Taxes on Earnings

12 Months Ended

Oct. 31, 2023

Income Tax Disclosure [Abstract]

Taxes on Earnings

Taxes on Earnings

Provision for Taxes

The domestic and foreign components of earnings before taxes were as follows:

	For the fiscal years ended October 31
h	2023		2022		2021
	In millions
U.S.	$	650	$	1,406	$	4,724
Non-U.S.	2,287		2,918		2,844
	$	2,937	$	4,324	$	7,568

The provision for (benefit from) taxes on earnings was as follows:

	For the fiscal years ended October 31
	2023		2022		2021
	In millions
U.S. federal taxes:
Current	$	226	$	272	$	1,112
Deferred	(549)		27		(458)
Non-U.S. taxes:
Current	337		338		420
Deferred	(305)		503		(173)
State taxes:
Current	42		9		78
Deferred	(77)		43		48
	$	(326)	$	1,192	$	1,027

The differences between the U.S. federal statutory income tax rate and HP’s effective tax rate were as follows:

	For the fiscal years ended October 31
	2023		2022		2021
U.S. federal statutory income tax rate from continuing operations	21.0	%	21.0	%	21.0	%
State income taxes, net of federal tax benefit	1.7	%	1.3	%	0.9	%
Impact of foreign earnings including GILTI and FDII, net	(1.4)	%	(7.9)	%	(3.9)	%
Valuation allowances	(7.3)	%	0.3	%	(3.5)	%
Uncertain tax positions and audit settlements	3.2	%	2.8	%	0.9	%
Impact of internal reorganization	(27.4)	%	9.4	%	(1.2)	%
Other, net	(0.9)	%	0.7	%	(0.6)	%
	(11.1)	%	27.6	%	13.6	%

The jurisdictions with favorable tax rates that have the most significant effective tax rate impact in the periods presented include Singapore, Malaysia, and Puerto Rico. HP has elected to treat GILTI inclusions as period costs.

In fiscal year 2023, HP recorded $1.1 billion of net income tax benefits related to discrete items in the provision for taxes. This amount included $726 million of tax effects related to internal reorganization, $255 million related to changes in valuation allowances, $101 million related to restructuring charges, $58 million related to the filing of tax returns in various jurisdictions, and $42 million related to acquisition charges. These benefits were partially offset by income tax charges of $60 million related to audit settlements in various jurisdictions, $27 million of uncertain tax position charges, and $25 million related to extinguishment of debt. In fiscal year 2023, excess tax benefits associated with stock options, restricted stock units and performance-adjusted restricted stock units were immaterial.

In fiscal year 2022, HP recorded $456 million of net income tax charges related to discrete items in the provision for taxes. This amount included $649 million of tax effects related to internal reorganization, $107 million of uncertain tax position charges,

$55 million related to withholding taxes on undistributed foreign earnings, $51 million related to audit settlements in various jurisdictions and $26 million of other net tax charges. These charges were partially offset by income tax benefits of $189 million related to the filing of tax returns in various jurisdictions, $156 million related to changes in valuation allowances, $44 million related to restructuring charges, and $43 million related to Poly acquisition charges. In fiscal year 2022, HP recorded excess tax benefits of $33 million associated with stock options, restricted stock units and performance-adjusted restricted stock.

In fiscal year 2021, HP recorded $4 million of net income tax charges related to discrete items in the provision for taxes. This amount included income tax charges of $533 million related to the Oracle litigation proceeds and $15 million of uncertain tax position charges. These charges were offset by income tax benefits of $368 million related to changes in valuation allowances, $89 million of tax effects related to internal reorganization, $51 million related to restructuring charges, $16 million related to the filing of tax returns in various jurisdictions, $11 million related to acquisition charges, and $9 million of other net tax benefits. In fiscal year 2021, excess tax benefits associated with stock options, restricted stock units and performance-adjusted restricted stock units were immaterial.

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 $190 million ($0.19 diluted net EPS) in fiscal year 2023, $313 million ($0.30 diluted net EPS) in fiscal year 2022 and $385 million ($0.32 diluted net EPS) in fiscal year 2021.

