Income Taxes

6 Months Ended

Jun. 27, 2020

Note 5. Income Taxes

The provision for income taxes in the accompanying statement of income differs from the provision calculated by applying the statutory federal income tax rate to income before provision for income taxes due to the following:


	Six Months Ended
	June 27,			June 29,
(In millions)	2020			2019

Statutory Federal Income Tax Rate	21		%	21		%

Provision for Income Taxes at Statutory Rate	$	437		$	464

Increases (Decreases) Resulting From:
Foreign rate differential	(110)			(184)
Foreign exchange loss on inter-company debt refinancing	—			(62)
Income tax credits	(226)			(137)
Global intangible low-taxed income	104			134
Foreign-derived intangible income	(29)			(24)
Withholding taxes	9			31


Transition tax and other impacts of U.S. tax reform	—			(20)
Provision for tax reserves, net	—			43
Excess tax benefits from stock options and restricted stock units	(50)			(50)
Basis difference on disposal of business	—			64


Other, net	2			17

Provision for Income Taxes	$	137		$	276

The company has operations and a taxable presence in approximately 50 countries outside the U.S. The company's effective income tax rate differs from the U.S. federal statutory rate each year due to certain operations that are subject to tax incentives, state and local taxes, and foreign taxes that are different than the U.S. federal statutory rate.

In the second quarter of 2020, the company implemented foreign tax credit planning in Sweden which resulted in $96 million of foreign tax credits, with no related incremental U.S. income tax expense.

Unrecognized Tax Benefits

As of June 27, 2020, the company had $1.55 billion of unrecognized tax benefits substantially all of which, if recognized, would reduce the effective tax rate.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:


(In millions)	2020

Balance at Beginning of Year	$	1,552


Additions for tax positions of current year	4



Settlements	(7)

Balance at End of Period	$	1,549

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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