Taxes (Tables)

12 Months Ended

Dec. 31, 2019

Taxes

Income before income taxes

($ in millions)
For the year ended December 31:	2019		2018		2017
Income from continuing operations before income taxes
U.S. operations	$	(315)	$	627	$	560
Non-U.S. operations		10,481		10,715		10,840
Total income from continuing operations before income taxes	$	10,166	$	11,342	$	11,400

Components of the provision for income taxes by geographic operations and taxing jurisdiction

($ in millions)
For the year ended December 31:	2019		2018		2017
U.S. operations	$	(408)	$	1,199	$	2,923
Non-U.S. operations		1,139		1,420		2,719
Total continuing operations provision for income taxes	$	731	$	2,619	$	5,642

($ in millions)
For the year ended December 31:	2019		2018		2017
U.S. federal
Current	$	331	$	(342)	$	2,388
Deferred		(839)		1,377		77
	$	(508)	$	1,035	$	2,465
U.S. state and local
Current	$	(85)	$	127	$	55
Deferred		(82)		(292)		28
	$	(167)	$	(165)	$	83
Non-U.S.
Current	$	1,829	$	2,135	$	3,891
Deferred		(423)		(386)		(797)
	$	1,406	$	1,749	$	3,094
Total continuing operations provision for income taxes	$	731	$	2,619	$	5,642
Discontinued operations provision for/(benefit from) income taxes		(1)		2		(3)
Provision for social security, real estate, personal property and other taxes		3,304		3,322		3,434
Total taxes included in net income	$	4,034	$	5,943	$	9,073

Effective income tax rate reconciliation

For the year ended December 31:	2019		2018		2017
Statutory rate	21	%	21	%	35	%
Enactment of U.S. tax reform	1		18		48
Tax differential on foreign income	(11)		(9)	*	(26)
Intra-entity transfers	0		0		(5)
Domestic incentives	(2)		(3)	*	(2)
State and local	(1)		(1)		1
Other	(1)		(3)		(2)
Effective rate	7	%	23	%	49	%

* Reclassified to conform to 2019 presentation.

Percentages rounded for disclosure purposes.

Components of deferred tax assets and liabilities

Deferred Tax Assets

($ in millions)
At December 31:	2019		2018
Retirement benefits	$	3,766	$	3,620
Leases*		1,729		103	**
Share-based and other compensation		637		636
Domestic tax loss/credit carryforwards		1,259		964
Deferred income		600		674
Foreign tax loss/credit carryforwards		836		903
Bad debt, inventory and warranty reserves		298		348
Depreciation		253		231
Accruals		368		336
Intangible assets		592		620
Capitalized research and development		722		—
Other		1,438		1,398
Gross deferred tax assets		12,498		9,833
Less: valuation allowance		608		915
Net deferred tax assets	$	11,890	$	8,918

Deferred Tax Liabilities

($ in millions)
At December 31:	2019		2018
Goodwill and intangible assets+	$	3,111	$	1,200
GILTI deferred taxes		1,908		1,927
Leases and right-of-use assets*		2,216		580
Depreciation		728		719
Retirement benefits		1,002		455
Software development costs+		1,075		292
Deferred transition costs		233		233
Undistributed foreign earnings		725		981
Other		940		1,011
Gross deferred tax liabilities	$	11,938	$	7,398

*    Reflects the adoption of the FASB guidance on leases.

**  Previously included in Other.

+ The increase in the balance was primarily due to the acquisition of Red Hat.

Reconciliation of the beginning and ending amount of unrecognized tax benefits

($ in millions)	2019		2018		2017
Balance at January 1	$	6,759	$	7,031	$	3,740
Additions based on tax positions related to the current year		816		394		3,029
Additions for tax positions of prior years		779		1,201		803
Reductions for tax positions of prior years (including impacts due to a lapse of statute)		(922)		(1,686)		(367)
Settlements		(286)		(181)		(174)
Balance at December 31	$	7,146	$	6,759	$	7,031