INCOME TAXES (Tables)

12 Months Ended

Nov. 03, 2019

INCOME TAXES

Tax Reform Measurement Period Adjustments and Effects on Results

The income tax expense (benefit) for the net deferred tax asset remeasurement and the repatriation tax adjustments in millions of dollars follow:

	Equipment		Financial
	Operations		Services		Total
2019
Net deferred tax asset remeasurement	$	1	$	5	$	6
Deemed earnings repatriation tax		(66)		(8)		(74)
Total discrete tax expense (benefit)	$	(65)	$	(3)	$	(68)
2018
Net deferred tax asset remeasurement	$	768	$	(354)	$	414
Deemed earnings repatriation tax		277		13		290
Total discrete tax expense (benefit)	$	1,045	$	(341)	$	704

Provision for Income Taxes by Taxing Jurisdiction and by Significant Component

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

	2019		2018		2017
Current:
U.S.:
Federal	$	545	$	(268)	$	360
State		72		123		48
Foreign		700		392		463
Total current		1,317		247		871
Deferred:
U.S.:
Federal		(345)		1,233		59
State		(26)		(40)		7
Foreign		(94)		287		34
Total deferred		(465)		1,480		100
Provision for income taxes	$	852	$	1,727	$	971

Comparison of Statutory and Effective Income Tax Provision

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

	2019		2018		2017
U.S. federal income tax provision at the U.S. statutory rate (2019 - 21 percent, 2018 - 23.3 percent, 2017 - 35 percent)	$	859	$	950	$	1,104
Increase (decrease) resulting from:
Net deferred tax asset remeasurement		6		414
Deemed earnings repatriation tax		(74)		290
Other effects of tax reform		(33)		42
Differences in taxability of foreign earnings		(94)		(92)		(83)
Valuation allowance on deferred taxes		28		50		89
Research and business tax credits		(85)		(43)		(63)
State and local income taxes, net of federal income tax benefit		47		59		37
Excess tax benefits on equity compensation		(40)		(49)		(30)
Tax rates on foreign earnings		183		44		(84)
Unrecognized tax benefits		(28)		30		9
Other—net		83		32		(8)
Provision for income taxes	$	852	$	1,727	$	971

Analysis of the 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 the deferred income tax assets and liabilities at November 3, 2019 and October 28, 2018 in millions of dollars follows:

	2019				2018
	Deferred		Deferred		Deferred		Deferred
	Tax		Tax		Tax		Tax
	Assets		Liabilities		Assets		Liabilities
OPEB liabilities	$	1,015			$	984
Lease transactions			$	599			$	850
Tax loss and tax credit carryforwards		781				713
Accrual for sales allowances		518				464
Tax over book depreciation				339				357
Goodwill and other intangible assets				378				458
Pension liability - net		186				45
Allowance for credit losses		70				115
Accrual for employee benefits		207				72
Share-based compensation		68				58
Deferred compensation		39				35
Undistributed foreign earnings								6
Foreign unrealized losses		8				10
Other items		367		311		346		261
Less valuation allowances		(661)				(658)
Deferred income tax assets and liabilities	$	2,598	$	1,627	$	2,184	$	1,932

Reconciliation of Unrecognized Tax Benefits

A reconciliation of the total amounts of unrecognized tax benefits at November 3, 2019, October 28, 2018, and October 29, 2017 in millions of dollars follows:

	2019		2018		2017
Beginning of year balance	$	279	$	221	$	198
Increases to tax positions taken during the current year		30		36		35
Increases to tax positions taken during prior years		357		62		13
Decreases to tax positions taken during prior years		(30)		(39)		(17)
Decreases due to lapse of statute of limitations		(6)		(15)		(11)
Acquisitions*				31
Settlements		(75)		(5)		(1)
Foreign exchange		(2)		(12)		4
End of year balance	$	553	$	279	$	221

*       See Note 4.