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, 2016

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

The following table summarizes income before income taxes:



	Years ended December 31,
In millions	2016		2015		2014
U.S. income	$	995	$	1,275	$	1,407
Foreign income	935		750		1,027
Income before income taxes	$	1,930	$	2,025	$	2,434

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

Income tax expense consists of the following:



	Years ended December 31,
In millions	2016			2015			2014
Current
U.S. federal and state	$	211		$	516		$	470
Foreign	213			147			197
Total current	424			663			667
Deferred
U.S. federal and state	57			(151		)	39
Foreign	(7		)	43			(8		)
Total deferred	50			(108		)	31
Income tax expense	$	474		$	555		$	698

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,
	2016		2015		2014
Statutory U.S. federal income tax rate	35.0	%	35.0	%	35.0	%
State income tax, net of federal effect	0.8		1.2		1.1
Differences in rates and taxability of foreign subsidiaries and joint ventures	(7.2	)	(6.6	)	(5.7	)
Research tax credits	(1.7	)	(1.4	)	(1.5	)
Other, net	(2.3	)	(0.8	)	(0.2	)
Effective tax rate	24.6	%	27.4	%	28.7	%

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	2016			2015
Deferred tax assets
U.S. state carryforward benefits	$	159		$	133
Foreign carryforward benefits	154			103
Employee benefit plans	401			377
Warranty expenses	405			369
Accrued expenses	107			76
Other	64			78
Gross deferred tax assets	1,290			1,136
Valuation allowance	(307		)	(209		)
Total deferred tax assets	983			927
Deferred tax liabilities
Property, plant and equipment	(319		)	(269		)
Unremitted income of foreign subsidiaries and joint ventures	(59		)	(69		)
Employee benefit plans	(213		)	(212		)
Other	(48		)	(21		)
Total deferred tax liabilities	(639		)	(571		)
Net deferred tax assets	$	344		$	356

Our Consolidated Balance Sheets contain the following tax related items:



	December 31,
In millions	2016		2015
Prepaid and other current assets
Refundable income taxes	$	192	$	176
Other assets
Deferred tax assets	420		390
Long-term refundable income taxes	22		18
Other liabilities and deferred revenue
Deferred tax liabilities	76		34

Summary of Income Tax Contingencies [Table Text Block]

A reconciliation of unrecognized tax benefits for the years ended December 31, 2016, 2015 and 2014 was as follows:



	December 31,
In millions	2016			2015			2014
Balance at beginning of year	$	135		$	174		$	169
Additions to current year tax positions	10			8			8
Additions to prior years tax positions	18			24			5
Reductions to prior years tax positions	—			—			(2		)
Reductions for tax positions due to settlements with taxing authorities	(104		)	(71		)	(5		)
Reductions for tax positions due to lapse of statute of limitations	—			—			(1		)
Balance at end of year	$	59		$	135		$	174