3M 2015 Annual Report Download - page 76

TableofContents
Areconciliationofthebeginningandendingamountofgrossunrecognizedtaxbenefits(UTB)isasfollows:
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Federal,StateandForeignTax
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(Millions)  2015  2014  2013 
GrossUTBBalanceatJanuary1  $ 583  $ 659  $ 528 
       
Additionsbasedontaxpositionsrelatedtothecurrentyear   77   201   97 
Additionsfortaxpositionsofprioryears   140   30   158 
Reductionsfortaxpositionsofprioryears   (399)  (74)  (29)
Settlements   (4)  (154)  (17)
Reductionsduetolapseofapplicablestatuteoflimitations   (16)  (79)  (78)
       
GrossUTBBalanceatDecember31  $ 381  $ 583  $ 659 
       
NetUTBimpactingtheeffectivetaxrateatDecember31  $ 369  $ 265  $ 262 
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ThetotalamountofUTB,ifrecognized,wouldaffecttheeffectivetaxrateby$369millionasofDecember31,2015,$265million
asofDecember31,2014,and$262millionasofDecember31,2013.TheendingnetUTBresultsfromadjustingthegrossbalance
foritemssuchasFederal,State,andnon-U.S.deferreditems,interestandpenalties,anddeductibletaxes.ThenetUTBisincludedas
componentsofOtherAssets,AccruedIncomeTaxes,andOtherLiabilitieswithintheConsolidatedBalanceSheet.
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TheCompanyrecognizesinterestandpenaltiesaccruedrelatedtounrecognizedtaxbenefitsintaxexpense.TheCompany
recognizedintheconsolidatedstatementofincomeonagrossbasisapproximately$2millionofexpense,$14millionofbenefit,and
$22millionofexpensein2015,2014,and2013,respectively.Theamountofinterestandpenaltiesrecognizedmaybeanexpenseor
benefitduetoneworremeasuredunrecognizedtaxbenefitaccruals.AtDecember31,2015,andDecember31,2014,accruedinterest
andpenaltiesintheconsolidatedbalancesheetonagrossbasiswere$45millionand$44million,respectively.Includedinthese
interestandpenaltyamountsareinterestandpenaltiesrelatedtotaxpositionsforwhichtheultimatedeductibilityishighlycertain
butforwhichthereisuncertaintyaboutthetimingofsuchdeductibility.Becauseoftheimpactofdeferredtaxaccounting,otherthan
interestandpenalties,thedisallowanceoftheshorterdeductibilityperiodwouldnotaffecttheannualeffectivetaxratebutwould
acceleratethepaymentofcashtothetaxingauthoritytoanearlierperiod.
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Asaresultofcertainemploymentcommitmentsandcapitalinvestmentsmadeby3M,incomefromcertainmanufacturingactivities
inthefollowingcountriesissubjecttoreducedtaxratesor,insomecases,isexemptfromtaxforyearsthroughthefollowing:
Taiwan(2015),China(2016),Korea(2018),Brazil(2023),Switzerland(2024),andSingapore(2025).Theincometaxbenefits
attributabletothetaxstatusofthesesubsidiariesareestimatedtobe$114million(18centsperdilutedshare)in2015,$99million(
15centsperdilutedshare)in2014,and$87million(13centsperdilutedshare)in2013.
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TheCompanyhasnotprovideddeferredtaxesonunremittedearningsattributabletointernationalcompaniesthathavebeen
consideredtobereinvestedindefinitely,withtheexceptionofanacquiredentity.Theseearningsrelatetoongoingoperationsand
wereapproximately$12billionasofDecember31,2015.BecauseoftheavailabilityofU.S.foreigntaxcredits,themultiple
avenuesinwhichtorepatriatetheearningstominimizetaxcost,andbecausealargeportionoftheseearningsarenotliquid,itisnot
practicaltodeterminetheincometaxliabilitythatwouldbepayableifsuchearningswerenotreinvestedindefinitely.
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