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INCOME TAXES | 12 Months Ended
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Oct. 31, 2020
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The domestic and foreign components of income before taxes are:
| Years Ended October 31,
| 2020 |  | 2019 |  | 2018
| (in millions)
U.S. operations | $ | 54 |  |  | $ | 189 |  |  | $ | 169 |
Non-U.S. operations | 788 |  |  | 730 |  |  | 777 |
Total income before taxes | $ | 842 |  |  | $ | 919 |  |  | $ | 946 |
The provision for income taxes is comprised of:
| Years Ended October 31,
| 2020 |  | 2019 |  | 2018
| (in millions)
U.S. federal taxes: |  |  |  |  |
Current | $ | 5 |  |  | $ | (191) |  |  | $ | 520 |
Deferred | 4 |  |  | — |  |  | 51 |
Non-U.S. taxes: |  |  |  |  |
Current | 84 |  |  | 290 |  |  | 95 |
Deferred | 24 |  |  | (267) |  |  | (22) |
State taxes, net of federal benefit: |  |  |  |  |
Current | 5 |  |  | 4 |  |  | 1 |
Deferred | 1 |  |  | 12 |  |  | (15) |
Total provision (benefit) | $ | 123 |  |  | $ | (152) |  |  | $ | 630 |
The differences between the U.S. federal statutory income tax rate and our effective tax rate are:
| Years Ended October 31,
| 2020 |  | 2019 |  | 2018
| (in millions)
Profit before tax times statutory rate | $ | 177 |  |  | $ | 193 |  |  | $ | 221 |
Non-U.S. income taxed at different rates | (36) |  |  | (8) |  |  | (93) |
Change in unrecognized tax benefits | (9) |  |  | (13) |  |  | (17) |
Impact of the Tax Act | — |  |  | — |  |  | 552 |
Extension of the tax incentive in Singapore | — |  |  | (299) |  |  | — |
Excess tax benefits from stock-based compensation | (18) |  |  | (10) |  |  | (18) |
Other, net | 9 |  |  | (15) |  |  | (15) |
Provision (benefit) for income taxes | $ | 123 |  |  | $ | (152) |  |  | $ | 630 |
Effective tax rate | 14.6 | % |  | (16.5) | % |  | 66.6 | %
For 2020, the company's income tax expense was $123 million with an effective tax rate of 14.6 percent. For the year ended October 31, 2020, our effective tax rate and the resulting provision for income taxes were impacted by foreign income taxed at lower rates. For 2019, the company's income tax benefit was $152 million with an effective tax rate of (16.5) percent. For the year ended October 31, 2019, our effective tax rate and the resulting provision for income taxes were significantly impacted by the discrete benefit of $299 million related to the extension of the company’s tax incentive in Singapore. As part of the business integration of some of our prior acquisitions, we undertook corporate restructurings in the fourth quarter of fiscal year 2019 that involved on-shoring certain intangible properties held by our foreign subsidiaries to the United States. These restructurings resulted in a cash tax liability of $231 million. These taxes generate tax attributes that will offset our transition tax liability which is included in other long-term liabilities in our consolidated balance sheet. For 2018, the company's income tax expense was $630 million with an effective tax rate of 66.6 percent. For the year ended October 31, 2018, our effective tax rate and the resulting provision for income taxes were significantly impacted by the discrete charge of $552 million related to the enactment of the U.S. Tax Cuts and Jobs Act (the “Tax Act”) consisting of (1) an expense of $499 million of U.S. transition tax and correlative items on deemed repatriated earnings of non-U.S. subsidiaries and (2) an expense of $53 million associated with the impact on deferred taxes resulting from the decreased U.S. corporate tax rate. The company has negotiated tax holidays in several different jurisdictions, most significantly in Singapore. The tax holidays provide lower rates of taxation on certain classes of income and require various thresholds of investments and employment or specific types of income in those jurisdictions. In December 2018, the tax holiday in Singapore was renegotiated and extended through 2027. As a result of the incentives, the impact of the tax holidays decreased income taxes by $71 million, $368 million, and $87 million in 2020, 2019, and 2018, respectively. The benefit of the tax holidays on net income per share (diluted) was approximately $0.23, $1.16, and $0.27 in 2020, 2019 and 2018, respectively. Of the $1.16 benefit of the tax incentives on net income per share (diluted) in 2019, $0.94 of the benefit relates to one-time items from the extension of the company’s tax incentive in Singapore. The significant components of deferred tax assets and deferred tax liabilities included on the consolidated balance sheet are:
| Years Ended October 31,
| 2020 |  | 2019
| (in millions)
Deferred Tax Assets |  |  |
Intangibles | $ | 153 |  |  | $ | 131 |
Pension benefits and retiree medical benefits | 65 |  |  | 71 |
Employee benefits, other than retirement | 31 |  |  | 34 |
Net operating loss, capital loss, and credit carryforwards | 182 |  |  | 195 |
Share-based compensation | 27 |  |  | 32 |
Deferred revenue | 22 |  |  | 38 |
Lease obligations | 35 |  |  | — |
Other | 41 |  |  | 35 |
Deferred tax assets | $ | 556 |  |  | $ | 536 |
Tax valuation allowance | (132) |  |  | (134) |
Deferred tax assets, net of valuation allowance | $ | 424 |  |  | $ | 402 |
Deferred Tax Liabilities |  |  |
Property, plant and equipment | $ | (19) |  |  | $ | (16) |
Right-of-use asset | (35) |  |  | — |
