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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The components of Income before income taxes are as follows for the years ended December 31:
|  | 2019 |  | 2018 |  | 2017
United States |  | $ | 1,050 |  |  | $ | 1,175 |  |  | $ | 1,072 |
International |  | 2,251 |  |  | 2,289 |  |  | 2,415 |
Total Income before income taxes |  | $ | 3,301 |  |  | $ | 3,464 |  |  | $ | 3,487 |
The Provision for income taxes consists of the following for the years ended December 31:
|  | 2019 |  | 2018 |  | 2017
United States |  | $ | 180 |  |  | $ | 213 |  |  | $ | 338 |
International |  | 594 |  |  | 693 |  |  | 975 |
Total Provision for income taxes |  | $ | 774 |  |  | $ | 906 |  |  | $ | 1,313 |
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:
|  | 2019 |  | 2018 |  | 2017
Goodwill and intangible assets |  | $ | 34 |  |  | $ | 2 |  |  | $ | 135 |
Property, plant and equipment |  | 12 |  |  | (15 | ) |  | 84 |
Pension and other retiree benefits |  | (13 | ) |  | (7 | ) |  | (192 | )
Stock-based compensation |  | (1 | ) |  | 9 |  |  | (28 | )
Tax credits and tax loss carryforwards |  | 3 |  |  | (4 | ) |  | (4 | )
Deferred withholding tax |  | (21 | ) |  | (100 | ) |  | (119 | )
Other, net |  | (33 | ) |  | 62 |  |  | 16 |
Total deferred tax benefit (provision) |  | $ | (19 | ) |  | $ | (53 | ) |  | $ | (108 | )
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 |  | 2019 |  | 2018 |  | 2017
Tax at United States statutory rate |  | 21.0 | % |  | 21.0 | % |  | 35.0 | %
State income taxes, net of federal benefit |  | 0.6 |  |  | 1.0 |  |  | 0.5 |
Earnings taxed at other than United States statutory rate |  | 4.7 |  |  | 5.6 |  |  | (3.4 | )
Charge for U.S. tax reform(1) |  | — |  |  | 2.3 |  |  | 7.9 |
Excess tax benefits from stock-based compensation |  | (0.2 | ) |  | (0.3 | ) |  | (1.4 | )
Foreign Tax Credit Carryback(2) |  | — |  |  | (1.7 | ) |  | — |
Benefit for foreign tax matters(3) |  | (0.9 | ) |  | (0.4 | ) |  | — |
Foreign-derived intangible income benefit |  | (1.3 | ) |  | (1.1 | ) |  | — |
Other, net |  | (0.5 | ) |  | (0.2 | ) |  | (0.9 | )
Effective tax rate |  | 23.4 | % |  | 26.2 | % |  | 37.7 | %
_________
(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) | 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.
(3) | In December 2019, the Swiss government enacted changes to its corporate tax regime, which included, among other items, the repeal of certain preferential tax regimes and an increase to the cantonal tax rate for future periods. Additionally, the government provided transition rules which allowed companies to record goodwill for tax purposes, partially offsetting the impact on cash taxes of the higher cantonal rate over the next ten years. As a result of these changes, the Company recorded an estimated net benefit of $29 to the Provision for income taxes. In 2018, the benefit from a tax matter of $15 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 components of deferred tax assets (liabilities) are as follows at December 31:
|  | 2019 |  | 2018
Deferred tax liabilities: |  |  |  |
Goodwill and intangible assets |  | $ | (598 | ) |  | $ | (344 | )
Property, plant and equipment |  | (303 | ) |  | (311 | )
Deferred withholding tax |  | (207 | ) |  | (181 | )
Other |  | (46 | ) |  | (75 | )
Total deferred tax liabilities |  | (1,154 | ) |  | (911 | )
Deferred tax assets: |  |  |  |  |  |
Pension and other retiree benefits |  | 381 |  |  | 354 |
Tax credits and tax loss carryforwards |  | 93 |  |  | 89 |
Accrued liabilities |  | 221 |  |  | 180 |
Stock-based compensation |  | 88 |  |  | 95 |
Other |  | 100 |  |  | 164 |
Total deferred tax assets |  | 883 |  |  | 882 |
Valuation Allowance |  | $ | (59 | ) |  | $ | (54 | )
Net deferred tax assets |  | $ | 824 |  |  | $ | 828 |
Net deferred income taxes |  | $ | (330 | ) |  | $ | (83 | )
|  | 2019 |  | 2018
Deferred taxes included within: |  |  |  |
Assets: |  |  |  |
Deferred income taxes |  | $ | 177 |  |  | $ | 152 |
Liabilities: |  |  |  |
Deferred income taxes |  | (507 | ) |  | (235 | )
Net deferred income taxes |  | $ | (330 | ) |  | $ | (83 | )
Applicable U.S. income and foreign withholding taxes have been provided on substantially all of the Company’s accumulated earnings of foreign subsidiaries. Net tax benefit of $13 in 2019, net tax benefit of $2 in 2018, and net tax benefit of $37 in 2017 were recorded directly through equity. The net tax benefit in 2019 predominantly includes current and future tax impacts related to benefit plans. The amounts in 2018 and 2017 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, 2019, 2018 and 2017 is summarized below:
|  | 2019 |  | 2018 |  | 2017
Unrecognized tax benefits: |  |  |  |  |  |
Balance, January 1 |  | $ | 190 |  |  | $ | 214 |  |  | $ | 201 |
Increases as a result of tax positions taken during the current year |  | 14 |  |  | 14 |  |  | 13 |
Decreases of tax positions taken during prior years |  | (21 | ) |  | (37 | ) |  | (9 | )
Increases of tax positions taken during prior years |  | 20 |  |  | 9 |  |  | 15 |
Decreases as a result of settlements with taxing authorities and the expiration of statutes of limitations |  | (30 | ) |  | (6 | ) |  | (15 | )
Effect of foreign currency rate movements |  | — |  |  | (4 | ) |  | 9 |
Balance, December 31 |  | $ | 173 |  |  | $ | 190 |  |  | $ | 214 |
If all of the unrecognized tax benefits for 2019 above were recognized, approximately $161 would impact the effective tax rate and would result in a cash outflow of approximately $170. Although it is possible that the amount of unrecognized benefits with respect to our uncertain tax positions will increase or decrease in the next twelve months, the Company does not expect material changes. The Company recognized approximately $0, $1 and $11 of interest expense related to the above unrecognized tax benefits within income tax expense in 2019, 2018 and 2017, respectively. The Company had accrued interest of approximately $23, $27 and $28 as of December 31, 2019, 2018 and 2017, 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, 2013. 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. The Company has made an accounting policy election to treat Global Intangible Low-Taxed Income taxes as a current period expense rather than including these amounts in the measurement of deferred taxes.

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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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