XML 26 R12.htm IDEA: XBRL DOCUMENT
v3.22.0.1

INCOME TAXES | 12 Months Ended
--- | ---
Dec. 31, 2021
Income Tax Disclosure [Abstract] |
INCOME TAXES | NOTE 4. INCOME TAXES The following table summarizes income before income taxes:
|  | Years ended December 31,
In millions |  | 2021 |  | 2020 |  | 2019
U.S. income |  | $ | 1,251 |  |  | $ | 1,134 |  |  | $ | 1,677 |
Foreign income |  | 1,500 |  |  | 1,204 |  |  | 1,157 |
Income before income taxes |  | $ | 2,751 |  |  | $ | 2,338 |  |  | $ | 2,834 |
Income tax expense (benefit) consisted of the following:
|  | Years ended December 31,
In millions |  | 2021 |  | 2020 |  | 2019
Current |  |  |  |  |  |
U.S. federal and state |  | $ | 261 |  |  | $ | 162 |  |  | $ | 288 |
Foreign |  | 319 |  |  | 358 |  |  | 282 |
Total current income tax expense |  | 580 |  |  | 520 |  |  | 570 |
Deferred |  |  |  |  |  |
U.S. federal and state |  | (12) |  |  | 2 |  |  | (32) |
Foreign |  | 19 |  |  | 22 |  |  | 28 |
Impact of India tax law changes |  | — |  |  | (17) |  |  | — |
Total deferred income tax expense (benefit) |  | 7 |  |  | 7 |  |  | (4) |
Income tax expense |  | $ | 587 |  |  | $ | 527 |  |  | $ | 566 |
A reconciliation of the statutory U.S. federal income tax rate to the effective tax rate was as follows:
|  | Years ended December 31,
|  | 2021 |  | 2020 |  | 2019
Statutory U.S. federal income tax rate |  | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State income tax, net of federal effect |  | 1.1 |  |  | 1.0 |  |  | 1.1 |
Differences in rates and taxability of foreign subsidiaries and joint ventures |  | 0.1 |  |  | 3.6 |  |  | 1.5 |
Research tax credits |  | (0.6) |  |  | (1.3) |  |  | (1.5) |
Foreign derived intangible income |  | (1.0) |  |  | (1.2) |  |  | (1.3) |
Impact of India tax law changes |  | — |  |  | (0.7) |  |  | — |
Other, net |  | 0.7 |  |  | 0.1 |  |  | (0.8) |
Effective tax rate |  | 21.3 | % |  | 22.5 | % |  | 20.0 | %
Our effective tax rate for 2021 was 21.3 percent compared to 22.5 percent for 2020 and 20.0 percent for 2019. The year ended December 31, 2021, contained unfavorable net discrete tax items of $9 million, primarily due to $12 million of unfavorable provision to return adjustments related to the 2020 filed tax returns, partially offset by $3 million of favorable other discrete tax items. The year ended December 31, 2020, contained $26 million of unfavorable net discrete tax items, primarily due to $33 million of unfavorable changes in tax reserves and $10 million of withholding tax adjustments, partially offset by $15 million of favorable changes due to the India Tax Law Change. The India Tax Law Change eliminated the dividend distribution tax and replaced it with a lower rate withholding tax as the burden shifted from the dividend payor to the dividend recipient for a net favorable income statement impact of $35 million. The India Tax Law Change resulted in the following adjustments to the Consolidated Statements of Net Income for the year ended December 31, 2020:
In millions |  |  |  |  |  | Favorable (Unfavorable) |  |
Equity, royalty and interest income from investees |  |  |  |  |  | $ | 37 |  |  |
Income tax expense (1) |  |  |  |  |  | 17 |  |  |
Less: Net income attributable to noncontrolling interests |  |  |  |  |  | (19) |  |  |
Net income statement impact |  |  |  |  |  | $ | 35 |  |  |
(1) The adjustment to "Income tax expense" includes $15 million of favorable discrete items. |  |
The year ended December 31, 2019, contained $34 million of favorable net discrete tax items, primarily due to withholding taxes and provision to return adjustments. At December 31, 2021, $4.1 billion of non-U.S. earnings are considered indefinitely reinvested in operations outside the U.S. for which deferred taxes were not provided. Determination of the related deferred tax liability, if any, is not practicable because of the complexities associated with the hypothetical calculation. Carryforward tax benefits and the tax effect of temporary differences between financial and tax reporting that give rise to net deferred tax assets (liabilities) were as follows:
|  | December 31,
In millions |  | 2021 |  | 2020
Deferred tax assets |  |  |  |
