Income Taxes

12 Months Ended

Dec. 31, 2019



	Years Ended December 31,
	2019		2018		2017
U.S. income	$	3,826	$	4,433	$	8,399
Non-U.S. income	2,342		1,953		1,332
Income before income taxes and equity income	$	6,168	$	6,386	$	9,731



	Years Ended December 31,
	2019			2018			2017
Current income tax expense (benefit)
U.S. federal	$	42		$	(104	)	$	18
U.S. state and local	102			113			83
Non-U.S.	758			577			552
Total current income tax expense	902			586			653
Deferred income tax expense (benefit)
U.S. federal	(145		)	(578		)	7,831
U.S. state and local	3			250			(187		)
Non-U.S.	9			216			3,236
Total deferred income tax expense (benefit)	(133		)	(112		)	10,880
Total income tax expense	$	769		$	474		$	11,533

Provisions are made for estimated U.S. and non-U.S. income taxes which may be incurred on the reversal of our basis differences in investments in foreign subsidiaries and corporate joint ventures not deemed to be indefinitely reinvested. Taxes have not been provided on basis differences in investments primarily as a result of earnings in foreign subsidiaries which are deemed indefinitely reinvested of $3.2 billion and $2.9 billion at December 31, 2019 and 2018. Additional basis differences related to investments in nonconsolidated China JVs exist of $4.1 billion at December 31, 2019 and 2018 as a result of fresh-start reporting. Quantification of the deferred tax liability, if any, associated with indefinitely reinvested basis differences is not practicable.



	Years Ended December 31,
	2019			2018			2017
Income tax expense at U.S. federal statutory income tax rate	$	1,295		$	1,341		$	3,406
State and local tax expense (benefit)	117			282			(76		)
Non-U.S. income taxed at other than the U.S. federal statutory tax rate	166			90			(145		)
U.S. tax impact on Non-U.S. income and activities	(197		)	(822		)	(941		)
Change in valuation allowances	(233		)	1,695			2,712
Change in tax laws	(122		)	(134		)	7,194
General business credits and manufacturing incentives	(420		)	(695		)	(428		)
Capital loss expiration	—			107			—
Settlements of prior year tax matters	—			(188		)	(256		)
Realization of basis differences in affiliates	—			(59		)	—
German statutory approval of net operating losses	—			(990		)	—
Foreign currency remeasurement	74			19			23
Other adjustments	89			(172		)	44
Total income tax expense	$	769		$	474		$	11,533

Deferred Income Tax Assets and Liabilities Deferred income tax assets and liabilities at December 31, 2019 and 2018 reflect the effect of temporary differences between amounts of assets, liabilities and equity for financial reporting purposes and the bases of such assets, liabilities and equity as measured based on tax laws, as well as tax loss and tax credit carryforwards. The following table summarizes the components of temporary differences and carryforwards that give rise to deferred tax assets and liabilities:



	December 31, 2019			December 31, 2018
Deferred tax assets
Postretirement benefits other than pensions	$	1,695		$	1,584
Pension and other employee benefit plans	2,968			3,020
Warranties, dealer and customer allowances, claims and discounts	6,299			6,307
U.S. capitalized research expenditures	6,035			5,176
U.S. operating loss and tax credit carryforwards(a)	8,686			8,591
Non-U.S. operating loss and tax credit carryforwards(b)	6,731			6,393
Miscellaneous	1,965			2,034
Total deferred tax assets before valuation allowances	34,379			33,105
Less: valuation allowances	(8,135		)	(7,976		)
Total deferred tax assets	26,244			25,129
Deferred tax liabilities
Property, plant and equipment	1,565			1,098
Intangible assets	763			729
Total deferred tax liabilities	2,328			1,827
Net deferred tax assets	$	23,916		$	23,302

_________


(a)	At December 31, 2019 U.S. operating loss and tax credit carryforwards of $8.7 billion expire by 2039 if not utilized.


(b)	At December 31, 2019 Non-U.S. operating loss and tax credit carryforwards of $1.3 billion expire by 2039 if not utilized and the remaining balance of $5.4 billion may be carried forward indefinitely.

Valuation Allowances During the years ended December 31, 2019 and 2018, valuation allowances against deferred tax assets of $8.1 billion and $8.0 billion were comprised of cumulative losses, credits and other timing differences, primarily in Germany, Spain and South Korea.

We have $3.3 billion of net operating loss carryforwards in Germany that, as a result of reorganizations that took place in 2008 and 2009 and then existing German Law, were not previously recorded as deferred tax assets. In 2018 a favorable European court decision was statutorily approved in Germany enabling use of those loss carryforwards, and deferred tax assets totaling $1.0 billion were established for the loss carryforwards. Offsetting valuation allowances were also established as the deferred tax assets are not more likely than not to be realized.

Uncertain Tax Positions The following table summarizes activity of the total amounts of unrecognized tax benefits:



	Years Ended December 31,
	2019			2018			2017
Balance at beginning of period	$	1,341		$	1,557		$	1,182
Additions to current year tax positions	18			292			160
Additions to prior years' tax positions	13			264			448
Reductions to prior years' tax positions	(501		)	(244		)	(195		)
Reductions in tax positions due to lapse of statutory limitations	(8		)	(38		)	(44		)
Settlements	(93		)	(450		)	(11		)
Other	5			(40		)	17
Balance at end of period	$	775		$	1,341		$	1,557

At December 31, 2019 and 2018 there were $539 million and $991 million of unrecognized tax benefits that if recognized would favorably affect our effective tax rate in the future. In the years ended December 31, 2019, 2018 and 2017 income tax related interest and penalties were insignificant. At December 31, 2019 and 2018 we had liabilities of $117 million and $116 million for income tax related interest and penalties.

At December 31, 2019 it is not possible to reasonably estimate the expected change to the total amount of unrecognized tax benefits in the next twelve months.

Other Matters Income tax returns are filed in multiple jurisdictions and are subject to examination by taxing authorities throughout the world. We have open tax years from 2009 to 2019 with various significant tax jurisdictions. Tax authorities may have the ability to review and adjust net operating loss or tax credit carryforwards that were generated prior to these periods if utilized in an open tax year. These open years contain matters that could be subject to differing interpretations of applicable tax laws and regulations as they relate to the amount, character, timing or inclusion of revenue and expenses or the sustainability of income tax credits for a given audit cycle.

The U.S. Tax Cuts and Jobs Act of 2017 (the Tax Act) was signed into law on December 22, 2017. The Tax Act changed many aspects of U.S. corporate income taxation and included reduction of the corporate income tax rate from 35% to 21%, implementation of a territorial tax system and imposition of a tax on deemed repatriated earnings of foreign subsidiaries. We recognized the tax effects of the Tax Act in the year ended December 31, 2017 and recorded $7.3 billion in tax expense. The tax expense primarily relates to the remeasurement of deferred tax assets to the 21% tax rate. We applied the guidance in SAB 118 when accounting for the enactment-date effects of the Tax Act in 2017 and 2018. During the year ended December 31, 2018 we reduced our year ended December 31, 2017 estimated tax expense of $7.3 billion to $7.1 billion, primarily related to the remeasurement of deferred tax assets to the 21% tax rate.