Income Taxes

12 Months Ended

Dec. 31, 2018

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

INCOME TAXES

On December 22, 2017, the Tax Cuts and Jobs Act (“The Act”) was enacted. The Act reduces the U.S. federal corporate income tax rate from 35 percent to 21 percent, requires companies to pay a one-time transition tax (“transition tax”) on earnings of certain foreign subsidiaries that were previously tax deferred, creates new provisions related to foreign sourced earnings, eliminates the domestic manufacturing deduction and moves to a territorial system. At December 31, 2017, the Company had not completed its accounting for the tax effects of The Act; however, as described below, the company made a reasonable estimate of the effects on its existing deferred tax balances and the one-time transition tax. In accordance with Staff Accounting Bulletin 118 ("SAB 118"), income tax effects of The Act were refined upon obtaining, preparing, or analyzing additional information during the measurement period. At December 31, 2018, the company had completed its accounting for the tax effects of The Act.

• As a result of The Act, the company remeasured its U.S. federal deferred income tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21 percent. The company recorded a cumulative benefit of $2,755 million ($2,716 million benefit in the year ended December 31, 2017 and $39 million benefit in the year ended December 31, 2018) to the provision for (benefit from) income taxes on continuing operations with respect to the remeasurement of the company's deferred tax balances. Of the $39 million benefit booked in the year ended December 31, 2018, $114 million relates to the company's discretionary pension contribution in 2018, which was deducted on a 2017 tax return. The remaining charges relate to purchase accounting adjustments made throughout 2018.

• The Act requires a mandatory deemed repatriation of post-1986 undistributed foreign earnings and profits (“E&P”), which results in a one-time transition tax. The company recorded a cumulative charge of $859 million ($715 million charge in the year ended December 31, 2017 and $144 million charge in the year ended December 31, 2018) to the provision for (benefit from) income taxes on continuing operations with respect to the one-time transition tax.

• In the year ended December 31, 2018, the company recorded an indirect impact of The Act related to prepaid tax on the intercompany sale of inventory. The amount recorded related to inventory was a $16 million charge to provision for income taxes on continuing operations.

• For tax years beginning after December 31, 2017, The Act introduces new provisions for U.S. taxation of certain global intangible low-taxed income (“GILTI”). The company has made the policy election to record any liability associated with GILTI in the period in which it is incurred.

Geographic Allocation of (Loss) Income and Provision for (Benefit from) Income Taxes	Successor						Predecessor
(In millions)	For the Year Ended December 31, 2018			For the Period September 1 through December 31, 2017			For the Period January 1 through August 31, 2017			For the Year Ended December 31, 2016
(Loss) Income from continuing operations before income taxes
Domestic	$	(4,496	)	$	(811	)	$	409		$	1,415
Foreign	(297		)	(775		)	1,382			1,308
(Loss) Income from continuing operations before income taxes	$	(4,793	)	$	(1,586	)	$	1,791		$	2,723
Current tax expense (benefit)
Federal	$	(333	)	$	216		$	(563	)	$	4
State and local	5			22			(11		)	9
Foreign	453			187			282			539
Total current tax expense (benefit)	$	125		$	425		$	(292	)	$	552
Deferred tax expense (benefit)
Federal	$	162		$	(2,790	)	$	476		$	22
State and local	(29		)	(48		)	(8		)	(29		)
Foreign	(38		)	(260		)	(27		)	96
Total deferred tax expense (benefit)	$	95		$	(3,098	)	$	441		$	89
Provision for (Benefit from) income taxes on continuing operations	220			(2,673		)	149			641
Net (loss) income from continuing operations	$	(5,013	)	$	1,087		$	1,642		$	2,082

Pre-tax loss from continuing operations for the year ended December 31, 2018 includes a non-deductible $4,503 million non-cash goodwill impairment charge associated with the agriculture reporting unit, of which $3,193 million related to the U.S. and the remaining $1,310 million related to foreign operations.

In connection with the Merger, pre-tax loss from continuing operations for the year ended December 31, 2018 and the period September 1 through December 31, 2017 includes depreciation and amortization associated with the fair value that was allocated to the company’s tangible and intangible assets as well as costs of $1,628 million and $1,469 million, respectively, recognized in cost of goods sold related to the fair value step-up of inventories (See Note 3 for further information).

