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INCOME TAXES | 12 Months Ended
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Dec. 28, 2024
Income Tax Disclosure [Abstract] |
Income Tax Disclosure [Text Block] | INCOME TAXES The components of income before income taxes and the provision for income taxes were as follows:
(millions) |  | 2024 |  | 2023 |  | 2022
Income before income taxes |  |  |  |  |  |
United States |  | $ | 891 |  |  | $ | 577 |  |  | $ | 360 |
Foreign |  | 763 |  |  | 463 |  |  | 542 |
|  | 1,654 |  |  | 1,040 |  |  | 902 |
Income taxes |  |  |  |  |  |
Current tax provision |  |  |  |  |  |
Federal |  | 74 |  |  | 153 |  |  | 110 |
State |  | 35 |  |  | 29 |  |  | 19 |
Foreign |  | 170 |  |  | 114 |  |  | 101 |
|  | 279 |  |  | 296 |  |  | 230 |
Deferred tax provision (benefit) |  |  |  |  |  |
Federal |  | 46 |  |  | (49) |  |  | (43) |
State |  | 8 |  |  | 23 |  |  | (6) |
Foreign |  | (29) |  |  | (12) |  |  | (1) |
|  | 25 |  |  | (38) |  |  | (50) |
Total income taxes |  | $ | 304 |  |  | $ | 258 |  |  | $ | 180 |
The difference between the U.S. federal statutory tax rate and the Company’s effective income tax rate was:
|  | 2024 |  | 2023 |  | 2022
U.S. statutory income tax rate |  | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Foreign rates varying from U.S. statutory rate |  | (1.3) |  |  | (2.9) |  |  | (3.6) |
State income taxes, net of federal benefit |  | 2.3 |  |  | 2.0 |  |  | 1.0 |
Cost (benefit) of remitted and unremitted foreign earnings |  | (0.3) |  |  | 1.7 |  |  | 2.0 |
Net change in valuation allowance |  | (1.7) |  |  | 3.0 |  |  | 4.6 |
Statutory rate changes, deferred tax impact |  | 0.1 |  |  | 0.1 |  |  | 0.3 |
Divestiture |  | (2.5) |  |  | 2.2 |  |  | — |
Foreign derived intangible income |  | (0.9) |  |  | (1.3) |  |  | (1.6) |
Other |  | 1.7 |  |  | (1.0) |  |  | (3.7) |
Effective income tax rate |  | 18.4 | % |  | 24.8 | % |  | 20.0 | %
As presented in the preceding table, the Company’s 2024 consolidated effective tax rate was 18.4%, as compared to 24.8% in 2023 and 20.0% in 2022. In September 2024, the Company entered into an agreement to sell a foreign subsidiary in Egypt. In conjunction with the agreement, the Company recognized a $41 million domestic tax benefit during the third quarter of 2024 for the excess of tax basis over book on the Company's investment in the subsidiary. The lower reported effective tax rate versus the prior year is due primarily to this domestic tax benefit. The higher effective tax rate for the year ended December 30, 2023 as compared to prior year was due primarily to a valuation allowance recorded in the fourth quarter of 2023 in conjunction with the separation of our North America cereal business. For the year ended December 31, 2022 the effective tax rate was favorably impacted by mark-to-market loss items and the resulting impact on mix of earnings. As of December 28, 2024, approximately $825 million of unremitted earnings were considered indefinitely reinvested. The unrecognized deferred tax liability for these earnings is estimated at approximately $47 million. However, this estimate could change based on the manner in which the outside basis difference associated with these earnings reverses. Management monitors the Company’s ability to utilize certain future tax deductions, operating losses and tax credit carryforwards, prior to expiration. Changes resulting from management’s assessment will result in impacts to deferred tax assets and the corresponding impacts on the effective income tax rate. Valuation allowances were recorded to reduce deferred tax assets to an amount that will, more likely than not, be realized in the future. The total tax benefit of carryforwards at year-end 2024 and 2023 were $299 million and $350 million, respectively, with related valuation allowances at year-end 2024 and 2023 of $249 million and $300 million, respectively. Of the total carryforwards at year-end 2024, $22 million expire in 5 years or less, $68 million expire in 2029 and later, and $209 million do not expire. The following table provides an analysis of the Company’s deferred tax assets and liabilities as of year-end 2024 and 2023:
|  | Deferred tax assets |  | Deferred tax liabilities
(millions) |  | 2024 |  | 2023 |  | 2024 |  | 2023
U.S. state income taxes |  | $ | — |  |  | $ | — |  |  | $ | 30 |  |  | $ | 9 |
Advertising and promotion-related |  | 15 |  |  | 12 |  |  | — |  |  | — |
