XML 34 R15.htm IDEA: XBRL DOCUMENT v3.25.0.1
Income taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income taxes Income taxes
Reconciliation of the U.S. federal statutory rate to effective rate:

Years ended December 31,
(Millions of dollars)202420232022
Taxes at U.S. statutory rate$2,809 21.0 %$2,740 21.0 %$1,838 21.0 %
(Decreases) increases resulting from:      
Non-U.S. subsidiaries taxed at other than the U.S. rate186 1.4 %129 1.0 %184 2.1 %
State and local taxes, net of federal 1
121 0.9 %93 0.7 %91 1.0 %
U.S. tax incentives(245)(1.8)%(170)(1.3)%(166)(1.9)%
Tax law change related to currency translation(224)(1.7)%— — %— — %
Nondeductible goodwill— — %— — %159 1.8 %
Other—net(18)(0.1)%(11)(0.1)%(39)(0.4)%
Provision (benefit) for income taxes$2,629 19.7 %$2,781 21.3 %$2,067 23.6 %
1 Excludes amount included in nondeductible goodwill and tax law change related to currency translation line items.
 
The provision for income taxes for 2024 included a non-cash tax benefit of $224 million due to the reversal of a deferred tax liability from a U.S. tax law change related to currency translation. The negative impact on the 2022 effective rate from the portion of the goodwill impairment not deductible for tax purposes is reported in the effective tax rate reconciliation line item above labeled “Nondeductible goodwill.” Included in the line item above labeled “Non-U.S. subsidiaries taxed at other than the U.S. rate” are the effects of local and U.S. taxes related to earnings of non-U.S. subsidiaries, changes in the amount of unrecognized tax benefits associated with these earnings, losses at non-U.S. subsidiaries without local tax benefits due to valuation allowances and other permanent differences between tax and U.S. GAAP results.

Distributions of profits from non-U.S. subsidiaries are not expected to cause a significant incremental U.S. tax impact in the future. However, these distributions may be subject to non-U.S. withholding taxes if profits are distributed from certain jurisdictions. Undistributed profits of non-U.S. subsidiaries of approximately $15 billion are considered indefinitely reinvested. Determination of the amount of unrecognized deferred tax liability related to indefinitely reinvested profits is not feasible primarily due to our legal entity structure and the complexity of U.S. and local tax laws.
The components of profit (loss) before taxes were: 
 Years ended December 31,
(Millions of dollars)202420232022
U.S.$6,219 $6,463 $2,962 
Non-U.S.7,154 6,587 5,790 
 $13,373 $13,050 $8,752 
 
Profit before taxes, as shown above, is based on the location of the entity to which such earnings are attributable. Where an entity’s earnings are subject to taxation, however, may not correlate solely to where an entity is located.  Thus, the income tax provision shown below as U.S. or non-U.S. may not correspond to the earnings shown above.
 
The components of the provision (benefit) for income taxes were:
 Years ended December 31,
(Millions of dollars)202420232022
Current tax provision (benefit):   
U.S.1
$1,584 $1,627 $1,055 
Non-U.S.1,531 1,592 1,255 
State (U.S.)135 154 134 
 3,250 3,373 2,444 
Deferred tax provision (benefit):   
U.S.1
(553)(391)(404)
Non-U.S.(69)(164)50 
State (U.S.)1 (37)(23)
 (621)(592)(377)
Total provision (benefit) for income taxes$2,629 $2,781 $2,067 
1 Includes U.S. taxes related to non-U.S. earnings. We account for U.S. taxes on global intangible low-taxed income as a period cost.
 
We paid net income tax and related interest of $3,126 million, $2,949 million and $3,076 million in 2024, 2023 and 2022, respectively.

