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, 2015

Schedule of Income before Income Tax, Domestic and Foreign [Table Text Block]



	Years ended December 31,
In millions	2015		2014		2013
Income before income taxes
U.S. income	$	1,275	$	1,407	$	1,058
Foreign income	750		1,027		1,061
Total	$	2,025	$	2,434	$	2,119

Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]

Income tax expense consists of the following:



	Years ended December 31,
In millions	2015			2014			2013
Current
U.S. federal and state	$	516		$	470		$	239
Foreign	147			197			192
Total current	663			667			431
Deferred
U.S. federal and state	(151		)	39			67
Foreign	43			(8		)	33
Total deferred	(108		)	31			100
Income tax expense	$	555		$	698		$	531

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

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



	Years ended December 31,
	2015		2014		2013
Statutory U.S. federal income tax rate	35.0	%	35.0	%	35.0	%
State income tax, net of federal effect	1.2		1.1		0.2
Differences in rates and taxability of foreign subsidiaries and joint ventures	(6.6	)	(5.7	)	(6.0	)
Research tax credits	(1.4	)	(1.5	)	(3.7	)
Other, net	(0.8	)	(0.2	)	(0.4	)
Effective tax rate	27.4	%	28.7	%	25.1	%

Schedule of Deferred Tax Assets and Liabilities [Table Text Block]

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	2015			2014
Deferred tax assets
U.S. state carryforward benefits	$	133		$	124
Foreign carryforward benefits	103			66
Employee benefit plans	377			367
Warranty expenses	369			354
Accrued expenses	76			89
Other	78			45
Gross deferred tax assets	1,136			1,045
Valuation allowance	(209		)	(144		)
Total deferred tax assets	927			901
Deferred tax liabilities
Property, plant and equipment	(269		)	(329		)
Unremitted income of foreign subsidiaries and joint ventures	(69		)	(204		)
Employee benefit plans	(212		)	(161		)
Other	(21		)	(23		)
Total deferred tax liabilities	(571		)	(717		)
Net deferred tax assets	$	356		$	184

Our Consolidated Balance Sheets contain the following tax related items:



	December 31,
In millions	2015			2014
Prepaid and other current assets
Deferred tax assets	$	—	⁽¹⁾	$	274
Refundable income taxes	176			170
Other assets
Deferred tax assets	390			40
Long-term refundable income taxes	18			24
Other liabilities and deferred revenue
Deferred tax liabilities	34			130

^{_____________________________________________________________}

⁽¹⁾Prepaid and other current assets include deferred tax assets of zero for the year ended December 31, 2015, as the result of the prospective early adoption of the new standard on balance sheet classification of deferred tax assets.

Summary of Income Tax Contingencies [Table Text Block]

A reconciliation of unrecognized tax benefits for the years ended December 31, 2015, 2014 and 2013 was as follows:



In millions
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
Additions based on tax positions related to the current year	8
Additions based on tax positions related to the prior years	5
Reductions for tax positions related to prior years	(2		)
Reductions for tax positions relating to settlements with taxing authorities	(5		)
Reductions for tax positions relating to lapse of statute of limitations	(1		)
Balance at December 31, 2014	174
Additions based on tax positions related to the current year	8
Additions based on tax positions related to the prior years	24
Reductions for tax positions relating to settlements with taxing authorities	(71		)
Balance at December 31, 2015	$	135