- Income Tax: note 12 pg 67- 69
- What is the effective tax rate for your company?
- What amount of tax is payable based on the tax return?
Use the follwoing tax info:
12. Taxes on Earnings The provision for income taxes on earnings from continuing operations consists of the following: 2019 2018 2017 Income taxes: Currently payable: Federal State Non-U.S. $ S 104 19 5 128 93 26 11 130 241 39 2 282 19 Deferred: Federal State Non-U.S. (26) 14 (12) (24) 106 97 2 11 23 110 151 S S 392 2019 2018 2017 Earnings from continuing operations before income taxes: United States Non-U.S. S $ 624 1 625 832 (2) (2) 830 1,264 52 1,316 S $ The following is a reconciliation of the effective income tax rate on continuing operations to the U.S. federal statutory income tax rate: 2019 21.0% 2.2 Federal statutory income tax rate State income taxes (net of federal tax benefit) Tax effect of international items Federal manufacturing deduction 2018 21.0% 3.0 (0.5) (1.4) 2017 35.0 % 2.1 (0.4) (2.2) 30/52 0.3 Tax Reform - impact on U.S. deferred tax assets and liabilities! Tax Reform - transition tax(1) Effect of higher U.S. federal statutory tax rate!) Foreign exchange losses 2) Divestiture impact on deferred taxes Other Effective income tax rate (21.7) 6.4 5.3 - - (3.8) 1.2 (0.5) 24.2 % 0.7 12.8 % (0.9) 29.8 % (1) The Tax Cuts and Jobs Act of 2017 (the Act) was enacted into law on December 22, 2017, and made significant changes to corporate taxation. Changes under the Act included: Reducing the federal corporate tax rate from 35% to 21% effective January 1, 2018. A blended rate applied for fiscal 2018 non-calendar year end companies for the fiscal periods that included the effective date of the rate change. The impact of this is shown as "Effect of higher U.S. federal statutory tax rate;" Repealing the exception for deductibility of performance-based compensation to covered employees, which impacted us beginning in 2019, along with expanding the number of covered employees; Transitioning to a territorial system for taxation on foreign earnings along with the imposition of a transition tax in 2018 on the deemed repatriation of unremitted foreign earnings: Immediate expensing of machinery and equipment placed into service after September 27, 2017; Eliminating the deduction for domestic manufacturing activities, which impacted us beginning in 2019; Changes to the taxation of multinational companies, including a new minimum tax on Global Intangible Low-Taxed Income, a new Base Erosion Anti- Abuse Tax, and a new U.S. corporate deduction for Foreign-Derived Intangible Income, all of which were effective for us beginning in 2019, and Limiting the deductibility of interest expense to 30% of adjusted taxable income, which was effective for us beginning in 2019. As a result of the Act, we recognized a benefit of $179 in 2018 on the remeasurement of deferred tax assets and liabilities and expenses of$2 in 2019 and 53 in 2018 on the transition tax on unremitted foreign earnings. The 2017 rate was favorably impacted by a $52 benefit primarily related to the sale of intercompany notes receivable to a financial institution, which resulted in the recognition of foreign exchange losses. (2) 2019 2018 342 868 16 35 1,245 144 24 Depreciation Amortization Other Deferred tax liabilities Benefits and compensation Pension benefits Tax loss carryforwards Capital loss carryforwards Outside basis difference Other Gross deferred tax assets Deferred tax asset valuation allowance Deferred tax assets, net of valuation allowance Net deferred tax liability 1,229 157 46 43 287 116 82 731 (427) 304 925 92 413 (133) 280 965 S At July 28, 2019, our U.S. and non-U.S. subsidiaries had tax loss carryforwards of approximately$438. Of these carryforwards, $48 may be carried forward indefinitely, and $390 expire between 2020 and 2037, with the majority expiring after 2028. At July 28, 2019, deferred tax asset valuation allowances have been established to offset $165 of these tax loss carryforwards. Additionally, as of July 28, 2019, our U.S. and non-U.S. subsidiaries had capital loss carryforwards of approximately $1,096, of which $1,060 were offset by valuation allowances. We may use a portion of our capital losses to offset the capital gain anticipated from the pending sale of the Arnott's and international operations, which could result in a U.S. valuation allowance release and recognition of a material income tax benefit in 2020. The sale of the Arnott's and international operations, which has not been finalized, is expected to be completed in the first half of 2020. After considering all available evidence, we concluded that we should maintain a valuation allowance as of July 28, 2019. The net change in the deferred tax asset valuation allowance in 2019 was an increase of $294. The increase was primarily due to the sale of Bolthouse Farms and the pending sale of the Arnott's and international operations. The net change in the deferred tax asset valuation allowance in 2018 was an increase of $13. The increase was primarily due to the acquisition of Snyder's-Lance and the impact of currency. The net change in the deferred tax asset valuation allowance in 2017 was an increase of $2. The increase was primarily due to the impact of currency and the recognition of additional valuation allowances on tax loss carryforwards, partially offset by the expiration of tax losses. As of July 28, 2019, other deferred tax assets included $13 of state tax credit carryforwards related to various states that expire between2021 and 2031. As of July 28, 2019, deferred tax asset valuation allowances have been established to offset $13 of the state credit carry forwards. The decrease in state tax credit carry forwards was primarily due to the utilization of credits and the sale of Bolthouse Farms. As of July 29, 2018, other deferred tax assets included $23 of state tax credit carryforwards related to various states that expire between 2021 and 2031. As of July 29, 2018, deferred tax asset valuation allowances have been established to offset $15 of the state credit carryforwards. As of July 28, 2019, we had approximately $156 of undistributed earnings of subsidiaries, most of which were subject to U.S. tax under the transition tax on foreign earnings due under the Act. Consistent with prior years, these unremitted earnings and the investment in our foreign subsidiaries are deemed to be permanently reinvested and no additional tax has been provided. It is not practical to estimate the tax liability that might be incurred if such earnings were remitted to the U.S. A reconciliation of the activity related to unrecognized tax benefits follows: 2019 2018 2017 $ 32 s 64 s 63 Balance at beginning of year Increases related to prior-year tax positions Decreases related to prior-year tax positions Increases related to current-year tax positions Settlements Lapse of statute Increase due to acquisitions Balance at end of year (37) 2 (1) (7) (1) 24 S 32 S 64 The amount of unrecognized tax benefits that, if recognized, would impact the annual effective tax rate was 17 as of July 28, 2019, S23 as of July 29, 2018, and $19 as of July 30, 2017. The total amount of unrecognized tax benefits can change due to audit settlements, tax examination activities, statute expirations and the recognition and measurement criteria under accounting for uncertainty in income taxes. Our accounting policy with respect to interest and penalties attributable to income taxes is to reflect any expense or benefit as a component of our income tax provision. The total amount of interest and penalties recognized in the Consolidated Statements of Earnings were earnings of $1 in 2019, and expense of $1 in 2018 and $4 in 2017. The total amount of interest and penalties recognized in the Consolidated Balance Sheets in Other liabilities was$4 as of July 28, 2019, and $5 as of July 29, 2018 We do business internationally and, as a result, file income tax returns in the U.S. federal jurisdiction and various state and non-U.S. jurisdictions. In the normal course of business, we are subject to examination by taxing authorities throughout the world, including such major jurisdictions as the U.S., Australia, Canada and Denmark. The 2019 tax year is currently under audit by the Internal Revenue Service. In addition, several state income tax examinations are in progress for the years 2006 to 2017. With limited exceptions, we have been audited for income tax m an in Austunlin through 2011 in Denmark through 2015, and in Canada through 2014. 12. Taxes on Earnings The provision for income taxes on earnings from continuing operations consists of the following: 2019 2018 2017 Income taxes: Currently payable: Federal State Non-U.S. $ S 104 19 5 128 93 26 11 130 241 39 2 282 19 Deferred: Federal State Non-U.S. (26) 14 (12) (24) 106 97 2 11 23 110 151 S S 392 2019 2018 2017 Earnings from continuing operations before income taxes: United States Non-U.S. S $ 624 1 625 832 (2) (2) 830 1,264 52 1,316 S $ The following is a reconciliation of the effective income tax rate on continuing operations to the U.S. federal statutory income tax rate: 2019 21.0% 2.2 Federal statutory income tax rate State income taxes (net of federal tax benefit) Tax effect of international items Federal manufacturing deduction 2018 21.0% 3.0 (0.5) (1.4) 2017 35.0 % 2.1 (0.4) (2.2) 30/52 0.3 Tax Reform - impact on U.S. deferred tax assets and liabilities! Tax Reform - transition tax(1) Effect of higher U.S. federal statutory tax rate!) Foreign exchange losses 2) Divestiture impact on deferred taxes Other Effective income tax rate (21.7) 6.4 5.3 - - (3.8) 1.2 (0.5) 24.2 % 0.7 12.8 % (0.9) 29.8 % (1) The Tax Cuts and Jobs Act of 2017 (the Act) was enacted into law on December 22, 2017, and made significant changes to corporate taxation. Changes under the Act included: Reducing the federal corporate tax rate from 35% to 21% effective January 1, 2018. A blended rate applied for fiscal 2018 non-calendar year end companies for the fiscal periods that included the effective date of the rate change. The impact of this is shown as "Effect of higher U.S. federal statutory tax rate;" Repealing the exception for deductibility of performance-based compensation to covered employees, which impacted us beginning in 2019, along with expanding the number of covered employees; Transitioning to a territorial system for taxation on foreign earnings along with the imposition of a transition tax in 2018 on the deemed repatriation of unremitted foreign earnings: Immediate expensing of machinery and equipment placed into service after September 27, 2017; Eliminating the deduction for domestic manufacturing activities, which impacted us beginning in 2019; Changes to the taxation of multinational companies, including a new minimum tax on Global Intangible Low-Taxed Income, a new Base Erosion Anti- Abuse Tax, and a new U.S. corporate deduction for Foreign-Derived Intangible Income, all of which were effective for us beginning in 2019, and Limiting the deductibility of interest expense to 30% of adjusted taxable income, which was effective for us beginning in 2019. As a result of the Act, we recognized a benefit of $179 in 2018 on the remeasurement of deferred tax assets and liabilities and