SEC Filings


10-K
CUMMINS INC filed this Form 10-K on 02/11/2019
Entire Document
 

NOTE 4. INCOME TAXES
The following table summarizes income before income taxes:
 

Years ended December 31,
In millions

2018

2017

2016
U.S. income

$
1,239


$
1,237


$
995

Foreign income

1,514


1,128


935

Income before income taxes

$
2,753


$
2,365


$
1,930


Income tax expense (benefit) consists of the following:
 
 
Years ended December 31,
In millions
 
2018
 
2017
 
2016
Current
 
 
 
 
 
 
U.S. federal and state
 
$
303

 
$
355

 
$
211

Foreign
 
348

 
289

 
213

Impact of tax legislation
 
153

 
349

 

Total current
 
804

 
993

 
424

Deferred
 
 
 
 
 
 
U.S. federal and state
 
(71
)
 
(42
)
 
57

Foreign
 
(26
)
 
(12
)
 
(7
)
Impact of tax legislation
 
(141
)
 
432

 

Total deferred
 
(238
)
 
378

 
50

Income tax expense
 
$
566

 
$
1,371

 
$
474


A reconciliation of the statutory U.S. federal income tax rate to the effective tax rate was as follows:
 
 
Years ended December 31,
 
 
2018
 
2017
 
2016
Statutory U.S. federal income tax rate
 
21.0
 %
 
35.0
 %
 
35.0
 %
State income tax, net of federal effect
 
0.9

 
0.6

 
0.8

Differences in rates and taxability of foreign subsidiaries and joint ventures
 
(0.2
)
 
(6.4
)
 
(7.2
)
Research tax credits
 
(1.2
)
 
(1.4
)
 
(1.7
)
Impact of tax legislation
 
0.5

 
33.1

 

Other, net
 
(0.4
)
 
(2.9
)
 
(2.3
)
Effective tax rate
 
20.6
 %
 
58.0
 %
 
24.6
 %

On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (Tax Legislation) which changed the U.S. statutory rate to 21 percent effective January 1, 2018 and required companies to pay a one-time transition tax on certain previously undistributed earnings on certain foreign subsidiaries and foreign joint ventures that were tax deferred. Our effective tax rate for 2018 was 20.6 percent compared to 58.0 percent for 2017 and 24.6 percent for 2016. The impacts of the Tax Legislation resulted in additional tax expense of $12 million in 2018 and $781 million in 2017.
The Securities and Exchange Commission (SEC) issued guidance which addressed the uncertainty in the application of GAAP to the Tax Legislation where certain income tax effects could not be finalized at December 31, 2017. This guidance allowed entities to record provisional amounts based on current estimates that were updated on a quarterly basis in 2018. The SEC required final calculations to be completed within the one year measurement period ending December 22, 2018 and reflect any additional guidance issued throughout the year. We made provisional estimates of the effects of the Tax Legislation in three primary areas: (1) our existing deferred tax balances; (2) the one-time transition tax and (3) the withholding tax accrued on those earnings no longer considered permanently reinvested at December 31, 2017. Each of these items is described in more detail below.

83