Wages and payroll taxes |  | 12 |  |  | 15 |  |  | — |  |  | — |
Inventory valuation |  | 7 |  |  | 12 |  |  | — |  |  | — |
Employee benefits |  | 95 |  |  | 99 |  |  | — |  |  | — |
Operating loss, credit and other carryforwards |  | 299 |  |  | 350 |  |  | — |  |  | — |
Research and development capitalization |  | 53 |  |  | 40 |  |  | — |  |  | — |
Hedging transactions |  | — |  |  | — |  |  | 83 |  |  | 8 |
Depreciation and asset disposals |  | — |  |  | — |  |  | 147 |  |  | 177 |
Operating lease right-of-use assets |  | — |  |  | — |  |  | 150 |  |  | 149 |
Operating lease liabilities |  | 149 |  |  | 147 |  |  | — |  |  | — |
Trademarks and other intangibles |  | — |  |  | — |  |  | 442 |  |  | 466 |
Deferred compensation |  | 20 |  |  | 13 |  |  | — |  |  | — |
Stock options |  | 34 |  |  | 43 |  |  | — |  |  | — |
Other |  | 36 |  |  | 64 |  |  | — |  |  | — |
|  | 720 |  |  | 795 |  |  | 852 |  |  | 809 |
Less valuation allowance |  | (249) |  |  | (300) |  |  | — |  |  | — |
Total deferred taxes |  | $ | 471 |  |  | $ | 495 |  |  | $ | 852 |  |  | $ | 809 |
Net deferred tax asset (liability) |  | $ | (381) |  |  | $ | (314) |  |  |  |  |
Classified in balance sheet as: |  |  |  |  |  |  |  |
Other assets |  | $ | 160 |  |  | $ | 183 |  |  |  |  |
Deferred income taxes |  | (541) |  |  | (497) |  |  |  |  |
Net deferred tax asset (liability) |  | $ | (381) |  |  | $ | (314) |  |  |  |  |
The change in valuation allowance reducing deferred tax assets was:
(millions) |  | 2024 |  | 2023 |  | 2022
Balance at beginning of year |  | $ | 300 |  |  | $ | 263 |  |  | $ | 248 |
Additions charged to income tax expense |  | 16 |  |  | 65 |  |  | 44 |
Reductions credited to income tax expense |  | (41) |  |  | (34) |  |  | (3) |
Currency translation adjustments |  | (26) |  |  | 6 |  |  | (26) |
Balance at end of year |  | $ | 249 |  |  | $ | 300 |  |  | $ | 263 |
Uncertain tax positions The Company is subject to federal income taxes in the U.S. as well as various state, local, and foreign jurisdictions. The Company was chosen to participate in the Internal Revenue Service (IRS) Compliance Assurance Program (CAP) beginning with the 2008 tax year. As a result, with limited exceptions, the Company is no longer subject to U.S. federal examinations by the IRS for years prior to 2022. The Company is under examination for income and non-income tax filings in various state and foreign jurisdictions. As of December 28, 2024, the Company has classified $9 million of unrecognized tax benefits as a current tax liability. Managements estimate of reasonably possible changes in unrecognized tax benefits during the next twelve months consists of the current liability expected to be paid within one year, offset by approximately $3 million of projected additions during the next twelve months related primarily to ongoing intercompany transfer pricing activity. Management is currently unaware of any issues under review that could result in significant additional payments, accruals, or other material deviation in this estimate. Following is a reconciliation of the Company’s total gross unrecognized tax benefits as of the years ended December 28, 2024, December 30, 2023 and December 31, 2022. For the 2024 year, approximately $29 million represents the amount that, if recognized, would affect the Company’s effective income tax rate in future periods.
(millions) |  | 2024 |  | 2023 |  | 2022
Balance at beginning of year |  | $ | 32 |  |  | $ | 36 |  |  | $ | 50 |
Tax positions related to current year: |  |  |  |  |  |
Additions |  | 7 |  |  | 6 |  |  | 6 |
Tax positions related to prior years: |  |  |  |  |  |
Additions |  | 1 |  |  | 3 |  |  | 1 |
Reductions |  | (2) |  |  | (10) |  |  | (18) |
Settlements |  | (2) |  |  | (1) |  |  | (1) |
Lapses in statutes of limitation |  | (2) |  |  | (2) |  |  | (2) |
Balance at end of year |  | $ | 34 |  |  | $ | 32 |  |  | $ | 36 |
During the year ended December 28, 2024, the Company recognized $2 million of tax related interest, increasing the balance to $7 million at year-end. During the year ended December 30, 2023, the Company recognized $2 million of tax related interest benefit and paid tax-related interest totaling $1 million, reducing the balance to $5 million at year-end. During the year ended December 31, 2022, the Company recognized $1 million of tax-related interest, increasing the balance to $8 million at year-end.

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