
	For the fiscal years ended October 31
	2020		2019		2018
	In millions
U.S. federal taxes:
Current	$	(24)	$	(987)	$	751
Deferred	(68)		149		(3,132)
Non-U.S. taxes:
Current	319		386		528
Deferred	164		(3)		(563)
State taxes:
Current	23		(160)		61
Deferred	(27)		(14)		41
	$	387	$	(629)	$	(2,314)


	For the fiscal years ended October 31
	2020		2019		2018
U.S. federal statutory income tax rate from operations	21.0	%	21.0	%	23.3	%
State income taxes, net of federal tax benefit	1.4	%	1.5	%	0.5	%
Impact of foreign earnings including GILTI and FDII, net	(6.1)	%	(4.4)	%	(10.9)	%
U.S. Tax Reform enactment	—	%	(2.6)	%	(35.8)	%
Research and development (“R&D”) credit	(0.7)	%	(1.1)	%	(0.7)	%
Valuation allowances	2.3	%	(3.7)	%	(9.3)	%
Uncertain tax positions and audit settlements	(4.1)	%	(41.1)	%	(50.3)	%
Indemnification related items	—	%	6.8	%	5.2	%
Other, net	(1.8)	%	(1.3)	%	1.2	%
	12.0	%	(24.9)	%	(76.8)	%

In fiscal year 2020, HP recorded $244 million of net income tax benefits related to discrete items in the provision for taxes. This amount includes tax benefits related to audit settlements of $124 million in various jurisdictions and $82 million related to restructuring benefits. Additionally, HP recorded benefits of $20 million related to proxy contest costs and $17 million of other net tax benefits. In fiscal year 2020, excess tax benefits associated with stock options, restricted stock units and performance-adjusted restricted stock units were immaterial.

In fiscal year 2019, HP recorded $1.3 billion of net income tax benefits related to discrete items in the provision for taxes. This amount includes tax benefits related to audit settlements of $1.0 billion, $75 million due to ability to utilize tax attributes, $57 million of restructuring benefits and net valuation allowance releases of $94 million. HP also recorded benefits of $78 million related to U.S. tax reform as a result of new guidance issued by the U.S. Internal Revenue Service (“IRS”). These benefits were partially offset by uncertain tax position charges of $51 million. In fiscal year 2019, in addition to the discrete items mentioned above, HP recorded excess tax benefits of $20 million associated with stock options, restricted stock units and performance-adjusted restricted stock units.

In fiscal year 2018, HP recorded $2.8 billion of net income tax benefits related to discrete items in the provision for taxes which include impacts of the TCJA. HP had not yet completed its analysis of the full impact of the TCJA. However, as of October 31, 2018, HP recorded a provisional tax benefit of $760 million related to $5.6 billion net benefit for the decrease in its deferred tax liability on unremitted foreign earnings, partially offset by $3.3 billion net expense for the deemed repatriation tax payable in installments over eight years, a $1.2 billion net expense for the remeasurement of its deferred assets and liabilities to the new U.S. statutory tax rate and a $317 million valuation allowance on net expense related to deferred tax assets that are expected to be realized at a lower rate. HP also recorded tax benefits related to audit settlements of $1.5 billion and valuation allowance releases of $601 million pertaining to a change in our ability to utilize certain foreign and U.S. deferred tax assets due to a change in our geographic earnings mix. These benefits were partially offset by other net tax charges of $34 million. In fiscal year 2018, in addition to the discrete items mentioned above, HP recorded excess tax benefits of $42 million associated with stock options, restricted stock units and performance-adjusted restricted stock units.

As a result of certain employment actions and capital investments HP has undertaken, income from manufacturing and services in certain countries is subject to reduced tax rates, and in some cases is wholly exempt from taxes, through 2029. The gross income tax benefits attributable to these actions and investments were estimated to be $344 million ($0.24 diluted EPS) in fiscal year 2020, $386 million ($0.25 diluted net EPS) in fiscal year 2019 and $578 million ($0.35 diluted net EPS) in fiscal year 2018.


	For the fiscal years ended October 31
	2020		2019		2018
	In millions
Balance at beginning of year	$	929	$	7,771	$	10,808
Increases:
For current year’s tax positions	59		79		66
For prior years’ tax positions	71		172		101
Decreases:
For prior years’ tax positions	(89)		(37)		(248)
Statute of limitations expirations	(2)		(15)		(3)
Settlements with taxing authorities	(148)		(7,041)		(2,953)
Balance at end of year	$	820	$	929	$	7,771

As of October 31, 2020, the amount of unrecognized tax benefits was $820 million, of which up to $657 million would affect HP’s effective tax rate if realized. As of October 31, 2019, the amount of unrecognized tax benefits was $929 million of which up to $803 million would affect HP’s effective tax rate if realized. The amount of unrecognized tax benefits decreased by $109 million primarily related to the resolution of various audits. HP recognizes interest income from favorable settlements and interest expense and penalties accrued on unrecognized tax benefits in the provision for taxes in the Consolidated

HP engages in continuous discussions and negotiations with taxing authorities regarding tax matters in various jurisdictions. HP expects to complete resolution of certain tax years with various tax authorities within the next 12 months. HP believes it is reasonably possible that its existing gross unrecognized tax benefits may be reduced by up to $107 million within the next 12 months, affecting HP’s effective tax rate if realized.

