Taxes on Earnings

9 Months Ended

Jul. 31, 2023

Income Tax Disclosure [Abstract]

Taxes on Earnings

Taxes on Earnings

Provision for Taxes

HP’s effective tax rate was 18.2% and 5.4% for the three months ended July 31, 2023 and 2022, respectively, and (9.8)% and 14.2% for the nine months ended July 31, 2023 and 2022, respectively. The difference between the U.S. federal statutory tax rate of 21% and HP’s effective tax rate for the three months ended July 31, 2023 was primarily due to favorable tax rates associated with certain earnings from HP’s operations in lower-tax jurisdictions throughout the world. For the nine months ended July 31, 2023, the difference was primarily due to tax effects of internal reorganization. The difference between the U.S. federal statutory tax rate of 21% and HP’s effective tax rate for the three and nine months ended July 31, 2022 was primarily due to tax effects of internal reorganization and favorable tax rates associated with certain earnings from HP’s operations in lower-tax jurisdictions throughout the world.

During the three and nine months ended July 31, 2023, HP recorded $32 million and $724 million, respectively, of net income tax benefits related to discrete items in the provision for taxes. The nine months ended July 31, 2023 included benefits of $697 million related to tax effects of internal reorganization. The three and nine months ended July 31, 2023 also included benefits of $16 million and $82 million related to restructuring charges, $51 million and $15 million related to the filing of tax returns in various jurisdictions, and $10 million and $37 million related to acquisition and divestiture charges, respectively. These benefits were partially offset by income tax charges of $2 million and $60 million related to audit settlements in various jurisdictions, $17 million and $32 million of uncertain tax position charges, and $27 million and $25 million related to extinguishment of debt for the three and nine months ended July 31, 2023, respectively. During the three and nine months ended July 31, 2023, discrete items in the provision for taxes and excess tax benefits associated with stock options, restricted stock units and performance-adjusted restricted stock units were immaterial.

During the three and nine months ended July 31, 2022, HP recorded $150 million and $111 million, respectively, of net income tax benefits related to discrete items in the provision for taxes. These amounts included income tax benefits of $167 million and $150 million related to the filing of tax returns in various jurisdictions for the three and nine months ended July 31, 2022 and $3 million and $31 million related to restructuring charges for the three and nine months ended July 31, 2022, respectively. The three and nine months ended July 31, 2022 also included $87 million of tax benefits related to internal reorganization. These benefits were partially offset by income tax charges of $98 million and $93 million related to uncertain tax positions and $10 million and $19 million related to audit settlements in various jurisdictions for the three and nine months ended July 31, 2022, respectively. The nine months ended July 31, 2022 also included tax charges of $55 million related to withholding taxes on undistributed foreign earnings. In addition to the discrete items mentioned above, HP recorded excess tax benefits of $32 million associated with stock options, restricted stock units and performance-adjusted restricted stock units for the nine months ended July 31, 2022.

Uncertain Tax Positions

As of July 31, 2023, the amount of gross unrecognized tax benefits was $1.2 billion, of which up to $861 million would affect HP’s effective tax rate if realized. Total gross unrecognized tax benefits increased by $106 million for the nine months ended July 31, 2023. HP recognizes interest income from favorable settlements and interest expense and penalties accrued on unrecognized tax benefits in the provision for taxes in the Consolidated Condensed Statements of Earnings. As of July 31, 2023 and 2022, HP had accrued $98 million and $76 million, respectively, for interest and penalties.

HP engages in continuous discussions and negotiations with taxing authorities regarding tax matters in various jurisdictions. HP expects complete resolution of certain tax years with various tax authorities within the next 12 months. HP believes it is reasonably possible that its existing gross unrecognized tax benefits may be reduced by $44 million within the next 12 months, affecting HP’s effective tax rate if realized.

HP is subject to income tax in the United States and approximately 60 other countries and is subject to routine corporate income tax audits in many of these jurisdictions. In addition, HP is subject to numerous ongoing audits by federal, state and foreign tax authorities. The Internal Revenue Service (“IRS”) is conducting an audit of HP’s 2018 and 2019 income tax returns.