Taxes on Earnings

3 Months Ended

Jan. 31, 2023

Income Tax Disclosure [Abstract]

Taxes on Earnings

Taxes on Earnings

Provision for Taxes

HP’s effective tax rate was 16.6% and 18.2% for the three months ended January 31, 2023 and 2022, respectively. The difference between the U.S. federal statutory tax rate of 21% and HP’s effective tax rate for the three months ended January 31, 2023 and 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.

During the three months ended January 31, 2023, HP recorded $56 million of net income tax benefits related to discrete items in the provision for taxes. These amounts included $30 million of income tax benefits related to restructuring charges, $14 million related to acquisition charges and $12 million of other net tax benefits. During the three months ended January 31, 2023, discrete items in the provision for taxes and excess tax benefits associated with stock options, restricted stock units and performance-adjusted restricted stock units were immaterial.

During the three months ended January 31, 2022, HP recorded $26 million of net income tax charges related to discrete items in the provision for taxes. These amounts included income tax charges of $39 million related to withholding taxes on undistributed foreign earnings and were partially offset by income tax benefits of $12 million related to restructuring charges for the three months ended January 31, 2022. In addition to the discrete items mentioned above, HP recorded excess tax benefits of $37 million associated with stock options, restricted stock units and performance-adjusted restricted stock units for the three months ended January 31, 2022.

Uncertain Tax Positions

As of January 31, 2023, the amount of gross unrecognized tax benefits was $1.0 billion, of which up to $807 million would affect HP’s effective tax rate if realized. Total gross unrecognized tax benefits decreased by $14 million for the three months ended January 31, 2023. 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 January 31, 2023 and 2022, HP had accrued $73 million and $75 million, respectively, for interest and penalties.

HP engages in continuous discussions and negotiations with taxing authorities regarding tax matters in various jurisdictions. HP expects 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 $51 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.