HP is subject to income tax in the United States and approximately 60 other countries and is subject to routine corporate income tax audits in many of these jurisdictions. In addition, HP is subject to numerous ongoing audits by federal, state and foreign tax authorities. The IRS is conducting an audit of HP’s 2018 and 2019 income tax returns.

With respect to major state and foreign tax jurisdictions, HP is no longer subject to tax authority examinations for years prior to 2002. No material tax deficiencies have been assessed in major state or foreign tax jurisdictions related to ongoing audits as of October 31, 2020.

The U.S. Tax Court ruled in May 2012 against HP related to certain tax attributes claimed by HP for the tax years 1999 through 2003. HP appealed the U.S. Tax Court determination by filing a formal Notice of Appeal with the Ninth Circuit Court of Appeals. This case was argued before the Ninth Circuit in November 2016. The Ninth Circuit Court of Appeals issued its opinion in November 2017 affirming the Tax Court determinations. In fiscal year 2018, HP decided against further appeal.

HP believes it has provided adequate reserves for all tax deficiencies or reductions in tax benefits that could result from federal, state and foreign tax audits. HP regularly assesses the likely outcomes of these audits in order to determine the appropriateness of HP’s tax provision. HP adjusts its uncertain tax positions to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular audit. However, income tax audits are inherently unpredictable and there can be no assurance that HP will accurately predict the outcome of these audits. The amounts ultimately paid on resolution of an audit could be materially different from the amounts previously included in the Provision for taxes and therefore the resolution of one or more of these uncertainties in any particular period could have a material impact on net income or cash flows.

HP has not provided for U.S. federal income and foreign withholding taxes on $5.7 billion of undistributed earnings from non-U.S. operations as of October 31, 2020 because HP intends to reinvest such earnings indefinitely outside of the United States. Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable. The TCJA taxed HP’s historic earnings and profits of its non-U.S. subsidiaries. HP will remit these taxed reinvested earnings for which deferred U.S. federal and withholding taxes have been provided where excess cash has accumulated and HP determines that it is advantageous for business operations, tax or cash management reasons.


	As of October 31
	2020		2019
	In millions
Deferred tax assets:
Loss and credit carryforwards	$	7,857	$	7,856
Intercompany transactions—excluding inventory	509		714
Fixed assets	120		115
Warranty	203		195
Employee and retiree benefits	411		396
Deferred revenue	134		135
Capitalized research and development	203		193
Intangible assets	467		420
Operating lease liabilities	218		—
Investment in partnership	108		14
Other	531		542
Gross deferred tax assets	10,761		10,580
Valuation allowances	(7,976)		(7,930)
Total deferred tax assets	2,785		2,650

Deferred tax liabilities:
Unremitted earnings of foreign subsidiaries	(60)		(27)
Right-of-use assets from operating leases	(203)		—
Other	(32)		(63)
Total deferred tax liabilities	(295)		(90)
Net deferred tax assets	$	2,490	$	2,560


	For the fiscal years ended October 31
	2020		2019		2018
	In millions
Balance at beginning of year	$	7,930	$	7,906	$	8,807
Income tax (benefit) expense	74		(339)		(897)
Other comprehensive loss (income), currency translation and charges to other accounts	(28)		363		(4)
Balance at end of year	$	7,976	$	7,930	$	7,906

Gross deferred tax assets as of October 31, 2020, 2019 and 2018 were reduced by valuation allowances of $8.0 billion, $7.9 billion and $7.9 billion, respectively. In fiscal year 2020, the deferred tax asset valuation allowance increased by $46 million primarily associated with foreign net operating losses and U.S. deferred tax assets that are anticipated to be realized at a lower effective rate than the federal statutory tax rate due to certain future U.S. international tax reform implications. In fiscal year 2019, the deferred tax asset valuation allowance increased by $24 million primarily associated with the recognition of the income tax consequences of intra-entity transfers other than inventory. This increase was partially offset by the impact of tax rate changes in foreign jurisdictions and state valuation allowance releases. In fiscal year 2018, the deferred tax asset valuation allowance decreased by $901 million primarily associated with foreign net operating losses and U.S. deferred tax assets that are anticipated to be realized at a lower effective rate than the federal statutory tax rate due to certain future U.S. international tax reform implications.