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Income Taxes (Tables) | 12 Months Ended
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Dec. 31, 2019
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:
|  | 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 |
Provision for income taxes | 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 |
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:
|  | 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 | )
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 |  | 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.
Components of deferred tax assets (liabilities) | 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 | )
Unrecognized tax benefits activity | 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 |

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