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, 2013



	Years ended December 31,
In millions	2013		2012		2011
Income before income taxes
U.S. income	$	1,058	$	998	$	881
Foreign income	1,061		1,273		1,790
Total	$	2,119	$	2,271	$	2,671

Income tax expense

Income tax expense consists of the following:



	Years ended December 31,
In millions	2013		2012		2011
Current
U.S. federal and state	$	239	$	118	$	116
Foreign	192		299		524
Total current	431		417		640
Deferred
U.S. federal and state	67		108		69
Foreign	33		8		16
Total deferred	100		116		85
Income tax expense	$	531	$	533	$	725

Reconciliation of the U.S. federal income tax rate to the actual effective tax rate

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



	Years ended December 31,
	2013		2012		2011
Statutory U.S. federal income tax rate	35.0	%	35.0	%	35.0	%
State income tax, net of federal effect	0.2		1.0		0.4
Research tax credits	(3.7	)	(0.4	)	(4.7	)
Differences in rates and taxability of foreign subsidiaries and joint ventures	(6.0	)	(12.1	)	(4.6	)
Other, net	(0.4	)	—		1.0
Effective tax rate	25.1	%	23.5	%	27.1	%

Net deferred tax assets

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



	December 31,
In millions	2013			2012
Deferred tax assets
U.S. federal and state carryforward benefits	$	124		$	115
Foreign carryforward benefits	63			50
Employee benefit plans	328			369
Warranty and marketing expenses	332			308
Accrued expenses	70			75
Other	51			78
Gross deferred tax assets	968			995
Valuation allowance	(101		)	(95		)
Total deferred tax assets	867			900
Deferred tax liabilities
Property, plant and equipment	(304		)	(218		)
Unremitted income of foreign subsidiaries and joint ventures	(201		)	(213		)
Employee benefit plans	(158		)	(47		)
Other	(27		)	(26		)
Total deferred tax liabilities	(690		)	(504		)
Net deferred tax assets	$	177		$	396

Reconciliation of the beginning and ending amount of unrecognized tax benefits

A reconciliation of unrecognized tax benefits was as follows:



In millions
Balance at December 31, 2010	$	85
Additions based on tax positions related to the current year	5
Additions based on tax positions related to the prior years	44
Reductions for tax positions related to prior years	(3		)
Reductions for tax positions relating to settlements with taxing authorities	(39		)
Reductions for tax positions relating to lapse of statute of limitations	(6		)
Balance at December 31, 2011	86
Additions based on tax positions related to the current year	4
Additions based on tax positions related to the prior years	57
Reductions for tax positions related to prior years	(2		)
Balance at December 31, 2012	145
Additions based on tax positions related to the current year	10
Additions based on tax positions related to the prior years	21
Reductions for tax positions related to prior years	(6		)
Reductions for tax positions relating to lapse of statute of limitations	(1		)
Balance at December 31, 2013	$	169

- Definition

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

+ References + Details