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Income Taxes (Tables) | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Components of income before income taxes | The components of Income before income taxes are as follows for the years ended December 31:
|  | 2018 |  | 2017 |  | 2016
United States |  | $ | 1,175 |  |  | $ | 1,072 |  |  | $ | 1,191 |
International |  | 2,289 |  |  | 2,415 |  |  | 2,547 |
Total Income before income taxes |  | $ | 3,464 |  |  | $ | 3,487 |  |  | $ | 3,738 |
Provision for income taxes | The Provision for income taxes consists of the following for the years ended December 31:
|  | 2018 |  | 2017 |  | 2016
United States |  | $ | 248 |  |  | $ | 338 |  |  | $ | 395 |
International |  | 658 |  |  | 975 |  |  | 757 |
Total Provision for income taxes |  | $ | 906 |  |  | $ | 1,313 |  |  | $ | 1,152 |
Schedule of components of deferred income tax benefit | 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:
|  | 2018 |  | 2017 |  | 2016
Goodwill and intangible assets |  | $ | 2 |  |  | $ | 135 |  |  | $ | 18 |
Property, plant and equipment |  | (15 | ) |  | 84 |  |  | (3 | )
Pension and other retiree benefits |  | (7 | ) |  | (192 | ) |  | — |
Stock-based compensation |  | 9 |  |  | (28 | ) |  | 15 |
Tax credits and tax loss carryforwards |  | (4 | ) |  | (4 | ) |  | 5 |
Deferred withholding tax |  | (100 | ) |  | (119 | ) |  | — |
Other, net |  | 62 |  |  | 16 |  |  | (106 | )
Total deferred tax benefit (provision) |  | $ | (53 | ) |  | $ | (108 | ) |  | $ | (71 | )
Effective tax rate reconciliation | 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 |  | 2018 |  | 2017 |  | 2016
Tax at United States statutory rate |  | 21.0 | % |  | 35.0 | % |  | 35.0 | %
State income taxes, net of federal benefit |  | 1.0 |  |  | 0.5 |  |  | 0.5 |
Earnings taxed at other than United States statutory rate |  | 4.5 |  |  | (3.4 | ) |  | (2.7 | )
Charge for U.S. tax reform(1) |  | 2.3 |  |  | 7.9 |  |  | — |
Excess tax benefits from stock-based compensation(2) |  | (0.3 | ) |  | (1.4 | ) |  | — |
Foreign Tax Credit Carryback(5) |  | (1.7 | ) |  | — |  |  | — |
(Benefit) charge for foreign tax matters(3) |  | (0.4 | ) |  | — |  |  | (0.8 | )
(Benefit) from Venezuela remeasurement(4) |  | — |  |  | — |  |  | (5.6 | )
Tax charge on incremental repatriation of foreign earnings(4) |  | — |  |  | — |  |  | 5.6 |
Other, net |  | (0.2 | ) |  | (0.9 | ) |  | (1.2 | )
Effective tax rate |  | 26.2 | % |  | 37.7 | % |  | 30.8 | %
_________
(1) | On December 22, 2017, the TCJA 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 earnings generated by foreign subsidiaries while providing for tax-free repatriation of such earnings through a 100% dividends-received deduction. The Company’s effective income tax rate in 2017 included a provisional charge of $275, recorded in the fourth quarter of 2017, based on its initial analysis of the TCJA using information and estimates available as of February 15, 2018, the date on which the Company filed its Annual Report on Form 10-K for the year ended December 31, 2017. During 2018, the Company finalized its assessment of the impact of the TCJA and recognized an additional tax expense of $80 reflecting the impact of transition tax guidance issued by the U.S. Treasury and the update of certain estimates and calculations based on information available through the end of 2018. Any further guidance issued after December 31, 2018 may have an impact to the Company’s Provision for income tax in the period such guidance is effective.
(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 $12 and $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 years ended December 31, 2018 and 2017, respectively. 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.
(4) | The effective tax rate in 2016 included a $210 U.S. income tax benefit principally related to changes in Venezuela’s foreign exchange regime implemented in March 2016. Although, effective December 31, 2015, the operating results of the Company’s Venezuelan subsidiary (“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.
(5) | In 2018, the Company generated excess foreign taxes associated with its foreign branch operations which are being carried back to 2017. This item is not expected to be recurring.
Components of deferred tax assets (liabilities) | The components of deferred tax assets (liabilities) are as follows at December 31:
|  | 2018 |  | 2017
Deferred tax liabilities: |  |  |  |
Goodwill and intangible assets |  | $ | (344 | ) |  | $ | (311 | )
Property, plant and equipment |  | (311 | ) |  | (306 | )
Deferred withholding tax |  | (181 | ) |  | (119 | )
Other |  | (75 | ) |  | (63 | )
Total deferred tax liabilities |  | (911 | ) |  | (799 | )
Deferred tax assets: |  |  |  |  |  |
Pension and other retiree benefits |  | 354 |  |  | 375 |
Tax credits and tax loss carryforwards |  | 89 |  |  | 48 |
Accrued liabilities |  | 180 |  |  | 197 |
Stock-based compensation |  | 95 |  |  | 90 |
Other |  | 164 |  |  | 82 |
Total deferred tax assets |  | 882 |  |  | 792 |
Valuation Allowance |  | $ | (54 | ) |  | $ | (9 | )
Net deferred tax assets |  | $ | 828 |  |  | $ | 783 |
Net deferred income taxes |  | $ | (83 | ) |  | $ | (16 | )
|  | 2018 |  | 2017
Deferred taxes included within: |  |  |  |
Assets: |  |  |  |
Deferred income taxes |  | $ | 152 |  |  | $ | 188 |
Liabilities: |  |  |  |
Deferred income taxes |  | (235 | ) |  | (204 | )
Net deferred income taxes |  | $ | (83 | ) |  | $ | (16 | )
Unrecognized tax benefits activity | Unrecognized tax benefits activity for the years ended December 31, 2018, 2017 and 2016 is summarized below:
|  | 2018 |  | 2017 |  | 2016
Unrecognized tax benefits: |  |  |  |  |  |
Balance, January 1 |  | $ | 214 |  |  | $ | 201 |  |  | $ | 186 |
Increases as a result of tax positions taken during the current year |  | 14 |  |  | 13 |  |  | 9 |
Decreases of tax positions taken during prior years |  | (37 | ) |  | (9 | ) |  | (45 | )
Increases of tax positions taken during prior years |  | 9 |  |  | 15 |  |  | 71 |
Decreases as a result of settlements with taxing authorities and the expiration of statutes of limitations |  | (6 | ) |  | (15 | ) |  | (18 | )
Effect of foreign currency rate movements |  | (4 | ) |  | 9 |  |  | (2 | )
Balance, December 31 |  | $ | 190 |  |  | $ | 214 |  |  | $ | 201 |

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