XML 38 R15.htm IDEA: XBRL DOCUMENT v3.22.0.1
Income Taxes (Notes)
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
We recognize income tax-related penalties in Provision for/(Benefit from) income taxes on our consolidated income statements. We recognize income tax-related interest income and interest expense in Other income/(loss), net on our consolidated income statements.

We account for U.S. tax on global intangible low-taxed income in the period incurred.

Valuation of Deferred Tax Assets and Liabilities

Deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences that exist between the financial statement carrying value of assets and liabilities and their respective tax bases, and operating loss and tax credit carryforwards on a taxing jurisdiction basis. We measure deferred tax assets and liabilities using enacted tax rates that will apply in the years in which we expect the temporary differences to be recovered or paid.

Our accounting for deferred tax consequences represents our best estimate of the likely future tax consequences of events that have been recognized on our consolidated financial statements or tax returns and their future probability.  In assessing the need for a valuation allowance, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets.  If, based on the weight of available evidence, it is more likely than not that the deferred tax assets will not be realized, we record a valuation allowance.
NOTE 7. INCOME TAXES (Continued)

Components of Income Taxes

Components of income taxes excluding cumulative effects of changes in accounting principles, other comprehensive income, and equity in net results of affiliated companies accounted for after-tax for the years ended December 31 were as follows:
 201920202021
Income/(Loss) before income taxes (in millions)
   
U.S.$2,656 $(231)$10,043 
Non-U.S.(3,296)(885)7,737 
Total$(640)$(1,116)$17,780 
Provision for/(Benefit from) income taxes (in millions)   
Current   
Federal$(101)$(23)$102 
Non-U.S.738 554 598 
State and local33 (45)26 
Total current670 486 726 
Deferred   
Federal(1,190)(523)2,290 
Non-U.S.(70)168 (3,254)
State and local(134)29 108 
Total deferred(1,394)(326)(856)
Total$(724)$160 $(130)
Reconciliation of effective tax rate   
U.S. statutory rate21.0 %21.0 %21.0 %
Non-U.S. tax rates under U.S. rates46.9 (2.6)1.3 
State and local income taxes12.4 8.9 0.5 
General business credits67.0 35.1 (2.3)
Dispositions and restructurings (a)45.5 (0.4)(18.8)
U.S. tax on non-U.S. earnings(49.2)27.0 2.4 
Prior year settlements and claims(5.0)8.3 (0.3)
Tax incentives20.7 (6.0)(0.6)
Enacted change in tax laws(12.5)1.5 1.1 
Valuation allowances(18.7)(108.8)(4.7)
Other(15.0)1.7 (0.3)
Effective rate113.1 %(14.3)%(0.7)%
__________
(a)Includes a benefit of $2.9 billion to recognize deferred tax assets resulting from changes in our global tax structure in 2021.

On December 22, 2017, the Tax Cuts and Jobs Act (H.R. 1) was signed into law. This act includes, among other items, a permanent reduction to the U.S. corporate income tax rate from 35% to 21% effective January 1, 2018, and requires immediate taxation of accumulated, unremitted non-U.S. earnings. For the year ended December 31, 2019, our tax provision includes additional expense of $95 million related to the impact of the act and subsequently issued Treasury regulations on our global operations.

During 2020, based on all available evidence, we established U.S. valuation allowances of $1.3 billion, primarily against tax credits as it was deemed more likely than not that these deferred tax assets would not be realized. In assessing the realizability of deferred tax assets, we consider the trade-offs between cash preservation and cash outlays to preserve tax credits. In 2021, we reversed $918 million of the previously established U.S. valuation allowances. The reversal primarily reflects a change in our intent to pursue planning actions involving cash outlays to preserve tax credits.

At December 31, 2021, $16.7 billion of non-U.S. earnings are considered indefinitely reinvested in operations outside the United States, for which deferred taxes have not been provided. Quantification of the deferred tax liability, if any, associated with indefinitely reinvested basis differences is not practicable.
NOTE 7. INCOME TAXES (Continued)

Components of Deferred Tax Assets and Liabilities

The components of deferred tax assets and liabilities at December 31 were as follows (in millions):
 20202021
Deferred tax assets  
Employee benefit plans$4,760 $2,320 
Net operating loss carryforwards1,584 4,163 
Tax credit carryforwards11,037 10,437 
Research expenditures1,321 1,117 
Dealer and dealers’ customer allowances and claims2,145 1,944 
Other foreign deferred tax assets729 2,005 
All other2,335 2,353 
Total gross deferred tax assets23,911 24,339 
Less: Valuation allowances(1,981)(1,067)
Total net deferred tax assets21,930 23,272 
Deferred tax liabilities  
Leasing transactions3,299 2,103 
Depreciation and amortization (excluding leasing transactions)3,218 2,881 
Finance receivables574 756 
Carrying value of investments144 2,149 
Other foreign deferred tax liabilities839 893 
All other1,971 2,275 
Total deferred tax liabilities10,045 11,057 
Net deferred tax assets/(liabilities)$11,885 $12,215 

Deferred tax assets for net operating losses and other temporary differences related to certain non-U.S. operations have not been recorded as a result of elections to tax these operations simultaneously in U.S. tax returns. During 2021, we restructured a significant portion of these operations resulting in recognition of $2.9 billion of net deferred tax assets. Reversal of the remaining elections would result in the recognition of $4.3 billion of deferred tax assets, subject to valuation allowance testing.

Operating loss carryforwards for tax purposes were $11.4 billion at December 31, 2021, resulting in a deferred tax asset of $4.2 billion.  There is no expiration date for $3.2 billion of these losses. A substantial portion of the remaining losses will expire beyond 2024. Tax credits available to offset future tax liabilities are $10.4 billion. The majority of these credits have a remaining carryforward period of five years or more. Tax benefits of operating loss and tax credit carryforwards are evaluated on an ongoing basis, including a review of historical and projected future operating results, the eligible carryforward period, and available tax planning strategies. In our evaluation, we anticipate making tax elections that change the order of tax credit carryforward utilization on U.S. tax returns.
NOTE 7. INCOME TAXES (Continued)

Other

A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31 were as follows (in millions):
 20202021
Beginning balance$1,943 $1,913 
Increase – tax positions in prior periods137 1,054 
Increase – tax positions in current period25 25 
Decrease – tax positions in prior periods(131)(54)
Settlements(61)1 
Lapse of statute of limitations— (7)
Foreign currency translation adjustment— (22)
Ending balance$1,913 $2,910 

The amount of unrecognized tax benefits that would affect the effective tax rate if recognized was $1.9 billion and $2.9 billion as of December 31, 2020 and 2021, respectively.

Examinations by tax authorities have been completed through the following years: 2004 in India, 2006 in Mexico, 2008 in Germany, 2010 in Spain, 2011 in Canada, 2014 in the United States and the United Kingdom, and 2016 in China.  

Net interest on income taxes was $29 million of expense, $2 million of expense, and $7 million of income for the years ended December 31, 2019, 2020, and 2021, respectively. These were reported in Other income/(loss), net in our consolidated income statements. Net payables for tax related interest were $36 million and $32 million as of December 31, 2020 and 2021, respectively.

Cash paid for income taxes was $599 million, $421 million, and $568 million in 2019, 2020, and 2021, respectively.