INCOME TAXES

12 Months Ended

Oct. 29, 2023

INCOME TAXES

INCOME TAXES

8. INCOME TAXES

We are subject to income taxes in a number of jurisdictions. We determine our income tax provision 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	$	1,803	$	514	$	899
State		386		136		183
Foreign		1,472		1,423		1,017
Total current		3,661		2,073		2,099
Deferred:
U.S.:
Federal		(485)		29		(303)
State		(65)		24		(45)
Foreign		(240)		(119)		(93)
Total deferred		(790)		(66)		(441)
Provision for income taxes	$	2,871	$	2,007	$	1,658

Based upon the location of our operations, the consolidated income before income taxes in the U.S. in 2023, 2022, and 2021 was $7.8 billion, $5.0 billion, and $4.1 billion, respectively, and in foreign countries was $5.2 billion, $4.1 billion, and $3.5 billion, respectively. Certain foreign operations are branches or partnerships of Deere & Company and are subject to U.S. as well as foreign income tax regulations. The pretax income by location and the preceding analysis of the income tax provision by taxing jurisdiction are not directly related.

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

	2023		2022		2021
U.S. federal income tax provision at the U.S. statutory rate (21 percent)	$	2,734	$	1,917	$	1,597
State and local taxes, net of federal effect		266		133		119
Other impacts of Tax Cuts and Jobs Act of 2017		(58)		(29)		(85)
Rate differential on foreign subsidiaries		142		121		148
Research and business tax credits		(107)		(65)		(48)
Excess tax benefits on equity compensation		(49)		(55)		(79)
Valuation allowances		9		179		18
Other - net		(66)		(194)		(12)
Provision for income taxes	$	2,871	$	2,007	$	1,658

At October 29, 2023, undistributed profits of subsidiaries outside the U.S. of approximately $5.1 billion are considered indefinitely reinvested. Determination of the amount of a 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 the deferred income tax assets and liabilities at October 29, 2023 and October 30, 2022 follows:

	2023				2022
	Deferred		Deferred		Deferred		Deferred
	Tax		Tax		Tax		Tax
	Assets		Liabilities		Assets		Liabilities
Accrual for employee benefits	$	439			$	304
Accrual for sales allowances		884				579
Allowance for credit losses		79				90
Amortization of R&D expenditures		492
Deferred compensation		45				44
Goodwill and other intangible assets			$	166			$	178
Lessee lease transactions		68		61		62		57
Lessor lease transactions				581				310
OPEB - net		193				213
Pension - net				424				532
Share-based compensation		38				41
Tax loss and tax credit carryforwards		1,518				1,405
Tax over book depreciation				198				174
Unearned revenue		177				154
Other items		681		278		487		254
Less: valuation allowances		(1,612)				(1,545)
Deferred income tax assets and liabilities	$	3,002	$	1,708	$	1,834	$	1,505

Deere & Company files a consolidated federal income tax return in the U.S., which includes the wholly-owned financial services subsidiaries. These subsidiaries account for income taxes as if they filed separate income tax returns, with a modification for realizability of certain tax benefits.

At October 29, 2023, tax loss and tax credit carryforwards of $1,518 were available with $1,031 expiring from 2024 through 2043 and $487 with an indefinite carryforward period.

A reconciliation of unrecognized tax benefits at October 29, 2023, October 30, 2022, and October 31, 2021 follows:

	2023		2022		2021
Beginning of year balance	$	891	$	811	$	668
Increases to tax positions taken during the current year		68		98		81
Increases to tax positions taken during prior years		164		29		100
Decreases to tax positions taken during the current year		(3)
Decreases to tax positions taken during prior years		(209)		(18)		(23)
Decreases due to lapse of statute of limitations		(10)		(7)		(12)
Other		(4)		2		(3)
Foreign exchange		10		(24)
End of year balance	$	907	$	891	$	811

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 $329 and $303, 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. The U.S. Internal Revenue Service (IRS) has completed the examination of our 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.