestos and environmental | 508 |  |  | 531 |
Employee compensation and benefits | 180 |  |  | 205 |
Lease liabilities | 197 |  |  | 167 |
Other accruals and reserves | 110 |  |  | 279 |
Net operating and capital losses | 779 |  |  | 652 |
Tax credit carryforwards | 219 |  |  | 246 |
Gross deferred tax assets | 2,078 |  |  | 2,191 |
Valuation allowance | (766) |  |  | (656) |
Total deferred tax assets | $ | 1,312 |  |  | $ | 1,535 |
Deferred tax liabilities: |  |  |
Pension | $ | (548) |  |  | $ | (469) |
Property, plant and equipment | (437) |  |  | (477) |
Right-of-use asset | (184) |  |  | (159) |
Intangibles | (898) |  |  | (1,296) |
Unremitted earnings of foreign subsidiaries | (398) |  |  | (419) |
Other asset basis differences | (169) |  |  | (136) |
Other | (31) |  |  | (163) |
Total deferred tax liabilities | (2,665) |  |  | (3,119) |
Net deferred tax liability | $ | (1,353) |  |  | $ | (1,584) |
The Company's gross deferred tax assets include $872 million related to non-U.S. operations comprised principally of net operating losses, capital loss and tax credit carryforwards (mainly in Canada, France, Germany, Luxembourg and the United Kingdom) and deductible temporary differences. We maintain a valuation allowance of $758 million against a portion of the non-U.S. gross deferred tax assets. The change in the valuation allowance resulted in an increase of $105 million, a decrease of $23 million and an increase of $57 million to income tax expense in 2020, 2019 and 2018. In the event we determine that we will not be able to realize our net deferred tax assets in the future, we will reduce such amounts through an increase to income tax expense in the period such determination is made. Conversely, if we determine that we will be able to realize net deferred tax assets in excess of the carrying amounts, we will decrease the recorded valuation allowance through a reduction to income tax expense in the period that such determination is made. As of December 31, 2020, the Company recorded a $398 million deferred tax liability on all our unremitted foreign earnings based on estimated earnings and profits of approximately $22.4 billion as of the balance sheet date. As of December 31, 2020, the Company's net operating loss, capital loss and tax credit carryforwards were as follows:
Jurisdiction | Expiration Period |  | Net Operating and Capital Loss Carryforwards |  | Tax Credit Carryforwards
U.S. Federal | 2040 |  | $ | 24 |  |  | $ | 92 |
U.S. State | 2040 |  | 382 |  |  | 21 |
Non-U.S. | 2040 |  | 314 |  |  | 111 |
Non-U.S. | Indefinite |  | 2,532 |  |  | — |
|  |  | $ | 3,252 |  |  | $ | 224 |
Many jurisdictions impose limitations on the timing and utilization of net operating loss and tax credit carryforwards. In those instances, whereby there is an expected permanent limitation on the utilization of the net operating loss or tax credit carryforward, the deferred tax asset and amount of the carryforward have been reduced.
| Years Ended December 31,
| 2020 |  | 2019 |  | 2018
Change in unrecognized tax benefits: |  |  |  |  |
Balance at beginning of year | $ | 1,164 |  |  | $ | 1,089 |  |  | $ | 947 |
Gross increases related to current period tax positions | 94 |  |  | 51 |  |  | 370 |
Gross increases related to prior periods tax positions | 68 |  |  | 83 |  |  | 82 |
Gross decreases related to prior periods tax positions | (256) |  |  | (34) |  |  | (201) |
Decrease related to resolutions of audits with tax authorities | (35) |  |  | (3) |  |  | (40) |
Expiration of the statute of limitations for the assessment of taxes | (76) |  |  | (13) |  |  | (50) |
Foreign currency translation | 32 |  |  | (9) |  |  | (19) |
Balance at end of year | $ | 991 |  |  | $ | 1,164 |  |  | $ | 1,089 |
As of December 31, 2020, 2019 and 2018, there were $991 million, $1,164 million, and $1,089 million of unrecognized tax benefits that if recognized would be recorded as a component of Tax expense. The following table summarizes tax years that remain subject to examination by major tax jurisdictions as of December 31, 2020:
Jurisdiction | Open Tax Years Based on Originally Filed Returns
Examination in progress |  | Examination not yet initiated
U.S. Federal | 2017 - 2018 |  | 2019 - 2020
U.S. State | 2011 - 2019 |  | 2016 - 2019
Australia | N/A |  | 2017 - 2020
Canada(1) | 2015 - 2018 |  | 2019 - 2020
China | 2010 - 2019 |  | 2020
France | 2017 - 2019 |  | 2020
Germany(1) | 2008 - 2018 |  | 2019 - 2020
India | 1999 - 2018 |  | 2019 - 2020
Italy | 2012 - 2017 |  | 2018 - 2020
Netherlands | 2016 - 2017 |  | 2018 - 2020
Switzerland(1) | 2015 - 2018 |  | 2019 - 2020
United Kingdom | 2013 - 2018 |  | 2019 - 2020
(1)Includes provincial or similar local jurisdictions, as applicable. Based on the outcome of these examinations, or as a result of the expiration of statute of limitations for specific jurisdictions, it is reasonably possible that certain unrecognized tax benefits for tax positions taken on previously filed tax returns will materially change from those recorded as liabilities in our financial statements. In addition, the outcome of these examinations may impact the valuation of certain deferred tax assets (such as net operating losses) in future periods. Unrecognized tax benefits for examinations in progress were $556 million, $413 million and $304 million, as of December 31, 2020, 2019 and 2018. Estimated interest and penalties related to the underpayment of income taxes are classified as a component of Tax expense in the Consolidated Statement of Operations and totaled $80 million, $73 million and $45 million for the years ended December 31, 2020, 2019 and 2018. Accrued interest and penalties were $507 million, $487 million and $426 million, as of December 31, 2020, 2019 and 2018.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration