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Income Taxes | 12 Months Ended
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Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The components of Income before income taxes are as follows for the years ended December 31:
|  | 2017 |  | 2016 |  | 2015
United States |  | $ | 1,072 |  |  | $ | 1,191 |  |  | $ | 1,118 |
International |  | 2,415 |  |  | 2,547 |  |  | 1,645 |
Total Income before income taxes |  | $ | 3,487 |  |  | $ | 3,738 |  |  | $ | 2,763 |
The Provision for income taxes consists of the following for the years ended December 31:
|  | 2017 |  | 2016 |  | 2015
United States |  | $ | 338 |  |  | $ | 395 |  |  | $ | 376 |
International |  | 975 |  |  | 757 |  |  | 839 |
Total Provision for income taxes |  | $ | 1,313 |  |  | $ | 1,152 |  |  | $ | 1,215 |
Temporary differences between accounting for financial statement purposes and accounting for tax purposes result in the current provision for taxes being higher (lower) than the total provision for income taxes as follows:
|  | 2017 |  | 2016 |  | 2015
Goodwill and intangible assets |  | $ | 135 |  |  | $ | 18 |  |  | $ | 3 |
Property, plant and equipment |  | 84 |  |  | (3 | ) |  | (25 | )
Pension and other retiree benefits |  | (192 | ) |  | — |  |  | 36 |
Stock-based compensation |  | (28 | ) |  | 15 |  |  | 11 |
Tax loss and tax credit carryforwards |  | (4 | ) |  | 5 |  |  | (4 | )
Other, net |  | (103 | ) |  | (106 | ) |  | 98 |
Total deferred tax benefit (provision) |  | $ | (108 | ) |  | $ | (71 | ) |  | $ | 119 |
The difference between the statutory U.S. federal income tax rate and the Company’s global effective tax rate as reflected in the Consolidated Statements of Income is as follows:
Percentage of Income before income taxes |  | 2017 |  | 2016 |  | 2015
Tax at United States statutory rate |  | 35.0 | % |  | 35.0 | % |  | 35.0 | %
State income taxes, net of federal benefit |  | 0.5 |  |  | 0.5 |  |  | 1.0 |
Earnings taxed at other than United States statutory rate |  | (3.4 | ) |  | (2.7 | ) |  | (3.6 | )
Charge for U.S. tax reform(1) |  | 7.9 |  |  | — |  |  | — |
Excess tax benefits from stock-based compensation(2) |  | (1.4 | ) |  | — |  |  | — |
(Benefit) charge for foreign tax matters(3) |  | — |  |  | (0.8 | ) |  | 0.5 |
(Benefit) from Venezuela remeasurement(4) |  | — |  |  | (5.6 | ) |  | — |
Tax charge on incremental repatriation of foreign earnings(4) |  | — |  |  | 5.6 |  |  | — |
Venezuela deconsolidation(5) |  | — |  |  | — |  |  | 12.8 |
Other, net |  | (0.9 | ) |  | (1.2 | ) |  | (1.7 | )
Effective tax rate |  | 37.7 | % |  | 30.8 | % |  | 44.0 | %
_________
(1) | On December 22, 2017, the Tax Cuts and Jobs Act (the “TCJA” or “U.S. tax reform”) was enacted which, among other things, lowered the U.S. corporate income tax rate to 21% from 35% and established a modified territorial system requiring a mandatory deemed repatriation tax on undistributed earnings of foreign subsidiaries. Beginning in 2018, the TCJA also requires a minimum tax on certain future earnings generated by foreign subsidiaries while providing for future tax-free repatriation of such earnings through a 100% dividends-received deduction. In accordance with ASC 740, Income Taxes, and Staff Accounting Bulletin 118, the Company recognized a provisional charge in the fourth quarter of 2017 of $275 related to the TCJA based on its initial analysis using available information and estimates. The provisional charge is comprised of $451 related to the one-time deemed repatriation of accumulated earnings of foreign subsidiaries and related withholding taxes and $20 related primarily to the remeasurement of net deferred tax assets as a result of the reduction in the corporate income tax rate, which are offset by $196 of income taxes which had been previously provided for planned repatriations of undistributed earnings of foreign subsidiaries. As a result, applicable U.S. and foreign taxes have been provided on substantially all of the Company’s accumulated earnings of foreign subsidiaries previously considered indefinitely reinvested. Given the significant complexity of the TCJA, anticipated guidance from the U.S. Treasury about implementing the TCJA and the potential for additional guidance from the Securities and Exchange Commission (“SEC”) or the FASB related to the TCJA or additional information becoming available, the Company’s provisional charge may be adjusted during 2018 and is expected to be finalized no later than the fourth quarter of 2018. Other provisions of the TCJA that impact future tax years are still being assessed.
(2) | As a result of adopting ASU No. 2016-09 “Compensation–Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” effective January 1, 2017, the Company recognized excess tax benefits from stock-based compensation of $47 (resulting from an increase in the fair value of an award from the grant date to the vesting or exercise date, as applicable) in the Provision for income taxes as a discrete item during the year ended December 31, 2017. These amounts may not necessarily be indicative of future amounts that may be recognized as any excess tax benefits from stock-based compensation recognized would be dependent on future stock price, employee exercise behavior and applicable tax rates. Prior to January 1, 2017, excess tax benefits from stock-based compensation were recognized in equity. See Note 2, Summary of Significant Accounting Policies - Recent Accounting Pronouncements for additional information.
(3) | The benefit from a tax matter in 2016 relates to several Supreme Court and Administrative Court rulings in a foreign jurisdiction allowing certain tax deductions which had the effect of reversing prior decisions. The charge for a tax matter in 2015 relates to several Supreme Court rulings in a foreign jurisdiction disallowing certain tax deductions which had the effect of reversing prior decisions.
(4) | The effective tax rate in 2016 included a $210 U.S. income tax benefit recognized in the first quarter of 2016 principally related to changes in Venezuela’s foreign exchange regime implemented in March 2016. Although, effective December 31, 2015, the operating results of CP Venezuela are no longer included in the Company’s Consolidated Financial Statements, under current tax rules, the Company is required to continue including CP Venezuela’s results in its consolidated U.S. federal income tax return. In order to fully utilize the above mentioned $210 tax benefit in 2016, the Company repatriated an incremental $1,500 of earnings of foreign subsidiaries it previously considered indefinitely reinvested outside of the U.S., and accordingly, recorded a tax charge of $210 during the first quarter of 2016.
(5) | See Note 14, Venezuela.
The components of deferred tax assets (liabilities) are as follows at December 31:
|  | 2017 |  | 2016
Deferred tax liabilities: |  |  |  |
Goodwill and intangible assets |  | $ | (311 | ) |  | $ | (451 | )
Property, plant and equipment |  | (306 | ) |  | (380 | )
Other |  | (182 | ) |  | (202 | )
|  | (799 | ) |  | (1,033 | )
Deferred tax assets: |  |  |  |  |  |
Pension and other retiree benefits |  | 375 |  |  | 599 |
Tax loss and tax credit carryforwards |  | 39 |  |  | 34 |
Accrued liabilities |  | 197 |  |  | 246 |
Stock-based compensation |  | 90 |  |  | 127 |
Other |  | 82 |  |  | 82 |
|  | 783 |  |  | 1,088 |
Net deferred income taxes |  | $ | (16 | ) |  | $ | 55 |
|  | 2017 |  | 2016
Deferred taxes included within: |  |  |  |
Assets: |  |  |  |
Deferred income taxes |  | $ | 188 |  |  | $ | 301 |
Liabilities: |  |  |  |
Deferred income taxes |  | (204 | ) |  | (246 | )
Net deferred income taxes |  | $ | (16 | ) |  | $ | 55 |
In addition, net tax benefit of $37 in 2017, net tax benefit of $85 in 2016, and net tax expense of $78 in 2015 were recorded directly through equity. The net tax benefit in 2017 predominantly includes current and future tax impacts related to benefit plans. The amounts in 2016 and 2015 include current and future tax impacts related to employee equity compensation and benefit plans. The Company uses a comprehensive model to recognize, measure, present and disclose in its financial statements uncertain tax positions that the Company has taken or expects to take on an income tax return. Unrecognized tax benefits activity for the years ended December 31, 2017, 2016 and 2015 is summarized below:
|  | 2017 |  | 2016 |  | 2015
Unrecognized tax benefits: |  |  |  |  |  |
Balance, January 1 |  | $ | 201 |  |  | $ | 186 |  |  | $ | 218 |
Increases as a result of tax positions taken during the current year |  | 13 |  |  | 9 |  |  | 20 |
Decreases of tax positions taken during prior years |  | (9 | ) |  | (45 | ) |  | (25 | )
Increases of tax positions taken during prior years |  | 15 |  |  | 71 |  |  | 61 |
Decreases as a result of settlements with taxing authorities and the expiration of statutes of limitations |  | (15 | ) |  | (18 | ) |  | (79 | )
Effect of foreign currency rate movements |  | 9 |  |  | (2 | ) |  | (9 | )
Balance, December 31 |  | $ | 214 |  |  | $ | 201 |  |  | $ | 186 |
If all of the unrecognized tax benefits for 2017 above were recognized, approximately $205 would impact the effective tax rate and would result in a cash outflow of approximately $185. Although it is possible that the amount of unrecognized benefits with respect to our uncertain tax positions will increase or decrease in the next 12 months, the Company does not expect material changes. The Company recognized approximately $11, $2 and $2 of interest expense related to the above unrecognized tax benefits within income tax expense in 2017, 2016 and 2015, respectively. The Company had accrued interest of approximately $28, $17 and $16 as of December 31, 2017, 2016 and 2015, respectively. The Company and its subsidiaries file U.S. federal income tax returns as well as income tax returns in many state and foreign jurisdictions. All U.S. federal income tax returns through December 31, 2011 have been audited by the IRS and there are limited matters which the Company plans to appeal for years 2010 through 2011, the settlement of which is not expected to have a material adverse effect on the Company’s results of operations, cash flows or financial condition. With a few exceptions, the Company is no longer subject to U.S. state and local income tax examinations for income tax returns through December 31, 2011. In addition, the Company has subsidiaries in various foreign jurisdictions that have statutes of limitations for tax audits generally ranging from three to six years.

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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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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