Taxes on Earnings

3 Months Ended

Jan. 31, 2020

Provision for Taxes

The Company's effective tax rate was 11.9% and 73.0% for the three months ended January 31, 2020 and 2019, respectively. The effective tax rate for the three months ended January 31, 2020 was due to favorable tax rates associated with certain earnings

from the Company’s operations in lower tax jurisdictions throughout the world. The effective tax rate for the three months ended January 31, 2019 was significantly impacted by the Tax Cuts and Jobs Act of 2017 (the “Tax Act”).

For the three months ended January 31, 2020, the Company recorded $16 million of net income tax benefits related to various items discrete to the period. The amount primarily included $21 million of income tax benefits related to the change in pre-Separation tax liabilities for which the Company shares joint and several liability with HP Inc. and for which the Company is indemnified by HP Inc.

For the three months ended January 31, 2019, the Company recorded $428 million of net income tax charges related to various items discrete to the period. The amount primarily included $375 million of income tax charges related to changes in U.S. federal and state valuation allowances as a result of impacts of the Tax Act, $37 million of income tax charges related to future withholding costs on distributions of earnings and $34 million of income tax charges related to the change in pre-Separation tax liabilities for which the Company shared joint and several liability with HP Inc., partially offset by $30 million of income tax benefits on restructuring charges and acquisition, disposition and other related charges.

Uncertain Tax Positions

As of January 31, 2020 and October 31, 2019, the amount of unrecognized tax benefits was $2.2 billion and $2.3 billion, respectively, of which up to $730 million and $772 million, respectively, would affect the Company's effective tax rate if realized as of their respective periods.

The Company recognizes interest income from favorable settlements and interest expense and penalties accrued on unrecognized tax benefits in Provision for taxes in the Condensed Consolidated Statements of Earnings. The Company recognized $5 million of interest income and $25 million of interest expense for the three months ended January 31, 2020 and 2019, respectively. As of January 31, 2020 and October 31, 2019, the Company had $124 million and $129 million, respectively, recorded for interest and penalties in the Condensed Consolidated Balance Sheets.

The Company engages in continuous discussions and negotiations with taxing authorities regarding tax matters in various jurisdictions. The Company does not expect complete resolution of any audit cycle within the next 12 months. However, it is reasonably possible that certain federal, foreign and state tax issues may be concluded in the next 12 months, including issues involving intercompany transactions, joint and several tax liabilities and other matters. Accordingly, the Company believes it is reasonably possible that its existing unrecognized tax benefits may be reduced by an amount up to $84 million within the next 12 months.

Deferred Tax Assets and Liabilities

Deferred tax assets and liabilities included in the Condensed Consolidated Balance Sheets were as follows:



	As of
	January 31, 2020			October 31, 2019
	In millions
Deferred tax assets	$	1,529		$	1,515
Deferred tax liabilities	(311		)	(311		)
Deferred tax assets net of deferred tax liabilities	$	1,218		$	1,204