Other | (14) |  |  | (7) |
Deferred tax liabilities | $ | (68) |  |  | $ | (23) |
Net deferred tax assets (liabilities) | $ | 356 |  |  | $ | 379 |
Valuation allowances require an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. Such assessment is required on a jurisdiction by jurisdiction basis. As of October 31, 2020, we continued to maintain a valuation allowance of $132 million until sufficient positive evidence exists to support reversal. The valuation allowance is primarily related to deferred tax assets for the states of California and Colorado, along with the net operating losses in the Netherlands and capital losses in the U.S. and Australia. At October 31, 2020, we had federal, state and foreign net operating loss carryforwards of approximately $11 million, $530 million and $411 million, respectively. The federal and state net operating loss carryforwards are subject to various limitations under Section 382 of the Internal Revenue Code and applicable state tax laws. If not utilized, the federal and state net operating loss carryforwards will begin to expire in 2021. If not utilized, $123 million of the foreign net operating loss carryforwards will begin to expire in 2021. The remaining $288 million of the foreign net operating losses carry forward indefinitely. At October 31, 2020, we had federal and foreign capital loss carryforwards of $48 million and $118 million, respectively. If not utilized, the federal capital loss carryforwards will expire in 2022. The foreign capital losses carry forward indefinitely. At October 31, 2020, we had state tax credit carryforwards of approximately $83 million. The state tax credits carry forward indefinitely. The breakdown between long-term deferred tax assets and deferred tax liabilities was as follows:
| October 31,
| 2020 |  | 2019
| (in millions)
Long-term deferred tax assets (included within other assets) | $ | 380 |  |  | $ | 410 |
Long-term deferred tax liabilities (included within other long-term liabilities) | (24) |  |  | (31) |
Total | $ | 356 |  |  | $ | 379 |
The breakdown between current and long-term income tax assets and liabilities, excluding deferred tax assets and liabilities, was as follows:
| October 31,
| 2020 |  | 2019
| (in millions)
Current income tax assets (included within other current assets) | $ | 89 |  |  | $ | 68 |
Long-term income tax assets (included within other assets) | 6 |  |  | 4 |
Current income tax liabilities (included within other accrued liabilities) | (63) |  |  | (292) |
Long-term income tax liabilities (included within other long-term liabilities) | (323) |  |  | (328) |
Total | $ | (291) |  |  | $ | (548) |
Uncertain Tax Positions The aggregate changes in the balances of our gross unrecognized tax benefits including all federal, state and foreign tax jurisdictions are as follows:
| 2020 |  | 2019 |  | 2018
| (in millions)
Balance, beginning of year | $ | 206 |  |  | $ | 214 |  |  | $ | 224 |
Additions for tax positions related to the current year | 6 |  |  | 7 |  |  | 27 |
Additions for tax positions from prior years | — |  |  | 12 |  |  | 2 |
Reductions for tax positions from prior years | — |  |  | (2) |  |  | (13) |
Statute of limitations expirations | (17) |  |  | (25) |  |  | (26) |
Balance, end of year | $ | 195 |  |  | $ | 206 |  |  | $ | 214 |
As of October 31, 2020, we had $240 million of unrecognized tax benefits, including interest and penalties of which $215 million, if recognized, would affect our effective tax rate. However, approximately $25 million of the unrecognized tax benefits were related to state income tax positions that, if recognized, would be in the form of a deferred tax asset that would likely not affect our effective tax rate due to a valuation allowance. We recognized tax expense of $8 million, $9 million and $11 million for interest and penalties related to unrecognized tax benefits in 2020, 2019 and 2018, respectively. Interest and penalties accrued as of October 31, 2020 and 2019 were $45 million and $36 million, respectively. In the U.S., tax years remain open back to the year 2017 for federal income tax purposes and for significant states. In other major jurisdictions where the company conducts business, the tax years generally remain open back to the year 2009. With these jurisdictions and the U.S., it is reasonably possible that there could be significant changes to our unrecognized tax benefits in the next twelve months due to either the expiration of a statute of limitation or a tax audit settlement which will be partially offset by an anticipated tax liability related to unremitted foreign earnings, where applicable. Given the number of years and numerous matters that remain subject to examination in various tax jurisdictions, management is unable to estimate the range of possible changes to the balance of our unrecognized tax benefits.

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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://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=84230637&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=116825942&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=84230637&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=116825942&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=84230637&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 + Details
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