On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic. The CARES Act contains numerous income tax provisions, such as relaxing the limitations on the deductibility of interest and the carryback of net operating losses for specific periods. We have performed an analysis of these provisions and due to the unavailability of excess taxable income in the current or carry back periods, and the application of a valuation allowance to deferred tax assets, the Company's effective income tax rate and its tax provision are currently unaffected by the provisions of the CARES Act.

Additionally, the CARES Act provides for refundable employee retention credits and the deferral of the employer-paid portion of social security taxes. As of October 31, 2020, we elected to defer the employer-paid portion of social security taxes for the remainder of 2020, to be repaid equally in December 2021 and December 2022. The total employer-paid portion of social security taxes deferred as of October 31, 2020 is $16 million. We intend to claim the refundable employee retention tax credits provided under the CARES Act, which can be used to offset payroll tax liabilities. We estimate the potential benefits that the employee retention credits can provide to be approximately $3.6 million.



	For the Years Ended October 31,
(in millions)	2020			2019			2018
Current:
Federal	$	(1	)	$	2		$	—
State and local	(1		)	3			1
Foreign	23			46			47
Total current expense	$	21		$	51		$	48
Deferred:
Federal	$	(60	)	$	(1	)	$	(2	)
State and local	(15		)	(5		)	1
Foreign	(5		)	(26		)	5
Total deferred (benefit) expense	$	(80	)	$	(32	)	$	4
Total income tax (benefit) expense	$	(59	)	$	19		$	52

The following table presents a reconciliation of statutory federal income tax expense (benefit) recorded in Income tax (expense) benefit in our Consolidated Statements of Operations:



	For the Years Ended October 31,
(in millions)	2020			2019			2018
Federal income tax (benefit) expense^(A)	$	(81	)	$	55		$	98
State income taxes, net of federal benefit	2			2			3
Credits and incentives	11			16			50
Adjustments to valuation allowances	110			(94		)	(1,120		)
Foreign operations	(4		)	1			2
Adjustments to uncertain tax positions	(2		)	2			1
Intraperiod tax allocation offset to equity components	(75		)	(5		)	—
Non-controlling interest adjustment	(4		)	(5		)	(6		)
Foreign inclusions	(7		)	34			—
Tax law change	(20		)	—			—
Tax act mandatory repatriation	—			—			34
Tax act US deferred remeasurement	—			—			983
Other	11			13			7
Recorded income tax (benefit) expense	$	(59	)	$	19		$	52

_________________________

The tax effect of pretax income or loss from continuing operations generally should be determined by a computation that does not consider the tax effects of items that are not included in continuing operations. An exception to that incremental approach is applied when there is a loss from continuing operations and income in another category of earnings (for example, discontinued operations, other comprehensive income, additional paid in capital, etc.). In that situation, a tax provision is first allocated to the other categories of earnings. A related tax benefit is then recorded in continuing operations. This exception to the general rule applies even when a valuation allowance is in place at the beginning and end of the year. While intraperiod tax allocations do not change the overall tax provision, it may result in a gross-up of the individual components, thereby changing the amount of tax provision included in each category of income. During 2020 and 2019, we recorded $75 million and $5 million, respectively, for intraperiod allocation benefits in domestic continuing operations associated with certain postretirement plan remeasurement gains.

Not including the effect of the federal income tax rate change, as a result of the Tax Act, which reduces the statutory corporate income tax rate from 35% to 21%, effective January 1, 2018, we recognized an income tax expense of $110 million, and an income tax benefit of $94 million and $137 million, for the change in the valuation allowance for the years ended October 31, 2020, 2019 and 2018, respectively.

At October 31, 2020, undistributed earnings of foreign subsidiaries were $379 million. Income taxes have not been provided on foreign undistributed earnings, whether previously taxed or not, because they are either considered to be permanently invested in foreign subsidiaries or are expected to be repatriated without significant incremental U.S. federal, state or foreign withholding taxes. It is impracticable to determine the exact amount of unrecognized deferred tax liabilities.



	As of October 31,
(in millions)	2020			2019
Deferred tax assets attributable to:
Employee benefits liabilities	$	501		$	578
Net operating loss ("NOL") carryforwards	801			782
Product liability and warranty accruals	151			165
Research and development	179			144
Tax credit carryforwards	183			196
Other	395			279
Gross deferred tax assets	2,210			2,144
Less: Valuation allowances	2,020			2,011
Net deferred tax assets	$	190		$	133
Deferred tax liabilities attributable to:
Other	$	(73	)	$	(18	)
Total deferred tax liabilities	$	(73	)	$	(18	)

At October 31, 2020, deferred tax assets attributable to NOL carryforwards include $495 million attributable to U.S. federal NOL carryforwards, $165 million attributable to state NOL carryforwards, and $141 million attributable to foreign NOL carryforwards. If not used to reduce future taxable income, U.S. federal NOLs are scheduled to expire beginning in 2032. State NOLs can be carried forward for initial periods of 5 to 20 years, and are scheduled to expire in 2021 to 2040. Approximately one third of our foreign net operating losses will expire beginning in 2027, and another approximate one third of our foreign net operating losses will expire beginning in 2033, while the remaining one third has no expiration date. The majority of our tax credits can be carried forward for initial periods of 20 years and are scheduled to expire between 2021 and 2040.

