Taxes on Earnings

6 Months Ended

Apr. 30, 2022

Income Tax Disclosure [Abstract]

Taxes on Earnings

Taxes on Earnings

Provision for Taxes

HP’s effective tax rate was 19.3% and 8.1% for the three months ended April 30, 2022 and 2021, respectively, and 18.7% and 12.7% for the six months ended April 30, 2022 and 2021, respectively. The difference between the U.S. federal statutory tax rate of 21% and HP’s effective tax rate for the three and six months ended April 30, 2022 was primarily due to tax effects of favorable tax rates associated with certain earnings from HP’s operations in lower-tax jurisdictions throughout the world. The difference between the U.S. federal statutory tax rate of 21% and HP’s effective tax rate for the three and six months ended April 30, 2021 was primarily due to tax effects of internal reorganization and by favorable tax rates associated with certain earnings from HP’s operations in lower-tax jurisdictions throughout the world.

During the three and six months ended April 30, 2022, HP recorded $8 million and $35 million, respectively, of net income tax charges related to discrete items in the provision for taxes. These amounts included income tax charges of $18 million related to the filing of tax returns in various jurisdictions for the six months ended April 30, 2022 and $17 million and $56 million related to withholding taxes on undistributed foreign earnings for the three and six months ended April 30, 2022, respectively. These charges were partially offset by income tax benefits of $20 million and $31 million related to restructuring charges and $7 million and $8 million related to other tax benefits for the three and six months ended April 30, 2022, respectively. In addition to the discrete items mentioned above, HP recorded excess tax benefits of $36 million associated with stock options, restricted stock units and performance-adjusted restricted stock units for the six months ended April 30, 2022.

During the three and six months ended April 30, 2021, HP recorded $128 million and $129 million, respectively, of net income tax benefits related to discrete items in the provision for taxes. These amounts included tax benefits of $89 million related to tax effects of internal reorganization, $8 million and $36 million related to restructuring charges, $23 million and $11 million related to audit settlements in various jurisdictions, and $12 million and $5 million related to other tax benefits for the three and six months ended April 30, 2021, respectively. These benefits were partially offset by $4 million and $12 million of uncertain tax position charges for the three and six months ended April 30, 2021, respectively. For the six months ended April 30, 2021, excess tax benefits associated with stock options, restricted stock units and performance-adjusted restricted stock units were immaterial.

Uncertain Tax Positions

As of April 30, 2022, the amount of gross unrecognized tax benefits was $843 million, of which up to $642 million would affect HP’s effective tax rate if realized. Total gross unrecognized tax benefits increased by $23 million for the six months ended April 30, 2022. 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 Condensed Statements of Earnings. As of April 30, 2022 and 2021, HP had accrued $81 million and $66 million, respectively, for interest and penalties.

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 $80 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 Internal Revenue Service (“IRS”) is conducting an audit of HP’s 2018 and 2019 income tax returns.