Additionally, global pre-tax earnings from continuing operations for the year ended December 31, 2018, the period September 1 through December 31, 2017, the period January 1 through August 31, 2017, and the year ended December 31, 2016 includes transaction costs associated with the Merger of $1,375 million, $314 million, $581 million, and $386 million, respectively.

Reconciliation to U.S. Statutory Rate	Successor				Predecessor
	For the Year Ended December 31, 2018		For the Period September 1 through December 31, 2017		For the Period January 1 through August 31, 2017		For the Year Ended December 31, 2016
Statutory U.S. federal income tax rate	21.0	%	35.0	%	35.0	%	35.0	%
Equity earning effect	0.2		0.9		(0.5	)	(0.8	)
Effective tax rates on international operations - net	0.5		(9.5	)	(11.4	)	(9.2	)
Acquisitions, divestitures and ownership restructuring activities 1, 2, 3	(1.6	)	15.8		5.2		1.9
U.S. research and development credit	0.6		0.4		(0.8	)	(0.7	)
Exchange gains/losses 4	(0.5	)	(1.8	)	(12.9	)	1.9
SAB 118 Impact of Enactment of U.S. Tax Reform5	(2.5	)	126.1
Excess tax benefits from stock compensation6	0.1		0.1		(1.7	)
Tax settlements and expiration of statute of limitations7	0.2		—		(3.8	)	(1.1	)
Goodwill impairment 8	(21.4	)	—		—		—
Other - net	(1.2	)	1.5		(0.8	)	(3.5	)
Effective tax rate	(4.6	)%	168.5	%	8.3	%	23.5	%

1. See Notes 3 and 4 for additional information.

2. Includes a net tax charge of $74 million related to repatriation activities to facilitate the Intended Business Separations for the year ended December 31, 2018.

3. Includes a net tax charge of $25 million and a net tax benefit of $261 million for the year ended December 31, 2018 and the period September 1 through December 31, 2017, respectively, related to an internal legal entity restructuring associated with the Intended Business Separations.

4. Principally reflects the impact of foreign exchange gains and losses on net monetary assets for which no corresponding tax impact is realized. Further information about the company's foreign currency hedging program is included in Note 8 and Note 20 under the heading Foreign Currency Risk.

5. Reflects a net tax charge of $121 million associated with the company's completion of the accounting for the tax effects of The Act for the year ended December 31, 2018.

6. Reflects the impact of the adoption of ASU 2016-09, Compensation - Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting, which was adopted January 1, 2017 and resulted in the recognition of excess tax benefits related to equity compensation in the (benefit from) provision for income taxes on continuing operations.

7. The period January 1 through August 31, 2017 includes a tax benefit of $53 million for accrued interest reversals (recorded in sundry income (expense) - net).

8. Reflects the impact of the non-tax-deductible impairment charge for the agriculture reporting unit and corresponding $75 million tax charge associated with a valuation allowance recorded against the net deferred tax asset position of a legal entity in Brazil for the year ended December 31, 2018.

Deferred Tax Balances at December 31	2018					2017
(In millions)	Assets			Liabilities		Assets			Liabilities
Property	$	—		$	1,043	$	—		$	1,160
Tax loss and credit carryforwards1	1,390			—		1,452			—
Accrued employee benefits	1,802			169		1,988			68
Other accruals and reserves	323			51		333			39
Intangibles	320			5,876		284			6,286
Inventory	129			371		130			597
Long-term debt	24			—		109			—
Investments	114			581		23			453
Unrealized exchange gains/losses	—			141		—			71
Other – net	280			141		260			121
Subtotal	$	4,382		$	8,373	$	4,579		$	8,795
Valuation allowances1,2,3	(1,087		)	—		(1,140		)	—
Total	$	3,295		$	8,373	$	3,439		$	8,795
Net Deferred Tax Liability	$	(5,078	)			$	(5,356	)

1. Primarily related to the realization of recorded tax benefits on tax loss carryforwards from operations in the United States, Brazil, and Luxembourg.    

2. The company has corrected its valuation allowance (with a corresponding reduction in tax loss and credit carryforwards) in the amount of $238 million as a result of a change in the Delaware state apportionment methodology.

3. During the year ended December 31, 2018, the company established a full valuation allowance against the net deferred tax asset position of a legal entity in Brazil due to revised financial projections, resulting in tax expense of $75 million. See Note 14 for additional information.

