Cummins Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

INCOME TAXES (Tables)

INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2023

Schedule of Income before Income Tax, Domestic and Foreign

The following table summarizes income before income taxes:


	Years ended December 31,
In millions	2023		2022		2021

U.S. (loss) income	$	(541)	$	1,336	$	1,251
Foreign income	2,167		1,483		1,500
Income before income taxes	$	1,626	$	2,819	$	2,751

Schedule of Components of Income Tax Expense (Benefit)

Income tax expense (benefit) consisted of the following:


	Years ended December 31,
In millions	2023		2022		2021
Current
U.S. federal and state	$	611	$	425	$	261
Foreign	632		485		319

Total current income tax expense	1,243		910		580
Deferred
U.S. federal and state	(468)		(229)		(12)
Foreign	11		(45)		19

Total deferred income tax (benefit) expense	(457)		(274)		7
Income tax expense	$	786	$	636	$	587

Schedule of Effective Income Tax Rate Reconciliation

A reconciliation of the statutory U.S. federal income tax rate to the effective tax rate was as follows:


	Years ended December 31,
	2023		2022		2021
Statutory U.S. federal income tax rate	21.0	%	21.0	%	21.0	%
State income tax, net of federal effect	(0.4)		1.3		1.1
Differences in rates and taxability of foreign subsidiaries and joint ventures (1)	11.9		3.1		0.1
Research tax credits	(4.7)		(1.8)		(0.6)
Foreign derived intangible income	(4.2)		(2.0)		(1.0)
Agreement in Principle, federal impact (2)	22.4		—		—
Agreement in Principle, state impact (2)	2.1		—		—
Other, net	0.2		1.0		0.7
Effective tax rate	48.3	%	22.6	%	21.3	%

(1) Includes the jurisdictional mix of pre-tax income and impact of actual and planned repatriation of earnings back to the U.S.
(2) See NOTE 2, "AGREEMENT IN PRINCIPLE," for additional information.

Schedule of Deferred Tax Assets and Liabilities

Carryforward tax benefits and the tax effect of temporary differences between financial and tax reporting that give rise to net deferred tax assets (liabilities) were as follows:


	December 31,
In millions	2023		2022
Deferred tax assets
U.S. and state carryforward benefits	$	272	$	272
Foreign carryforward benefits	609		527
Employee benefit plans	347		258
Warranty expenses	483		458
Lease liabilities	125		110
Capitalized research and development expenditures	591		238
Accrued expenses	253		174
Other	78		126
Gross deferred tax assets	2,758		2,163
Valuation allowance	(789)		(704)
Total deferred tax assets	1,969		1,459
Deferred tax liabilities
Property, plant and equipment	(367)		(369)
Unremitted income of foreign subsidiaries and joint ventures	(179)		(210)
Employee benefit plans	(278)		(311)
Lease assets	(123)		(108)
Intangible assets	(406)		(435)
Other	(64)		(50)
Total deferred tax liabilities	(1,417)		(1,483)
Net deferred tax (liabilities) assets	$	552	$	(24)

Our Consolidated Balance Sheets contain the following tax related items:


	December 31,
In millions	2023		2022
Prepaid expenses and other current assets

Refundable income taxes	$	81	$	83
Other assets
Deferred income tax assets	1,082		625
Long-term refundable income taxes	27		14
Other accrued expenses
Income tax payable	242		173
Other liabilities
Long-term income taxes	111		192
Deferred income tax liabilities	530		649

Schedule of Unrecognized Tax Benefits Roll Forward

A reconciliation of unrecognized tax benefits for the years ended December 31, 2023, 2022 and 2021 was as follows:


	December 31,
In millions	2023		2022		2021
Balance at beginning of year	$	283	$	89	$	122
Additions to tax positions due to acquisitions	8		189		—
Additions to current year tax positions	21		17		11
Additions to prior years' tax positions	19		17		16
Reductions to prior years' tax positions	(1)		(1)		(28)
Reductions for tax positions due to settlements with taxing authorities	—		(28)		(32)

Balance at end of year	$	330	$	283	$	89