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Income Taxes | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The following table sets forth the geographic split of earnings before income taxes:
| Year Ended
(In millions) | December 31
| 2020 |  | 2019 |  | 2018
United States | $ | 442 |  |  | $ | 756 |  |  | $ | 972 |
Foreign | 1,441 |  |  | 832 |  |  | 1,088 |
| $ | 1,883 |  |  | $ | 1,588 |  |  | $ | 2,060 |
Significant components of income taxes are as follows:
(In millions) | Year Ended December 31 |
| 2020 |  | 2019 |  | 2018 |
Current |  |  |  |  |  |
Federal | $ | (164) |  |  | $ | 37 |  |  | $ | 96 |  |
State | 4 |  |  | 11 |  |  | 25 |  |
Foreign | 186 |  |  | 181 |  |  | 171 |  |
Deferred |  |  |  |  |  |
Federal | 41 |  |  | 47 |  |  | (55) |  |
State | (10) |  |  | 1 |  |  | (16) |  |
Foreign | 44 |  |  | (68) |  |  | 24 |  |
| $ | 101 |  |  | $ | 209 |  |  | $ | 245 |  |
Significant components of deferred tax liabilities and assets are as follows:
| December 31, 2020 |  | December 31, 2019
| (In millions)
Deferred tax liabilities |  |  |
Property, plant, and equipment | $ | 903 |  |  | $ | 1,012 |
Intangibles | 334 |  |  | 286 |
Right of use assets | 223 |  |  | 220 |
Equity in earnings of affiliates | 64 |  |  | 72 |
Inventory reserves | 25 |  |  | 32 |
Debt exchange | 53 |  |  | 80 |
Reserves and other accruals | 195 |  |  | 20 |
Other | 173 |  |  | 109 |
| $ | 1,970 |  |  | $ | 1,831 |
Deferred tax assets |  |  |
Pension and postretirement benefits | $ | 163 |  |  | $ | 155 |
Lease liabilities | 227 |  |  | 225 |
Stock compensation | 80 |  |  | 62 |
Foreign tax loss carryforwards | 470 |  |  | 411 |
Capital loss carryforwards | 70 |  |  | 62 |
State tax attributes | 79 |  |  | 74 |
Reserves and other accruals | 42 |  |  | — |
Other | 136 |  |  | 147 |
Gross deferred tax assets | 1,267 |  |  | 1,136 |
Valuation allowances | (339) |  |  | (325) |
Net deferred tax assets | $ | 928 |  |  | $ | 811 |
Net deferred tax liabilities | $ | 1,042 |  |  | $ | 1,020 |
The net deferred tax liabilities are classified as follows: |  |  |
Noncurrent assets (foreign) | $ | 260 |  |  | $ | 174 |
Noncurrent liabilities | (957) |  |  | (969) |
Noncurrent liabilities (foreign) | (345) |  |  | (225) |
| $ | (1,042) |  |  | $ | (1,020) |
Reconciliation of the statutory federal income tax rate to the Company’s effective income tax rate on earnings is as follows:
| Year Ended
| December 31
| 2020 |  | 2019 |  | 2018
Statutory rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State income taxes, net of federal tax benefit | (0.3) |  |  | 0.6 |  |  | 0.3 |
Foreign earnings taxed at rates other than the U.S. statutory rate | (4.5) |  |  | (0.9) |  |  | (1.5) |
Foreign currency effects/remeasurement | (1.1) |  |  | 0.7 |  |  | (1.9) |
Income tax adjustment to filed returns | (0.4) |  |  | 0.2 |  |  | (1.9) |
Tax benefit on U.S. biodiesel credits | (3.3) |  |  | (7.5) |  |  | (2.3) |
Tax benefit on U.S. railroad credits | (8.0) |  |  | (3.6) |  |  | — |
Tax on Global Intangible Low Taxed Income (GILTI) | 2.9 |  |  | 1.4 |  |  | 1.0 |
Tax benefit on Foreign Derived Intangible Income Deduction (FDII) | (0.1) |  |  | — |  |  | (1.0) |
U.S. tax reform impacts | (0.3) |  |  | 0.4 |  |  | (1.1) |
Other | (0.5) |  |  | 0.9 |  |  | (0.7) |
Effective income tax rate | 5.4 | % |  | 13.2 | % |  | 11.9 | %
The effective tax rate for 2020 was impacted by changes in the geographic mix of earnings and U.S. tax credits, mainly the railroad maintenance tax credit, and GILTI. The effective tax rate for 2019 was impacted by U.S. tax credits, including the 2018 and 2019 biodiesel tax credit and the railroad maintenance tax credit, signed into law in December 2019. The effective tax rate for 2018 included the 2017 biodiesel tax credit recorded in the first quarter of 2018 and the additional true-up adjustments related to the 2017 U.S. tax reform, along with certain favorable discrete tax items. The foreign rate differential was primarily due to lower tax rates from the Company’s operations in Switzerland, Asia, and the Caribbean. The Company’s foreign earnings, which were taxed at rates lower than the U.S. rate and generated from these jurisdictions, were 59%, 61%, and 56% of its foreign earnings before taxes in fiscal years 2020, 2019, and 2018, respectively. Undistributed earnings of the Company’s foreign subsidiaries and corporate joint ventures were approximately $12.5 billion at December 31, 2020. Because these undistributed earnings continue to be indefinitely reinvested in foreign operations, no income taxes, other than the transition tax, the U.S. tax on undistributed Subpart F, and the minimum tax on GILTI, have been provided after the Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. It is not practicable to determine the amount of unrecognized deferred tax liability related to any remaining undistributed earnings of foreign subsidiaries and corporate joint ventures not subject to the transition tax. The Company has elected to pay the one-time transition tax on accumulated foreign earnings over eight years. As of December 31, 2020, the Company’s remaining transition tax liability was $164 million, which will be paid in installments through 2025 The Company incurred U.S. taxable income of $259 million, $105 million, and $101 million related to GILTI and deducted $12 million, $1 million, and $101 million related to FDII in fiscal years 2020, 2019, and 2018 respectively. The Company made an accounting policy election to treat GILTI as a period cost. The Company has recorded and will continue to record the impact of tax reform items as U.S. tax authorities issue Treasury Regulations and other guidance addressing tax reform-related changes. It is also reasonable to expect that global taxing authorities will be reviewing their current legislation for potential modifications in reaction to the implementation of the Act. The additional guidance, along with the potential for additional global tax legislation changes, may affect significant deductions and income inclusions and could have a material adverse effect on the Company’s net income or cash flow. The Company had $470 million and $411 million of tax assets related to net operating loss carry-forwards of certain international subsidiaries at December 31, 2020 and 2019, respectively. As of December 31, 2020, approximately $357 million of these assets have no expiration date, and the remaining $113 million expire at various times through fiscal 2029. The annual usage of certain of these assets is limited to a percentage of taxable income of the respective foreign subsidiary for the year. The Company has recorded a valuation allowance of $197 million and $193 million against these tax assets at December 31, 2020 and 2019, respectively, due to the uncertainty of their realization. The Company had $70 million and $62 million of tax assets related to foreign capital loss carryforwards at December 31, 2020 and 2019, respectively. The Company has recorded a valuation allowance of $70 million and $62 million against these tax assets at December 31, 2020 and 2019, respectively. The Company had $79 million and $74 million of tax assets related to state income tax attributes (incentive credits and net operating loss carryforwards), net of federal tax benefit, at December 31, 2020 and 2019, the majority of which will expire between 2021 and 2025. Due to the uncertainty of realization, the Company recorded a valuation allowance of $72 million and $70 million related to state income tax assets net of federal tax benefit as of December 31, 2020 and 2019, respectively. The Company remains subject to federal examination in the U.S. for the calendar tax years 2016, 2017, 2018, 2019, and 2020. The following table sets forth a rollforward of activity of unrecognized tax benefits for the year ended December 31, 2020 and 2019 as follows:
| Unrecognized Tax Benefits
| December 31, 2020 |  | December 31, 2019
| (In millions)
Beginning balance | $ | 130 |  |  | $ | 107 |
Additions related to current year’s tax positions | 2 |  |  | 8 |
Additions related to prior years’ tax positions | 37 |  |  | — |
Additions (adjustments) related to acquisitions | (1) |  |  | 32 |
Reductions related to prior years’ tax positions | (3) |  |  | (14) |
Reductions related to lapse of statute of limitations | (9) |  |  | (2) |
Settlements with tax authorities | (5) |  |  | (1) |
Ending balance | $ | 151 |  |  | $ | 130 |
The additions and reductions in unrecognized tax benefits shown in the table included effects related to net income and shareholders’ equity. The changes in unrecognized tax benefits did not have a material effect on the Company’s net income or cash flow. At December 31, 2020 and 2019, the Company had accrued interest and penalties on unrecognized tax benefits of $33 million and $26 million, respectively. 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 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. If the total amount of unrecognized tax benefits were recognized by the Company at one time, there would be a reduction of $151 million on the tax expense for that period. Between 2011 and 2019, 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 December 31, 2020, these assessments totaled $10 million in tax and up to $42 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 $31 million in tax and $27 million in interest (adjusted for variation in currency exchange rates as of December 31, 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 December 31, 2020, this assessment was $99 million in tax and $38 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. In April 2020, the court issued a ruling unfavorable to the Company and in October 2020, assigned a third party expert to establish a valuation by early 2021. 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 December 31, 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. During the quarter ended June 30, 2020, the ongoing litigation between the Company’s wholly-owned subsidiary, ADM do Brasil Ltda., and the Brazilian Federal Revenue Service was favorably resolved without any tax due. The litigation related to assessments received with respect to the tax deductibility of commodity hedging losses and related expenses. The Company does not expect to receive any additional tax assessments with respect to this issue.

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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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