U.S. and state carryforward benefits |  | $ | 218 |  |  | $ | 223 |
Foreign carryforward benefits |  | 177 |  |  | 159 |
Employee benefit plans |  | 254 |  |  | 273 |
Warranty expenses |  | 445 |  |  | 445 |
Lease liabilities |  | 108 |  |  | 107 |
Accrued expenses |  | 111 |  |  | 93 |
Other |  | 78 |  |  | 52 |
Gross deferred tax assets |  | 1,391 |  |  | 1,352 |
Valuation allowance |  | (360) |  |  | (346) |
Total deferred tax assets |  | 1,031 |  |  | 1,006 |
Deferred tax liabilities |  |  |  |
Property, plant and equipment |  | (272) |  |  | (258) |
Unremitted income of foreign subsidiaries and joint ventures |  | (197) |  |  | (185) |
Employee benefit plans |  | (355) |  |  | (229) |
Lease assets |  | (105) |  |  | (103) |
Other |  | (77) |  |  | (77) |
Total deferred tax liabilities |  | (1,006) |  |  | (852) |
Net deferred tax assets |  | $ | 25 |  |  | $ | 154 |
Our 2021 U.S. carryforward benefits include $218 million of state credit and net operating loss carryforward benefits that begin to expire in 2022. Our foreign carryforward benefits include $177 million of net operating loss carryforwards that begin to expire in 2022. A valuation allowance is recorded to reduce the gross deferred tax assets to an amount we believe is more likely than not to be realized. The valuation allowance is $360 million and increased in 2021 by a net $14 million. The valuation allowance is primarily attributable to the uncertainty regarding the realization of a portion of the U.S. state and foreign net operating loss and tax credit carryforward benefits. Our Consolidated Balance Sheets contain the following tax related items:
|  | December 31,
In millions |  | 2021 |  | 2020
Prepaid expenses and other current assets |  |  |  |
Refundable income taxes |  | $ | 101 |  |  | $ | 172 |
Other assets |  |  |  |
Deferred income tax assets |  | 428 |  |  | 479 |
Long-term refundable income taxes |  | — |  |  | 23 |
Other accrued expenses |  |  |  |
Income tax payable |  | 107 |  |  | 82 |
Other liabilities |  |  |  |
Long-term income tax |  | 263 |  |  | 289 |
Deferred income tax liabilities |  | 403 |  |  | 325 |
A reconciliation of unrecognized tax benefits for the years ended December 31, 2021, 2020 and 2019 was as follows:
|  | December 31,
In millions |  | 2021 |  | 2020 |  | 2019
Balance at beginning of year |  | $ | 122 |  |  | $ | 77 |  |  | $ | 71 |
Additions to current year tax positions |  | 11 |  |  | 9 |  |  | 23 |
Additions to prior years' tax positions |  | 16 |  |  | 49 |  |  | 5 |
Reductions to prior years' tax positions |  | (28) |  |  | (13) |  |  | (11) |
Reductions for tax positions due to settlements with taxing authorities |  | (32) |  |  | — |  |  | (11) |
Balance at end of year |  | $ | 89 |  |  | $ | 122 |  |  | $ | 77 |
Included in the December 31, 2021, 2020 and 2019, balances are $85 million, $114 million and $69 million, respectively, related to tax positions that, if recognized, would favorably impact the effective tax rate in future periods. We also accrued interest expense related to the unrecognized tax benefits of $15 million, $17 million and $5 million as of December 31, 2021, 2020 and 2019, respectively. We recognize potential accrued interest and penalties related to unrecognized tax benefits in income tax expense. Audit outcomes and the timing of audit settlements are subject to significant uncertainty. Although we believe that adequate provision has been made for such issues, there is the possibility that the ultimate resolution of such issues could have an adverse effect on our earnings. Conversely, if these issues are resolved favorably in the future, the related provision would be reduced, thus having a positive impact on earnings. As a result of our global operations, we file income tax returns in various jurisdictions including U.S. federal, state and foreign jurisdictions. We are routinely subject to examination by taxing authorities throughout the world, including Australia, Belgium, Brazil, Canada, China, France, India, Mexico, the U.K. and the U.S. With few exceptions, our U.S. federal, major state and foreign jurisdictions are no longer subject to income tax assessments for years before 2017.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration