Read the Income Tax footnote for 3M Company and answer the following questions. Each question is worth 2 points.

1. Footnote 10 indicates a deferred tax asset of $220 million. Footnote 7 indicates where on the balance sheet this amount is shown. Reconcile the amounts in Footnote 7 to the total deferred tax asset.

Deferred income taxes included in other assets $

Deferred income taxes included in other liabilities ______________

Net deferred tax assets $ 220 mill.

2. Explain in your own words why 3M would have a deferred tax liability for accelerated depreciation

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?

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%?

3M Company and Subsidiaries NOTE 10. Income Taxes Income before Income Taxes (Millions) 2019 2018 2017 United States $ 3,008 $ 3,487 $ 4,149 International 2,704 3,513 3,399 Total $ 5,712 $ 7,000 $ 7,548 Provision for Income Taxes (Millions) 2019 2018 2017 Currently payable Federal $ 534 $ 698 $ 1,022 State 59 109 59 International 673 763 722 Tax Cuts and Jobs Act (TCJA) non-current transition tax provision 176 623 Deferred Federal (32) (38) 162 State (26) (17) 15 International (78) (54) 76 Total $ 1,130 $ 1,637 $ 2,679 Components of Deferred Tax Assets and Liabilities (Millions) 2019 2018 Deferred tax assets: Accruals not currently deductible Employee benefit costs $ 169 $ 187 Product and other claims 280 228 Miscellaneous accruals 119 113 Pension costs 824 643 Stock-based compensation 218 203 Net operating/capital loss/tax credit carry forwards 150 71 Foreign tax credits 66 Inventory 70 54 Other 113 24 Gross deferred tax assets 2,009 1,523 Valuation allowance (158) (67) Total deferred tax assets $ 1,851 $ 1,456 Deferred tax liabilities: Product and other insurance receivables $ $ (7) Accelerated depreciation (580) (521) Intangible amortization (1,021) (799) Currency translation (30) (35) Other (8) Total deferred tax liabilities $ (1,631) $ (1,370) Net deferred tax assets $ 220 $ 86 The net deferred tax assets are included as components of Other Assets and Other Liabilities within the Consolidated Balance Sheet. See Note 7 Supplemental Balance Sheet Information for further details. 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 $ 521 $ 365 Prepaid pension and post retirement 230 208 Insurance related receivables and other 67 68 Cash surrender value of life insurance policies 254 251 Equity method investments 70 70 Equity and other investments 126 118 Other 406 265 Total other assets $ 1,674 $ 1,345 Other liabilities Accrued income taxes long-term portion $ 1,507 $ 1,274 Employee benefits 312 299 Contingent liability claims and other 787 789 Finance lease obligations 111 75 Deferred income taxes 301 279 Other 257 294 Total other liabilities $ 3,275 $ 3,010 As of December 31, 2019, the Company had tax effected operating losses, capital losses, and tax credit carryovers for federal (approximately $82 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 managements 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 2018 2017 Statutory U.S. tax rate 21.0 % 21.0 % 35.0 % State income taxes - net of federal benefit 0.5 1.0 0.8 International income taxes - net 0.2 0.2 (6.3) Global Intangible Low Taxed Income (GILTI) 1.8 1.1 Foreign Derived Intangible Income (FDII) (2.9) (1.3) U.S. TCJA enactment - net impacts 2.5 10.1 U.S. research and development credit (1.7) (1.5) (0.7) Reserves for tax contingencies 2.3 1.2 2.2 Domestic Manufacturers deduction (1.8) Employee share-based payments (1.3) (1.4) (3.2) All other - net (0.1) 0.6 (0.6) Effective worldwide tax rate 19.8 % 23.4 % 35.5 %