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Income Taxes
 6 Months Ended
Jun. 29, 2019
Income Tax Disclosure [Abstract]  
Income Taxes [Text Block]
Note 6.
Income Taxes
The provision for income taxes in the accompanying statement of income differs from the provision calculated by applying the statutory federal income tax rate to income before provision for income taxes due to the following:
 
 
Six Months Ended
 
 
June 29,

 
June 30,

(In millions)
 
2019

 
2018

 
 
 
 
 
Statutory Federal Income Tax Rate
 
21
%
 
21
%
 
 
 
 
 
Provision for Income Taxes at Statutory Rate
 
$
464

 
$
302

 
 
 
 
 
Increases (Decreases) Resulting From:
 
 
 
 
Foreign rate differential
 
(184
)
 
(127
)
Foreign exchange loss on inter-company debt refinancing
 
(62
)
 
—

Income tax credits
 
(137
)
 
(119
)
Global intangible low-taxed income
 
134

 
81

Foreign-derived intangible income
 
(24
)
 
(22
)
Withholding taxes
 
31

 
11

Singapore tax holiday
 
(13
)
 
(19
)
Transition tax and other impacts of U.S. tax reform
 
(20
)
 
70

Provision for (reversal of) tax reserves, net
 
43

 
(49
)
Excess tax benefits from stock options and restricted stock units
 
(50
)
 
(36
)
Basis difference on disposal of business
 
64

 
—

Other, net
 
30

 
17

 
 
 
 
 
Provision for income taxes
 
$
276

 
$
109


The company has operations and a taxable presence in approximately 50 countries outside the U.S. Some of these countries have lower tax rates than the U.S. The company’s ability to obtain a benefit from lower tax rates outside the U.S. is dependent on its relative levels of income in countries outside the U.S. and on the statutory tax rates in those countries.
In the first quarter of 2019, the company recorded a $62 million income tax benefit related to a foreign exchange loss for tax purposes on certain intercompany financing arrangements. In the second quarter of 2019, the company recorded a tax provision of $187 million related to the gain on sale of the Anatomical Pathology business. In addition, in the second quarter of 2019, the company implemented foreign tax credit planning in Sweden which resulted in $75 million of foreign tax credits, with no related incremental U.S. income tax expense.
During the first six months of 2019, the company recorded a net tax provision of $1 million to adjust the impacts of U.S. tax reform based on final regulations issued by the U.S. Treasury in January and June 2019. The income tax provision consists of an incremental benefit of $20 million and a $7 million reduction of related unrecognized tax benefits in the first quarter of 2019 and a $28 million charge to increase an unrecognized tax benefit in the second quarter of 2019.
The company has significant activities in Singapore and has received considerable tax incentives. The local taxing authority granted the company pioneer company status which provides an incentive encouraging companies to undertake activities that have the effect of promoting economic or technological development in Singapore. This incentive equates to a tax exemption on earnings associated with most of the company’s manufacturing activities in Singapore and continues through December 31, 2026. In 2019 and 2018, the impact of this tax holiday decreased the annual effective tax rates by 0.6 percentage points and 1.3 percentage points, respectively, and increased diluted earnings per share by approximately $0.03 and $0.05, respectively.
Unrecognized Tax Benefits
As of June 29, 2019, the company had $1.50 billion of unrecognized tax benefits substantially all of which, if recognized, would reduce the effective tax rate.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:
(In millions)
 
2019

 
 
 
Balance at Beginning of Year
 
$
1,442

Additions for tax positions of current year
 
4

Additions for tax positions of prior years
 
62

Reductions for tax positions of prior years
 
(12
)
 
 
 
Balance at End of Period
 
$
1,496