Income Taxes

12 Months Ended

Oct. 29, 2023

Income Taxes

Income Taxes

Note 14. Income Taxes

We are subject to income taxes in a number of jurisdictions. The income tax provision is determined using the asset and liability method. The provision for income taxes by taxing jurisdiction and by significant component consisted of the following:

	2023		2022		2021
Current:
U.S.:
Federal	$	(98.6)	$	200.8	$	231.1
State		(33.7)		10.8		15.2
Foreign		41.0		29.3		37.2
Total current		(91.3)		240.9		283.5
Deferred:
U.S.:
Federal		230.6		(48.9)		(75.4)
State		29.1		3.2		1.9
Foreign		(2.5)		10.4		(16.2)
Total deferred		257.2		(35.3)		(89.7)
Provision for income taxes	$	165.9	$	205.6	$	193.8

Our taxable income is included in the consolidated U.S. income tax return and various state returns of Deere & Company. Under tax sharing arrangements with Deere & Company, our provision for income taxes is generally recorded as if Capital Corporation and each of our subsidiaries filed separate income tax returns, with a modification for realizability of certain tax benefits. The difference between the provision for income taxes recorded by us and the provision for income taxes calculated on an unmodified, separate return basis was not material in 2023, 2022, or 2021.

The amounts due from (payable to) Deere & Company under the tax sharing arrangements at October 29, 2023 and October 30, 2022 were as follows:

	2023		2022
Tax sharing receivables	$	43.8	$	6.3
Tax sharing payables		(7.5)		(9.3)

The tax sharing receivables are included in “Other receivables” and the payables are included in “Accounts payable and accrued expenses.”

A comparison of the statutory and effective income tax provision and reasons for related differences follows:

	2023		2022		2021
U.S. federal income tax provision at a statutory rate (21 percent)	$	154.1	$	187.8	$	184.4
Increase (decrease) resulting from:
Tax rates on foreign earnings		1.4		6.0		5.5
State and local income taxes, net of federal income tax benefit		.4		11.3		13.7
Other - net		10.0		.5		(9.8)
Provision for income taxes	$	165.9	$	205.6	$	193.8

At October 29, 2023, accumulated earnings of $87.0 in certain subsidiaries outside the U.S. are expected to remain indefinitely reinvested outside of the U.S. As such, a provision for foreign withholding taxes has not been made. Determination of the amount of foreign withholding tax liability on these unremitted earnings is not practicable.

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 29, 2023 and October 30, 2022 was as follows:

	2023				2022
	Deferred		Deferred		Deferred		Deferred
	Tax		Tax		Tax		Tax
	Assets		Liabilities		Assets		Liabilities
Lease transactions	$	1.2	$	562.6	$	.1	$	262.6
Accrual for retirement and other benefits		3.8				5.3
Accrual for other employee benefits		19.6				14.3
Allowance for credit losses		39.8				32.6
Net unrealized gain on derivatives/investments				8.8				26.5
Tax loss and tax credit carryforwards		27.6				11.6
Federal taxes on deferred state tax deductions		4.9				7.8
Miscellaneous accruals and other		61.1		8.1		46.8		4.1
Less valuation allowances		(10.2)				(8.3)
Deferred income tax assets and liabilities	$	147.8	$	579.5	$	110.2	$	293.2

At October 29, 2023, tax loss and tax credit carryforwards of $27.6 were available, with $26.3 expiring from 2029 through 2043 and $1.3 with an indefinite carryforward period.

A reconciliation of the total amounts of unrecognized tax benefits at October 29, 2023, October 30, 2022, and October 31, 2021 was as follows:

	2023		2022		2021
Beginning of year balance	$	36.5	$	34.9	$	33.3
Increases to tax positions taken during the current year		15.0		9.3		11.2
Increases to tax positions taken during prior years		3.2		1.2		1.4
Decreases to tax positions taken during prior years		(6.9)		(6.1)		(5.8)
Decreases due to lapse of statute of limitations		(2.6)		(2.7)		(3.7)
Settlements		(.8)		(.1)		(1.5)
End of year balance	$	44.4	$	36.5	$	34.9

The amount of unrecognized tax benefits at October 29, 2023 and October 30, 2022 that would impact the effective tax rate if the tax benefits were recognized was $26.8 and $25.2, respectively. The remaining liability was related to tax positions for which there are offsetting tax receivables, or the uncertainty was only related to timing. We expect that any reasonably possible change in the amounts of unrecognized tax benefits in the next twelve months would not be significant.

We file our tax returns according to the tax laws of the jurisdictions in which we operate, which includes the U.S. federal jurisdiction, and various state and foreign jurisdictions. We are included in the consolidated U.S. income tax return and various state returns of Deere & Company. The U.S. Internal Revenue Service has completed the examination of Deere & Company’s federal income tax returns for periods prior to 2015. The federal income tax returns for years 2015 to 2020 are currently under examination. Various state and foreign income tax returns also remain subject to examination by taxing authorities.

Our policy is to recognize interest related to income taxes in “Interest expense” and “Other income,” and recognize penalties in “Administrative and operating expenses.” The amount of interest and penalties recognized was not significant for any of the periods presented. At October 29, 2023 and October 30, 2022, the liability for accrued interest and penalties totaled $12.3 and $12.8, respectively.