Operating Loss and Tax Credit Carryforwards	Deferred Tax Asset
(In millions)	2018		2017
Operating loss carryforwards
Expire within 5 years	$	76	$	42
Expire after 5 years or indefinite expiration	1,137		1,245
Total operating loss carryforwards	$	1,213	$	1,287
Tax credit carryforwards
Expire within 5 years	$	8	$	10
Expire after 5 years or indefinite expiration	169		155
Total tax credit carryforwards	$	177	$	165
Total Operating Loss and Tax Credit Carryforwards	$	1,390	$	1,452

Total Gross Unrecognized Tax Benefits 1	Successor						Predecessor
	For the Year Ended December 31, 2018			For the Period September 1 through December 31, 2017			For the Period January 1 through August 31, 2017			For the Year Ended December 31, 2016
(In millions)
Total unrecognized tax benefits as of beginning of period	$	741		$	709		$	596		$	906
Decreases related to positions taken on items from prior years	(44		)	(2		)	(19		)	(46		)
Increases related to positions taken on items from prior years	74			9			3			33
Increases related to positions taken in the current year	9			28			49			55
Settlement of uncertain tax positions with tax authorities	(13		)	1			(6		)	(314		)
Decreases due to expiration of statutes of limitations	(5		)	(5		)	(86		)	(41		)
Exchange (gain) loss	(13		)	1			1			3
Total unrecognized tax benefits as of end of period	$	749		$	741		$	538		$	596
Total unrecognized tax benefits that, if recognized, would impact the effective tax rate	$	157		$	253		$	188		$	253
Total amount of interest and penalties (benefit) recognized in Provision for income taxes on continuing operations	$	11		$	1		$	(27	)	$	10
Total accrual for interest and penalties associated with unrecognized tax benefits	$	45		$	47		$	40		$	98

1. The prior year amounts have been revised for amounts previously omitted.

Each year the company files hundreds of tax returns in the various national, state and local income taxing jurisdictions in which it operates. These tax returns are subject to examination and possible challenge by the tax authorities. Positions challenged by the tax authorities may be settled or appealed by the company. As a result, there is an uncertainty in income taxes recognized in the company's financial statements in accordance with accounting for income taxes and accounting for uncertainty in income taxes. It is reasonably possible that changes to the company’s global unrecognized tax benefits could be significant; however, due to the uncertainty regarding the timing of completion of audits and possible outcomes, a current estimate of the range of increases or decreases that may occur within the next twelve months cannot be made.

Tax years that remain subject to examination for the company’s major tax jurisdictions are shown below:

Tax Years Subject to Examination by Major Tax Jurisdiction at Dec 31,	Earliest Open Year
Jurisdiction
Brazil	2012
Canada	2013
China	2014
Denmark	2012
Germany	2006
India	2001
The Netherlands	2017
Switzerland	2014
United States:
Federal income tax	2012
State and local income tax	2004

Undistributed earnings of foreign subsidiaries and related companies that are deemed to be permanently invested amounted to $15,565 million at December 31, 2018 and $15,408 million at December 31, 2017. In addition to the U.S. federal tax imposed by The Act on all accumulated unrepatriated earnings through December 31, 2017, The Act introduced additional U.S. federal tax on foreign earnings, effective as of January 1, 2018. The undistributed foreign earnings as of December 31, 2018 may still be subject to certain taxes upon repatriation, primarily where foreign withholding taxes apply. The company is still asserting indefinite reinvestment related to certain investments in foreign subsidiaries. It is not practicable to calculate the unrecognized deferred tax liability on undistributed foreign earnings due to the complexity of the hypothetical calculation.

During 2018, in connection with the Intended Business Separations, the company repatriated certain funds from its non-U.S. subsidiaries that were not needed to finance local operations. During the year ended December 31, 2018, the company recorded net tax expense of $74 million associated with foreign withholding tax incurred in connection with these repatriation activities.

Historical DuPont and its subsidiaries are included in DowDuPont's consolidated federal income tax group and consolidated tax return.  Generally, the consolidated tax liability of the DowDuPont U.S. tax group for each year will be apportioned among the members of the consolidated group based on each member’s separate taxable income.  Historical DuPont and Historical Dow intend that to the extent Federal and/or State corporate income tax liabilities are reduced through the utilization of tax attributes of the other, settlement of any receivable and payable generated from the use of the other party’s sub-group attributes will be in accordance with a tax sharing agreement and/or tax matters agreement.