Accounting for income taxes under U.S. GAAP requires that individual tax-paying entities of the company offset all deferred tax liabilities and assets within each particular tax jurisdiction and present them as a noncurrent deferred tax liability or asset in the Consolidated Financial Position. Amounts in different tax jurisdictions cannot be offset against each other. The amount of deferred income taxes at December 31, included on the following lines in Statement 3, were as follows:
 
 December 31,
(Millions of dollars)20242023
Assets:  
Noncurrent deferred and refundable income taxes$3,191 $2,634 
Liabilities:  
Other liabilities432 454 
Deferred income taxes—net$2,759 $2,180 
 
The components of deferred tax assets and liabilities were:
 December 31,
(Millions of dollars)20242023
Deferred income tax assets:  
Research expenditures$1,735 $1,350 
Tax carryforwards1,346 1,389 
Postemployment benefits560 656 
Employee compensation and benefits531 634 
Warranty reserves303 325 
Post sale discounts260 253 
Inventory valuation183 138 
Lease obligations151 144 
Other—net288 205 
 5,357 5,094 
Deferred income tax liabilities:  
Capital and intangible assets, including lease basis differences(1,270)(1,312)
Other outside basis differences(253)(267)
Undistributed profits, including translation adjustments(201)(401)
 (1,724)(1,980)
Valuation allowance for deferred tax assets(874)(934)
Deferred income taxes—net$2,759 $2,180 
 
At December 31, 2024, deferred tax assets for U.S. state losses and credit carryforwards of $75 million expire on or before the end of 2044 while the remaining $16 million may be carried over indefinitely. Of these U.S. state deferred tax assets, $55 million were reduced by valuation allowances. The deferred tax assets for U.S. federal losses and credit carryforwards of $196 million primarily expire on or before the end of 2034. Of these U.S. federal deferred tax assets, $192 million were reduced by valuation allowances. Deferred tax assets for losses and credit carryforwards of non-U.S. entities of $278 million expire on or before the end of 2044 while the remaining $781 million may be carried over indefinitely. Non-U.S. entities that have not demonstrated consistent and/or sustainable profitability to support the realization of net deferred tax assets, including certain entities in Luxembourg, have recorded valuation allowances of $627 million against tax carryforwards and other deferred tax assets.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits for uncertain tax positions, including positions impacting only the timing of tax benefits, follows.
 
Reconciliation of unrecognized tax benefits: 1
 Years ended December 31,
(Millions of dollars)202420232022
Beginning balance$1,223 $1,140 $1,886 
Additions for tax positions related to current year118 94 72 
Additions for tax positions related to prior years49 42 91 
Reductions for tax positions related to prior years(30)(19)(66)
Reductions for settlements 2 
(60)(27)(840)
Reductions for expiration of statute of limitations(11)(7)(3)
Ending balance$1,289 $1,223 $1,140 
Amount that, if recognized, would impact the effective tax rate$1,137 $997 $874 

1Foreign currency impacts are included within each line as applicable.
2Includes cash payment or other reduction of assets to settle liability.

We classify interest and penalties on income taxes as a component of the provision for income taxes. We recognized a net provision for interest and penalties of $35 million, $36 million and $49 million during the years ended December 31, 2024, 2023 and 2022, respectively. The total amount of interest and penalties accrued was $190 million and $135 million as of December 31, 2024 and 2023, respectively.

On September 8, 2022, the company reached a settlement with the U.S. Internal Revenue Service (IRS) that resolves all issues for tax years 2007 through 2016, without any penalties. The company's settlement includes, among other issues, the resolution of disputed tax treatment of profits earned by Caterpillar SARL (CSARL) from certain parts transactions. We vigorously contested the IRS's application of the "substance-over-form" or "assignment-of-income" judicial doctrines and its proposed increases to tax and imposition of accuracy related penalties. The settlement does not include any increases to tax in the United States based on those judicial doctrines and does not include any penalties. The final tax assessed by the IRS for all issues under the settlement was $490 million for the ten-year period. This amount was primarily paid in 2022 along with associated interest of $250 million. The settlement was within the total amount of gross unrecognized tax benefits for uncertain tax positions and enables us to avoid the costs and burdens of further disputes with the IRS. As a result of the settlement, we recorded a tax benefit of $41 million in 2022 to reflect changes in estimates of prior years' taxes and related interest, net of tax.

We are subject to the continuous examination of our U.S. federal income tax returns by the IRS, and tax years 2017 to 2019 are currently under examination. In our major non-U.S. jurisdictions including Australia, Brazil, China, Germany, India, Japan, Mexico, Switzerland, Singapore and the U.K., tax years are typically subject to examination for three to ten years. Due to the uncertainty related to the timing and potential outcome of audits, we cannot estimate the range of reasonably possible change in unrecognized tax benefits in the next 12 months.