Annual report pursuant to Section 13 and 15(d)

INCOME TAXES (Tables)

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INCOME TAXES (Tables)
12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Schedule of income before income taxes
Income before income taxes consisted of the following (in millions):
Year Ended December 31, 2021 2020 2019
United States $ 3,538  $ 3,149  $ 3,249 
International 8,887  6,600  7,537 
Total $ 12,425  $ 9,749  $ 10,786 
Schedule of income tax expense (benefit)
Income taxes consisted of the following (in millions):
United States State and Local International Total
2021        
Current $ 243  $ 106  $ 1,378  $ 1,727 
Deferred 229  (10) 675 
1
894 
2020        
Current $ 296  $ 396  $ 1,307  $ 1,999 
Deferred (220) 21  181  (18)
2019        
Current $ 508  $ 94  $ 1,479  $ 2,081 
Deferred (65) 52  (267) (280)
1 Includes net tax expense of $195 million related to the changes in tax laws in certain foreign jurisdictions.
Reconciliation of the statutory U.S. federal tax rate and effective tax rates
A reconciliation of the statutory U.S. federal tax rate and our effective tax rate is as follows:
Year Ended December 31, 2021 2020 2019
Statutory U.S. federal tax rate 21.0  % 21.0  % 21.0  %
State and local income taxes — net of federal benefit 1.1  1.1  0.9 
Earnings in jurisdictions taxed at rates different from the statutory U.S. federal tax rate 2.3 
1
0.9 
3
1.1 
6,7,8
Equity income or loss (2.0) (1.4) (1.6)
Excess tax benefits on stock-based compensation (0.5) (0.8) (0.9)
Other — net (0.8)
2
(0.5)
4,5
(3.8)
9
Effective tax rate 21.1  % 20.3  % 16.7  %
1 Includes net tax charges of $375 million (or a 3.0 percent impact on our effective tax rate) related to changes in tax laws in certain foreign jurisdictions, amounts required to be recorded for changes to our uncertain tax positions, including interest and penalties, in various international jurisdictions, as well as other discrete items.
2 Includes a tax benefit of $14 million (or a 1.5 percent impact on our effective tax rate) associated with the $834 million gain recorded upon the acquisition of the remaining ownership interest in BodyArmor. Refer to Note 2.
3 Includes net tax charges of $110 million (or a 1.1 percent impact on our effective tax rate) related to amounts required to be recorded for changes to our uncertain tax positions, including interest and penalties, in various international jurisdictions, as well as other agreed-upon audit issues.
4 Includes net tax expense of $431 million (or a 4.4 percent impact on our effective tax rate) primarily related to changes in judgment on specific tax positions due to the Opinion and amounts required to be recorded for changes to other uncertain tax positions, including interest and penalties. Also includes a tax benefit of $107 million (or a 1.1 percent impact on our effective tax rate) related to changes in our assessment of certain valuation allowances and a net tax benefit of $135 million (or a 1.4 percent impact on our effective tax rate) related to domestic return to provision adjustments and other tax items.
5 Includes a tax benefit of $40 million (or a 2.4 percent impact on our effective tax rate) associated with the $902 million gain recorded upon the acquisition of the remaining ownership interest in fairlife. Refer to Note 2.
6 Includes net tax charges of $199 million (or a 1.9 percent impact on our effective tax rate) related to amounts required to be recorded for changes to our uncertain tax positions, including interest and penalties, in various international jurisdictions, as well as other agreed-upon audit issues.
7 Includes the impact of pretax charges of $710 million (or a 1.2 percent impact on our effective tax rate) related to the impairment of certain of our equity method investees.
8 Includes a tax benefit of $199 million (or a 1.5 percent impact on our effective tax rate) recorded as a result of CCBA no longer qualifying as a discontinued operation. Refer to Note 2.
9 Includes a net tax benefit of $184 million (or a 1.7 percent impact on our effective tax rate) related to amounts required to be recorded for changes to our uncertain tax positions, including interest and penalties, a tax benefit of $145 million (or a 1.4 percent impact on our effective tax rate) related to changes in our assessment of certain valuation allowances and a net tax benefit of $89 million (or a 0.8 percent impact on our effective tax rate) related to domestic return to provision adjustments as well as other agreed-upon audit issues.
Schedule of Unrecognized Tax Benefits Roll Forward
A reconciliation of the changes in the gross amount of unrecognized tax benefits is as follows (in millions):
Year Ended December 31, 2021 2020 2019
Balance of unrecognized tax benefits at beginning of year $ 915  $ 392  $ 336 
Increase related to prior period tax positions 9  528 
1
204 
2
Decrease related to prior period tax positions (50) (1) — 
Increase related to current period tax positions 37  26  29 
Decrease related to settlements with taxing authorities (4) (19) (174)
3
Effect of foreign currency translation (1) (11) (3)
Balance of unrecognized tax benefits at end of year $ 906  $ 915  $ 392 
1 The increase was primarily related to a change in judgment on certain tax positions due to the Opinion. Refer to Note 11.
2 The increase was primarily related to a change in judgment about the Company’s tax positions with several foreign jurisdictions.
3 The decrease was primarily related to a change in judgment about one of the Company’s tax positions that became certain as a result of settlement of a matter in the United States.
Deferred tax assets and liabilities
The tax effects of temporary differences and carryforwards that give rise to deferred tax assets and liabilities consisted of the following (in millions):
December 31, 2021 2020
Deferred tax assets:    
Property, plant and equipment $ 36  $ 44 
Trademarks and other intangible assets 1,910  2,214 
Equity method investments (including net foreign currency translation adjustments) 595  580 
Derivative financial instruments 215  523 
Other liabilities 1,255  1,401 
Benefit plans 670  893 
Net operating/capital loss carryforwards 280  320 
Other 377  391 
Gross deferred tax assets 5,338  6,366 
Valuation allowances (401) (406)
Total deferred tax assets $ 4,937  $ 5,960 
Deferred tax liabilities:    
Property, plant and equipment $ (721) $ (837)
Trademarks and other intangible assets (1,783) (1,661)
Equity method investments (including net foreign currency translation adjustments) (1,619) (1,533)
Derivative financial instruments (500) (435)
Other liabilities (315) (402)
Benefit plans (527) (321)
Other (164) (144)
Total deferred tax liabilities $ (5,629) $ (5,333)
Net deferred tax assets (liabilities) $ (692) $ 627 
Summary of Valuation Allowance
An analysis of our deferred tax asset valuation allowances is as follows (in millions):
Year Ended December 31, 2021 2020 2019
Balance at beginning of year $ 406  $ 303  $ 419 
Additions 25  240  148 
Deductions (30) (137) (264)
Balance at end of year $ 401  $ 406  $ 303