114
Table of Contents
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Geographic Allocation of Income and Provision (Credit) for Income Taxes
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In millions
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2017
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2016
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2015
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Income (Loss) from continuing operations before income taxes
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Domestic 1, 2, 3
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$
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(2,804
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)
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$
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485
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$
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5,313
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Foreign
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3,997
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3,928
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4,617
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Income from continuing operations before income taxes
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$
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1,193
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$
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4,413
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$
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9,930
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Current tax expense (benefit)
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Federal
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$
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(98
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)
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$
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91
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$
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583
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State and local
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22
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21
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38
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Foreign
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1,766
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1,156
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1,221
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Total current tax expense
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$
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1,690
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$
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1,268
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$
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1,842
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Deferred tax (benefit) expense
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Federal 4
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$
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(1,764
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)
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$
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(1,255
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)
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$
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358
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State and local
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8
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(10
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)
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(8
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)
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Foreign
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(410
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)
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6
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(45
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)
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Total deferred tax (benefit) expense
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$
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(2,166
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)
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$
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(1,259
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)
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$
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305
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Provision (Credit) for income taxes on continuing operations
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$
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(476
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)
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$
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9
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$
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2,147
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Income from continuing operations, net of tax
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$
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1,669
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$
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4,404
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$
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7,783
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1.
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In 2017, the domestic component of "Income (Loss) from continuing operations before income taxes" included a $1.5 billion charge recognized in "Cost of sales" related to the fair value step-up of inventories assumed in the Merger and the acquisition of the H&N Business, a $1.5 billion goodwill impairment charge, $874 million of restructuring charges related to the Synergy Program and $308 million of income from portfolio actions, primarily related to the Merger remedy actions. See Notes 3 and 4 for additional information.
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2.
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In 2016, the domestic component of "Income (Loss) from continuing operations before income taxes" included approximately $2.1 billion ( $3.5 billion in 2015) and the foreign component contained zero ( $1.1 billion in 2015) of income from portfolio actions, primarily related to the DCC Transaction. See Notes 3 , 4 and 6 for additional information.
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3. In 2016, the domestic component of "Income (Loss) from continuing operations before income taxes" included approximately $2.6 billion of expenses related to the urethane matters class action lawsuit and opt-out cases settlements, asbestos-related charge and charges for environmental matters. See Note 16 for additional information.
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4.
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The 2016 amount reflects the tax impact of accrued one-time items and reduced domestic income which limited the utilization of tax credits.
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Reconciliation to U.S. Statutory Rate
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2017
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2016
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2015
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Statutory U.S. federal income tax rate
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35.0
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%
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35.0
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%
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35.0
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%
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Equity earnings effect
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(11.0
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)
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(1.2
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)
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(1.8
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)
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Foreign income taxed at rates other than 35% 1
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(26.7
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)
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(7.0
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(4.0
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U.S. tax effect of foreign earnings and dividends
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(2.5
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)
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(4.6
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)
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1.3
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Unrecognized tax benefits
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2.9
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(0.8
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)
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0.8
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Acquisitions, divestitures and ownership restructuring activities 2, 3
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6.5
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(21.2
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)
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(9.5
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)
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Exchange gains (losses), net
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2.4
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—
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—
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Impact of U.S. Tax Reform
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(90.9
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)
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—
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—
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State and local income taxes
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6.1
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0.2
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0.6
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Goodwill impairment
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44.9
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—
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—
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Excess tax benefits from stock-based compensation 4
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(8.5
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)
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—
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—
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Other - net
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1.9
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(0.2
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)
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(0.8
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)
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Effective tax rate
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(39.9
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)%
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0.2
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%
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21.6
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%
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1.
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Includes the impact of valuation allowances in foreign jurisdictions.
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2.
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See Notes 3 , 4 and 6 for additional information.
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3.
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Includes a net tax benefit of $261 million related to an internal entity restructuring associated with the Intended Business Separations.
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4.
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Reflects the impact of the adoption of ASU 2016-09, which resulted in the recognition of excess tax benefits related to stock-based compensation in the "Provision (Credit) for income taxes on continuing operations." See Note 1 for additional information.
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115
Table of Contents
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Deferred Tax Balances at Dec 31
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2017
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2016
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In millions
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Assets
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Liabilities
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Assets
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Liabilities
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Property
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$
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508
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$
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3,634
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$
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307
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$
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2,860
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Tax loss and credit carryforwards
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3,425
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—
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2,450
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—
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Postretirement benefit obligations
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4,227
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199
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3,715
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75
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Other accruals and reserves
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1,661
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190
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1,964
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883
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Intangibles
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460
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7,296
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128
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1,536
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Inventory
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165
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768
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50
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197
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Long-term debt
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109
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—
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—
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—
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Investments
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295
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611
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179
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119
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Unrealized exchange gains (losses), net
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—
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71
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—
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—
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Other – net
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806
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535
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737
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643
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Subtotal
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$
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11,656
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$
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13,304
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$
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9,530
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$
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6,313
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Valuation allowances 1
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(2,749
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)
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—
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(1,061
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—
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Total
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$
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8,907
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$
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13,304
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$
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8,469
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$
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6,313
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Net Deferred Tax (Liability) Asset
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$
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(4,397
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)
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$
|
2,156
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1.
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Primarily related to the realization of recorded tax benefits on tax loss carryforwards from operations in the United States, Brazil, Luxembourg and Asia Pacific.
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