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Income Taxes | 6 Months Ended
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Jun. 30, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The Company’s effective tax rates for the three and six months ended June 30, 2020 were 14.5% and 6.9%, respectively, compared to 13.1% and 19.9% for the three and six months ended June 30, 2019, respectively. The change in the rate for the three months was driven primarily by an unfavorable change in discrete tax items during the quarter compared to the prior year, partially offset by the favorable impact of U.S. tax credits signed into law in December 2019. The change in the rate for the six months was primarily due to the impact of U.S. tax credits signed into law in December 2019, including a $73 million discrete tax benefit related to 45G railroad credits recognized in the six months ended June 30, 2020, which are now reflected in the 2020 projected effective tax rate. The prior period rate also included unfavorable discrete tax items primarily related to U.S. tax reform transition tax adjustments. In March 2020, the Coronavirus Aid Relief and Economic Security Act (CARES Act) was signed into law in the United States. The Company continues to assess the effects of the provisions of the CARES Act and does not expect any income tax effects to have a material impact on the annual effective tax rate for the year ending December 31, 2020. The Company also continues to evaluate the effects of COVID-19 on its ability to indefinitely reinvest foreign earnings and does not expect any change in its assertion to have a material impact on the annual effective tax rate for the year ending December 31, 2020. The Company is subject to income taxation and routine examinations in many jurisdictions around the world and frequently faces challenges regarding the amount of taxes due. These challenges include positions taken by the Company related to the timing, nature and amount of deductions and the allocation of income among various tax jurisdictions. In its routine evaluations of the exposure associated with various tax filing positions, the Company recognizes a liability, when necessary, for estimated potential tax owed by the Company in accordance with applicable accounting standards. Resolution of the related tax positions, through negotiations with relevant tax authorities or through litigation, may take years to complete. Therefore, it is difficult to predict the timing for resolution of tax positions and the Company cannot predict or provide assurance as to the ultimate outcome of these ongoing or future examinations. However, the Company does not anticipate that the total amount of unrecognized tax benefits will increase or decrease significantly in the next twelve months. Given the long periods of time involved in resolving tax positions, the Company does not expect that the recognition of unrecognized tax benefits will have a material impact on the Company’s effective income tax rate in any given period. During the second quarter, the ongoing litigation between the Company’s wholly-owned subsidiary, ADM do Brasil Ltda. (“ADM do Brasil”), and the Brazilian Federal Revenue Service (“BFRS”) was favorably resolved without any tax due. The litigation related to assessments received totaling approximately $77 million in tax and $228 million in interest and penalties as of June 30, 2020 (adjusted for variation in currency exchange rates), with respect to the tax deductibility of commodity hedging losses and related expenses for the tax years 2004, 2006, and 2007. The Company does not expect to receive any additional tax assessments with respect to this issue. The Company’s subsidiary in Argentina, ADM Agro SRL (formerly ADM Argentina SA and Alfred C. Toepfer Argentina SRL), received tax assessments challenging transfer prices used to price grain exports for the tax years 1999 through 2011. As of June 30, 2020, these assessments totaled $12 million in tax and $47 million in interest (adjusted for variation in currency exchange rates). The Argentine tax authorities conducted a review of income and other taxes paid by large exporters and processors of cereals and other agricultural commodities resulting in allegations of income tax evasion. The Company strongly believes that it has complied with all Argentine tax laws. To date, the Company has not received assessments for closed years subsequent to 2011. While the statute of limitations has expired for tax years 2012 and 2013, the Company cannot rule out receiving additional assessments challenging transfer prices used to price grain exports for years subsequent to 2013, and estimates that these potential assessments could be approximately $37 million in tax and $23 million in interest (adjusted for variation in currency exchange rates as of June 30, 2020). The Company believes that it has appropriately evaluated the transactions underlying these assessments, and has concluded, based on Argentine tax law, that its tax position would be sustained, and accordingly, has not recorded a tax liability for these assessments. In accordance with the accounting requirements for uncertain tax positions, the Company has not recorded an uncertain tax liability for this assessment because it has concluded that it is more likely than not to prevail on the matter based upon its technical merits and because the taxing jurisdiction’s process does not provide a mechanism for settling at less than the full amount of the assessment. The Company intends to vigorously defend its position against the current assessments and any similar assessments that may be issued for years subsequent to 2013. In 2014, the Company’s wholly-owned subsidiary in the Netherlands, ADM Europe B.V., received a tax assessment from the Netherlands tax authority challenging the transfer pricing aspects of a 2009 business reorganization, which involved two of its subsidiary companies in the Netherlands. As of June 30, 2020, this assessment was $91 million in tax and $36 million in interest (adjusted for variation in currency exchange rates). In September 2019, the Company received an interim decision on its appeal which directed the parties to work toward a settlement. On April 23, 2020, the court issued an unfavorable ruling and directed the parties to explore the possibility of settling, noting that any unresolved valuation questions may be assigned to a third party expert to establish a valuation. Subsequent appeals may take an extended period of time and could result in additional financial impacts of up to the entire amount of the assessment. The Company has carefully evaluated the underlying transactions and has concluded that the amount of gain recognized on the reorganization for tax purposes was appropriate. As of June 30, 2020, the Company has accrued its best estimate of what it believes will be the likely outcome of the litigation and will vigorously defend its position against the assessment.

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