Income Taxes (Tables)

12 Months Ended

Oct. 28, 2018

Income Taxes

Tax Reform Measurement Period Adjustments and Effects on Results

The income tax (benefit) expense for the net deferred tax liability remeasurement and the repatriation tax in 2018 were as follows (in millions of dollars):

	2018
Net deferred tax liability remeasurement	$	(362.9)
Deemed earnings repatriation tax		20.6
Total discrete tax (benefit) expense	$	(342.3)

Provision (Credit) for Income Taxes by Taxing Jurisdiction and by Significant Component

The provision (credit) for income taxes by taxing jurisdiction and by significant component consisted of the following (in millions of dollars):

	2018		2017		2016
Current:
U.S.:
Federal	$	(244.5)	$	50.0	$	(119.0)
State		6.0		3.1		4.4
Foreign		17.6		25.6		17.1
Total current		(220.9)		78.7		(97.5)
Deferred:
U.S.:
Federal		(3.4)		93.5		273.4
State		4.2		.3		(.7)
Foreign		2.9		(1.0)		5.1
Total deferred		3.7		92.8		277.8
Provision (credit) for income taxes	$	(217.2)	$	171.5	$	180.3

Pro forma Provision (Credit) for Income Taxes and Net Income

In 2018, the Company recorded a tax benefit under the tax sharing agreement that was $19.0 million higher than an unmodified, separate return basis. The additional tax benefit is related to deductions that will be included in the 2018 consolidated U.S. income tax return of Deere & Company at Deere & Company’s 2018 U.S. statutory income tax rate of 23.3 percent. On an unmodified, separate return basis, a net operating loss would have been generated and a deferred tax asset recorded in 2018 at a U.S. statutory income tax rate of 21 percent. The pro forma provision (credit) for income taxes and net income on this basis would have been as follows (in millions of dollars):

	2018
Provision (credit) for income taxes assuming computation on an unmodified, separate return basis	$	(198.2)
Pro forma net income attributable to the Company		780.2

Comparison of Statutory and Effective Income Tax Provision

A comparison of the statutory and effective income tax provision and reasons for related differences follows (in millions of dollars):

	2018		2017		2016
U.S. federal income tax provision at a statutory rate (2018 - 23.3 percent, 2017 and 2016 - 35 percent)	$	135.3	$	174.6	$	182.0
Increase (decrease) resulting from:
Net deferred tax liability remeasurement		(362.9)
Deemed earnings repatriation tax		20.6
Other effects of tax reform		(8.5)
Tax rates on foreign earnings		2.1		(6.8)		(5.9)
Municipal lease income not taxable		(.8)		(1.3)		(1.4)
State and local income taxes, net of federal income tax benefit		7.8		2.2		2.4
Other – net		(10.8)		2.8		3.2
Provision (credit) for income taxes	$	(217.2)	$	171.5	$	180.3

Analysis of Deferred Income Tax Assets and Liabilities

Deferred income taxes arise because there are certain items that are treated differently for financial accounting than for income tax reporting purposes. An analysis of deferred income tax assets and liabilities at October 28, 2018 and October 29, 2017 was as follows (in millions of dollars):

	2018				2017
	Deferred		Deferred		Deferred		Deferred
	Tax		Tax		Tax		Tax
	Assets		Liabilities		Assets		Liabilities
Lease transactions			$	856.5			$	898.4
Tax over book depreciation				5.2				2.5
Deferred retail note finance income				1.6				4.6
Accrual for retirement and other benefits				.5	$	29.9
Allowance for credit losses	$	31.8				54.5
Tax loss and tax credit carryforwards		33.6				29.5
Federal taxes on deferred state tax deductions		13.4				14.5
Miscellaneous accruals and other		4.1		3.9		1.7		2.3
Less valuation allowances		(2.6)				(2.9)
Deferred income tax assets and liabilities	$	80.3	$	867.7	$	127.2	$	907.8

Reconciliation of Total Amounts of Unrecognized Tax Benefits

A reconciliation of the total amounts of unrecognized tax benefits at October 28, 2018, October 29, 2017, and October 30, 2016 was as follows (in millions of dollars):

	2018		2017		2016
Beginning of year balance	$	35.5	$	36.5	$	36.0
Increases to tax positions taken during the current year		9.1		7.6		9.7
Increases to tax positions taken during prior years		.9		1.2		1.1
Decreases to tax positions taken during prior years		(4.6)		(5.9)		(7.3)
Decreases due to lapse of statute of limitations		(4.6)		(3.9)		(3.0)
End of year balance	$	36.3	$	35.5	$	36.5