expenses of$2 in 2019 and 53 in 2018 on the transition tax on unremitted foreign earnings. The 2017 rate was favorably impacted by a $52 benefit primarily related to the sale of intercompany notes receivable to a financial institution, which resulted in the recognition of foreign exchange losses. (2) 2019 2018 342 868 16 35 1,245 144 24 Depreciation Amortization Other Deferred tax liabilities Benefits and compensation Pension benefits Tax loss carryforwards Capital loss carryforwards Outside basis difference Other Gross deferred tax assets Deferred tax asset valuation allowance Deferred tax assets, net of valuation allowance Net deferred tax liability 1,229 157 46 43 287 116 82 731 (427) 304 925 92 413 (133) 280 965 S At July 28, 2019, our U.S. and non-U.S. subsidiaries had tax loss carryforwards of approximately$438. Of these carryforwards, $48 may be carried forward indefinitely, and $390 expire between 2020 and 2037, with the majority expiring after 2028. At July 28, 2019, deferred tax asset valuation allowances have been established to offset $165 of these tax loss carryforwards. Additionally, as of July 28, 2019, our U.S. and non-U.S. subsidiaries had capital loss carryforwards of approximately $1,096, of which $1,060 were offset by valuation allowances. We may use a portion of our capital losses to offset the capital gain anticipated from the pending sale of the Arnott's and international operations, which could result in a U.S. valuation allowance release and recognition of a material income tax benefit in 2020. The sale of the Arnott's and international operations, which has not been finalized, is expected to be completed in the first half of 2020. After considering all available evidence, we concluded that we should maintain a valuation allowance as of July 28, 2019. The net change in the deferred tax asset valuation allowance in 2019 was an increase of $294. The increase was primarily due to the sale of Bolthouse Farms and the pending sale of the Arnott's and international operations. The net change in the deferred tax asset valuation allowance in 2018 was an increase of $13. The increase was primarily due to the acquisition of Snyder's-Lance and the impact of currency. The net change in the deferred tax asset valuation allowance in 2017 was an increase of $2. The increase was primarily due to the impact of currency and the recognition of additional valuation allowances on tax loss carryforwards, partially offset by the expiration of tax losses. As of July 28, 2019, other deferred tax assets included $13 of state tax credit carryforwards related to various states that expire between2021 and 2031. As of July 28, 2019, deferred tax asset valuation allowances have been established to offset $13 of the state credit carry forwards. The decrease in state tax credit carry forwards was primarily due to the utilization of credits and the sale of Bolthouse Farms. As of July 29, 2018, other deferred tax assets included $23 of state tax credit carryforwards related to various states that expire between 2021 and 2031. As of July 29, 2018, deferred tax asset valuation allowances have been established to offset $15 of the state credit carryforwards. As of July 28, 2019, we had approximately $156 of undistributed earnings of subsidiaries, most of which were subject to U.S. tax under the transition tax on foreign earnings due under the Act. Consistent with prior years, these unremitted earnings and the investment in our foreign subsidiaries are deemed to be permanently reinvested and no additional tax has been provided. It is not practical to estimate the tax liability that might be incurred if such earnings were remitted to the U.S. A reconciliation of the activity related to unrecognized tax benefits follows: 2019 2018 2017 $ 32 s 64 s 63 Balance at beginning of year Increases related to prior-year tax positions Decreases related to prior-year tax positions Increases related to current-year tax positions Settlements Lapse of statute Increase due to acquisitions Balance at end of year (37) 2 (1) (7) (1) 24 S 32 S 64 The amount of unrecognized tax benefits that, if recognized, would impact the annual effective tax rate was 17 as of July 28, 2019, S23 as of July 29, 2018, and $19 as of July 30, 2017. The total amount of unrecognized tax benefits can change due to audit settlements, tax examination activities, statute expirations and the recognition and measurement criteria under accounting for uncertainty in income taxes. Our accounting policy with respect to interest and penalties attributable to income taxes is to reflect any expense or benefit as a component of our income tax provision. The total amount of interest and penalties recognized in the Consolidated Statements of Earnings were earnings of $1 in 2019, and expense of $1 in 2018 and $4 in 2017. The total amount of interest and penalties recognized in the Consolidated Balance Sheets in Other liabilities was$4 as of July 28, 2019, and $5 as of July 29, 2018 We do business internationally and, as a result, file income tax returns in the U.S. federal jurisdiction and various state and non-U.S. jurisdictions. In the normal course of business, we are subject to examination by taxing authorities throughout the world, including such major jurisdictions as the U.S., Australia, Canada and Denmark. The 2019 tax year is currently under audit by the Internal Revenue Service. In addition, several state income tax examinations are in progress for the years 2006 to 2017. With limited exceptions, we have been audited for income tax m an in Austunlin through 2011 in Denmark through 2015, and in Canada through 2014