Uncertain Tax Positions

A reconciliation of unrecognized tax benefits is as follows:

	For the fiscal years ended October 31
	2023		2022		2021
	In millions
Balance at beginning of year	$	1,045	$	829	$	830
Increases:
For current year’s tax positions	61		26		62
For prior years’ tax positions	186		299		92
Decreases:
For prior years’ tax positions	(35)		(60)		(92)
Statute of limitations expirations	(8)		(5)		(9)
Settlements with taxing authorities	(112)		(44)		(54)
Balance at end of year	$	1,137	$	1,045	$	829

As of October 31, 2023, the amount of gross unrecognized tax benefits was $1.1 billion, of which up to $815 million would affect HP’s effective tax rate if realized. Total gross unrecognized tax benefits increased by $92 million for the twelve months ended October 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 Statements of Earnings. As of October 31, 2023, 2022 and 2021, HP had accrued $102 million, $64 million and $70 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 up to $54 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 2007. No material tax deficiencies have been assessed in major state or foreign tax jurisdictions related to ongoing audits as of October 31, 2023.

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 $5.1 billion of undistributed earnings from non-U.S. operations as of October 31, 2023 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.

Deferred Income Taxes

The significant components of deferred tax assets and deferred tax liabilities were as follows:

	As of October 31
	2023		2022
	In millions
Deferred tax assets:
Loss and credit carryforwards	$	7,194	$	7,601
Intercompany transactions—excluding inventory	540		799
Fixed assets	110		118
Warranty	124		170
Employee and retiree benefits	232		133
Deferred revenue	250		221
Capitalized research and development	821		654
Operating lease liabilities	242		238
Investment in partnership	703		70
Other	469		352
Gross deferred tax assets	10,685		10,356
Valuation allowances	(6,994)		(7,592)
Total deferred tax assets	3,691		2,764
Deferred tax liabilities:
Unremitted earnings of foreign subsidiaries	(88)		(75)
Right-of-use assets from operating leases	(223)		(227)
Intangible assets	(205)		(261)
Cash flow hedges	(64)		(155)
Total deferred tax liabilities	(580)		(718)
Net deferred tax assets	$	3,111	$	2,046

Deferred tax assets and liabilities included in the Consolidated Balance Sheets as follows:

	As of October 31
	2023		2022
	In millions
Deferred tax assets	$	3,155	$	2,167
Deferred tax liabilities	(44)		(121)
Total	$	3,111	$	2,046

 As of October 31, 2023, HP had recorded deferred tax assets for net operating loss (“NOL”) carryforwards as follows:

	Gross NOLs		Deferred Taxes on NOLs		Valuation allowance		Initial Year of Expiration
	In millions
Federal	$	73	$	15	$	(4)	2024
State	2,313		138		(47)		2024
Foreign	24,925		6,895		(6,494)		2028
Balance at end of year	$	27,311	$	7,048	$	(6,545)

As of October 31, 2023, HP had recorded deferred tax assets for various tax credit carryforwards as follows:

	Carryforward		Valuation Allowance		Initial Year of Expiration
	In millions
Tax credits in state and foreign jurisdictions	$	324	$	(51)	2024
Balance at end of year	$	324	$	(51)

Deferred Tax Asset Valuation Allowance

The deferred tax asset valuation allowance and changes were as follows:

	For the fiscal years ended October 31
	2023		2022		2021
	In millions
Balance at beginning of year	$	7,592	$	7,749	$	7,951
Income tax (benefit) expense	(650)		(274)		(168)
Goodwill, other comprehensive loss (income), currency translation and charges to other accounts	52		117		(34)
Balance at end of year	$	6,994	$	7,592	$	7,749

Gross deferred tax assets as of October 31, 2023, 2022, and 2021 were reduced by valuation allowances of $7.0 billion, $7.6 billion and $7.7 billion, respectively. In fiscal year 2023, the deferred tax asset valuation allowance decreased by $598 million primarily due to internal reorganization impacting 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 rate. In fiscal year 2022, the deferred tax asset valuation allowance decreased by $157 million primarily due to foreign net operating losses, U.S. deferred tax assets that are anticipated to be realized at a lower effective tax rate than the federal statutory tax rate, and the impact of the acquisition of Poly on the company’s deferred tax assets. In fiscal year 2021, the deferred tax asset valuation allowance decreased by $202 million primarily due to foreign net operating losses and U.S. deferred tax assets that are anticipated to be realized at a lower effective rate due to certain future U.S. international tax reform implications.