2019 2018 187 228 113 643 203 71 Components of Deferred Tax Assets and Liabilities (Millions) Deferred tax assets: Accruals not currently deductible Employee benefit costs Product and other claims Miscellaneous accruals Pension costs Stock-based compensation Net operating/capital loss/tax credit carryforwards Foreign tax credits Inventory Other Gross deferred tax assets Valuation allowance Total deferred tax assets Deferred tax liabilities: Product and other insurance receivables Accelerated depreciation Intangible amortization Currency translation Other Total deferred tax liabilities Net deferred tax assets 169 280 119 824 218 150 66 70 113 2,009 (158) 1,851 54 24 1,523 (67) 1.456 S S (580) (1,021) (30) (7) (521) (799) (35) (8) (1.370) 86 olul (1.631) S 220 S idated NOTE 7. Supplemental Balance Sheet Information Additional supplemental balance sheet information is provided in the table that follows. (Millions) 2019 2018 Other assets Deferred income taxes Prepaid pension and post retirement Insurance related receivables and other Cash surrender value of life insurance policies Equity method investments Equity and other investments Other Total other assets 521 230 67 254 70 126 406 1,674 365 208 68 251 70 118 265 1,345 Other liabilities Accrued income taxes - long-term portion Employee benefits Contingent liability claims and other Finance lease obligations Deferred income taxes Other Total other liabilities 1,507 $ 312 787 111 301 257 3,275 $ 1,274 299 789 75 279 294 3,010 As of December 31, 2019, the Company had tax effected operating losses, capital losses, and tax credit carryovers for federal (approximately 882 million), state (approximately $79 million), and international (approximately $55 million), with all amounts before limitation impacts and valuation allowances. Federal tax attribute carryovers will expire after one to 10 years, the state after one to 11 years, and the international after one year to an indefinite carryover period. As of December 31, 2019, the Company has provided $158 million of valuation allowance against certain of these deferred tax assets based on management's determination that it is more likely than not that the tax benefits related to these assets will not be realized. Reconciliation of Effective Income Tax Rate 2019 21.0 % 0.5 0.2 1.8 (2.9) 2017 35.0 % 0.8 (6.3) Statutory U.S. tax rate State income taxes - net of federal benefit International income taxes - net Global Intangible Low Taxed Income (GILTI) Foreign Derived Intangible Income (FDII) U.S. TCJA enactment - net impacts U.S. research and development credit Reserves for tax contingencies Domestic Manufacturer's deduction Employee share-based payments All other - net Effective worldwide tax rate 2018 21.0 % 1.0 0.2 1.1 (1.3) 2.5 (1.5) 1.2 (1.7) 2.3 10.1 (0.7) 2.2 (1.8) (3.2) (0.6) 35.5 % (1.4) (1.3) (0.1) 19.8 % 0.6 23.4 % 3M Company and Subsidiaries 2019 2018 2017 $ 3,008 S 3,487 S 4,149 2,704 3,513 3,399 $ 5,712 S 7,000 $ 7,548 2019 2018 2017 534 $ 59 698 $ 109 763 1,022 59 722 673 176 623 NOTE 10. Income Taxes Income before Income Taxes fillions) nited States ternational Total Provision for Income Taxes (Millions) Currently payable Federal State International Tax Cuts and Jobs Act (TCJA) non-current transition tax provision Deferred Federal State International Total Components of Deferred Tax Assets and Liabilities (Millions) Deferred tax assets: Accruals not currently deductible Employee benefit costs Product and other claims Miscellaneous accruals Pension costs Stock-based compensation Net operating/capital loss/tax credit carryforwards Foreign tax credits Inventory (32) (26) (78) 1,130 $ (38) (17) (54) 1.637 $ 162 15 76 2,679 2019 2018 S 169 280 119 824 218 150 66 70 187 228 113 643 203 71 54 CX IMG-1686.jpg Paragraph Styles 2. Explain in your own words why 3M would have a deferred tax liability for "accelerated depreciation" Based on the tax it would increase or decrease. 3. Explain in your own words why 3M would have deferred tax asset for "accruals not currently deductible." 4. Why would 3M Company think it is more likely than not that it will not realize the benefit of its net operating/capital loss/tax credit carryforwards? I 5. Looking at the schedule of the Effective Income Tax Rate for 3M Company over the last three years, what is the main reason for the reduction in the rate from 35.5% to 19.8%