A valuation allowance is required to be established or maintained when, based on currently available information, it is more likely than not that all or a portion of a deferred tax asset will not be realized. The guidance on accounting for income taxes provides important factors in determining whether a deferred tax asset will be realized, including whether there has been sufficient taxable income in recent years and whether sufficient income can reasonably be expected in future years in order to utilize the deferred tax asset.

For the year ended October 31, 2020, we have evaluated the need to maintain a valuation allowance for deferred tax assets based on our assessment of whether it is more likely than not that deferred tax benefits will be realized through the generation of future taxable income. Appropriate consideration is given to all available evidence, both positive and negative, in assessing the need for a valuation allowance.

We incurred domestic losses from continuing operations for the year ended October 31, 2020 and domestic income for the years ended October 31, 2019 and 2018. The positive evidence of domestic income from the years ended October 31, 2019 and 2018 does not outweigh the negative evidence of cumulative losses from prior years. The qualitative and quantitative analysis of current and expected domestic earnings, industry volumes, tax planning strategies, and general business risks resulted in a more likely than not conclusion of not being able to realize a significant portion of our deferred tax assets as of October 31, 2020.

We continue to maintain a valuation allowances on the majority of our U.S. deferred tax assets as well as certain foreign deferred tax assets that we believe, on a more-likely-than-not basis, will not be realized based on current forecasted results. For all remaining deferred tax assets, while we believe that it is more likely than not that they will be realized, we believe that it is reasonably possible that additional deferred tax asset valuation allowances could be required in the next twelve months.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. As of October 31, 2020, the amount of liability for uncertain tax positions was $20 million. The liability at October 31, 2020 has a recorded offsetting tax benefit associated with various issues that total $10 million. If the unrecognized tax benefits are recognized, all would impact our effective tax rate, except for positions for which we maintain a full valuation allowance against certain deferred tax assets. In this case, the effect may be in the form of an increase in the deferred tax asset related to our net operating loss carryforward, which would be offset by a full valuation allowance.



	For the years ended October 31,
(in millions)	2020			2019
Liability for uncertain tax positions at November 1	$	21		$	27
Additions as a result of positions taken in prior periods	1			3
Decrease as a result of positions taken in prior periods	(2		)	(2		)
Settlements	—			(7		)
Liability for uncertain tax positions at October 31	$	20		$	21

We recognize interest and penalties related to uncertain tax positions as part of Income tax expense. Total interest and penalties related to our uncertain tax positions resulted in income tax benefit of $1 million, income tax expense of less than $1 million, and income tax benefit of $1 million for the years ended October 31, 2020, 2019, and 2018, respectively. The total interest and penalties accrued were $3 million and $4 million for the years ended October 31, 2020 and 2019, respectively.

We have open tax years back to 2001 with various significant taxing jurisdictions including the U.S., Canada, Mexico, and Brazil. In connection with the examination of tax returns, contingencies may arise that generally result from differing interpretations of applicable tax laws and regulations as they relate to the amount, timing, or inclusion of revenues or expenses in taxable income, or the sustainability of tax credits to reduce income taxes payable. In fiscal 2018, we received a favorable ruling from the Brazilian court in connection with certain Brazil indirect federal taxes (PIS and COFINS) credits. During the fourth quarter of 2020, we estimated that it was probable to receive a benefit of $7 million, net of reserves, (translated into US dollars as of October 31, 2020) associated with tax years 2002 to 2010. We recorded $3 million of a benefit in Sales of manufactured products, net and $4 million of interest income in Interest expense (income) in our Consolidated Statements of Operations in our Global Operations segment. Timing on realization of these recoveries is dependent upon the timing of administrative approvals and generation of federal tax liabilities eligible for offset or sale. The Brazilian IRS has filed a Motion of Clarification on this matter with the Brazilian Supreme Court, which is awaiting decision as of the time of this disclosure. Additional contingencies that would result in tax recoveries may be resolved in future periods which could be material.

We believe we have sufficient accruals for our contingent tax liabilities. Annual tax provisions include amounts considered sufficient to pay assessments that may result from examinations of prior year tax returns, although actual results may differ. While it is probable that the liability for unrecognized tax benefits may increase or decrease during the next twelve months, we do not expect any such change would have a material effect on our financial condition, results of operations, or cash flows.