v3.8.0.1
Income Taxes
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12 Months Ended |
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| Income Tax Disclosure [Abstract] |
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| Income Taxes |
Income Taxes The provision for income taxes by taxing jurisdiction and by significant components consisted of the following: | | | | | | | | | | | | | ($ in millions) | 2017 |
| | 2016 |
| | 2015 |
| Current | | | | | | U.S. federal |
| $182 |
| |
| ($251 | ) | |
| $132 |
| U.S. state and local | 49 |
| | (12 | ) | | 20 |
| Foreign | 349 |
| | 306 |
| | 261 |
| Total current income tax expense |
| $580 |
| |
| $43 |
| |
| $413 |
| Deferred | | | | | | U.S. federal |
| $105 |
| |
| $176 |
| |
| $31 |
| U.S. state and local | (16 | ) | | (10 | ) | | 6 |
| Foreign | (53 | ) | | 8 |
| | (37 | ) | Total deferred income tax expense |
| $36 |
| |
| $174 |
| |
| $— |
| Total income tax expense |
| $616 |
| |
| $217 |
| |
| $413 |
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A reconciliation of the statutory U.S. corporate federal income tax rate to the Company’s effective tax rate follows: | | | | | | | | | | | 2017 |
| | 2016 |
| | 2015 |
| U.S. federal income tax rate | 35.0 | % | | 35.0 | % | | 35.0 | % | Changes in rate due to: | | | | | | U.S. tax cost - Tax Cuts & Jobs Act | 11.0 |
| | — |
| | — |
| U.S./foreign tax differential | (9.3 | ) | | (17.7 | ) | | (8.2 | ) | U.S. current tax benefit on foreign exchange realization | (4.9 | ) | | (3.0 | ) | | — |
| U.S. tax incentives | (2.3 | ) | | (3.7 | ) | | (1.9 | ) | U.S. tax (benefit) cost on foreign dividends | (1.9 | ) | | 0.4 |
| | (1.0 | ) | U.S. state and local taxes | 1.1 |
| | (1.8 | ) | | 1.0 |
| U.S. deferred tax benefit on foreign income | (0.6 | ) | | (3.1 | ) | | (4.1 | ) | Asbestos charge | — |
| | 19.1 |
| | — |
| Other | 2.6 |
| | 2.4 |
| | 2.9 |
| Effective income tax rate | 30.7 | % | | 27.6 | % | | 23.7 | % |
On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”) which, among other things lowered the U.S. corporate statutory income tax rate from 35% to 21%, eliminated certain deductible items and added other deductible items for corporations, imposed a tax on unrepatriated foreign earnings and eliminated U.S. taxes on most future foreign earnings. In December 2017, the Company recorded a net tax charge of $134 million related to the Act. The net charge consists of the tax on unrepatriated foreign earnings of approximately $250 million and a charge of approximately $125 million related to the remeasurement of PPG’s U.S. deferred tax assets and liabilities at the new enacted statutory rate. These charges were partially offset by a benefit from the reversal of an existing deferred tax liability on repatriated foreign earnings of approximately $150 million and a benefit resulting from PPG’s decision to accelerate recognition of certain U.S. tax attributes during the fourth quarter. The net charge recorded as a provisional amount as of December 31, 2017 represents the Company’s best estimate using information available as of February 1, 2018. The Company anticipates U.S. regulatory agencies will issue further regulations during 2018, which may alter this estimate. The Company is still evaluating among other things, its position with respect to permanent reinvestment of foreign earnings overseas and other related outside basis difference considerations and the amount of tax owed on unrepatriated earnings by subsidiaries. The Company believes its remeasurement of the U.S deferred tax assets and liabilities is complete, except for changes in estimates that can result from finalizing the filing of our 2017 U.S. income tax return, which are not anticipated to be material, and changes that may be a direct impact of other provisional amounts recorded due to the enactment of the Act. The Company will refine its estimates to incorporate new or better information as it comes available through the filing date of its 2017 U.S. income tax returns in the fourth quarter of 2018. The tax owed by PPG on its unrepatriated foreign earnings is payable over eight years and is subject to a prescriptive calculation to determine the portion payable in 2018 and beyond. PPG’s current estimate, using this prescriptive method, indicates its tax payable will be increased by approximately $1 million to $3 million per year through 2025. As such, the portion of the tax on unrepatriated foreign earnings not payable within the next 12 months is presented within “Other liabilities” on the consolidated balance sheet. The total tax expense for 2017 also includes a deferred tax benefit of $22 million related to the $60 million of pre-tax pension settlement charges discussed in Note 12, “Pensions and Other Postretirement Benefits.” During 2016, the Company recorded a $151 million net tax charge associated with the funding of the Pittsburgh Corning (“PC”) asbestos settlement trust (the “Trust”) described in Note 13, "Commitments and Contingent Liabilities." Further, in conjunction with the funding of the Trust, PPG provided taxes on the earnings of certain foreign subsidiaries and recorded one-time book tax benefits for its contribution of the Company's ownership interest in PC's European subsidiary to the Trust and for a change in the measurement of certain deferred tax liabilities. In 2017 and 2016, U.S. deferred tax on foreign earnings includes the remeasurement of a U.S. deferred tax liability to repatriate foreign earnings on which PPG has not asserted permanent reinvestment in the foreign jurisdiction. Income (Loss) before income taxes of the Company’s U.S. operations for 2017, 2016 and 2015 was $716 million, $(204) million and $693 million, respectively. Income before income taxes of the Company’s foreign operations for 2017, 2016 and 2015 was $1,292 million, $990 million and $1,052 million, respectively. Deferred income taxes Deferred income taxes are provided for the effect of temporary differences that arise because there are certain items treated differently for financial accounting than for income tax reporting purposes. The deferred tax assets and liabilities are determined by applying the enacted tax rate in the year in which the temporary difference is expected to reverse. | | | | | | | | | ($ in millions) | 2017 |
| | 2016 |
| Deferred income tax assets related to | | | | Employee benefits |
| $399 |
| |
| $604 |
| Contingent and accrued liabilities | 164 |
| | 263 |
| Operating loss and other carry-forwards | 221 |
| | 197 |
| Inventories | 6 |
| | 14 |
| Property | 51 |
| | 49 |
| Other | 135 |
| | 100 |
| Valuation allowance | (173 | ) | | (119 | ) | Total |
| $803 |
| |
| $1,108 |
| Deferred income tax liabilities related to | | | | Property |
| $314 |
| |
| $349 |
| Intangibles | 578 |
| | 647 |
| Employee benefits | 11 |
| | 4 |
| Derivatives | 1 |
| | 6 |
| Undistributed foreign earnings | 24 |
| | 189 |
| Other | 20 |
| | 146 |
| Total |
| $948 |
| |
| $1,341 |
| Deferred income tax (liabilities) assets – net |
| ($145 | ) | |
| ($233 | ) |
Net operating loss and credit carryforwards | | | | | | | | | | | ($ in millions) | 2017 |
| | 2016 |
| | Expiration | Available net operating loss carryforwards: | | | | | | Indefinite expiration |
| $447 |
| |
| $376 |
| | NA | Definite expiration | 247 |
| | 118 |
| | 2018 - 2030 | Total |
| $694 |
| |
| $494 |
| | NA | Net operating loss carryforwards, tax effected |
| $210 |
| |
| $140 |
| | NA | Income tax credit carryforwards |
| $9 |
| |
| $57 |
| | 2018 - 2027 |
A valuation allowance of $170 million and $119 million has been established for carry-forwards at December 31, 2017 and 2016, when the ability to utilize them is not likely. Undistributed foreign earnings Over the past several years, PPG has established deferred tax liabilities on certain undistributed earnings, namely in connection with divestitures and the funding of the Pittsburgh Corning Asbestos Trust (refer to Note 13, “Commitments and Contingent Liabilities”). At December 31, 2016, the expected future tax cost to repatriate these foreign earnings which were not permanently reinvested totaled $189 million. At December 31, 2016, no significant deferred U.S. income taxes had been provided on the remaining $3.5 billion of PPG’s undistributed earnings as they were considered to be reinvested for an indefinite period of time or will be repatriated when it is tax effective to do so. In 2017, in conjunction with the enactment of the Act, PPG owes U.S. tax on substantially all unrepatriated earnings. As of December 31, 2017, the Company has provisionally not changed its intention to reinvest foreign earnings indefinitely or repatriate when it is tax effective to do so, and as such has not established a liability for foreign withholding taxes or other costs that would be incurred if the earnings were repatriated. Unrecognized tax benefits The Company files federal, state and local income tax returns in numerous domestic and foreign jurisdictions. In most tax jurisdictions, returns are subject to examination by the relevant tax authorities for a number of years after the returns have been filed. The Company is no longer subject to examinations by tax authorities in any major tax jurisdiction for years before 2006. Additionally, the Internal Revenue Service has completed its examination of the Company’s U.S. federal income tax returns filed for years through 2011. The examinations of the Company’s U.S. federal income tax returns for 2012 through 2013 are currently underway. A reconciliation of the total amounts of unrecognized tax benefits (excluding interest and penalties) as of December 31 follows: | | | | | | | | | | | | | ($ in millions) | 2017 |
| | 2016 |
| | 2015 |
| January 1 |
| $94 |
| |
| $82 |
| |
| $71 |
| Current year tax positions - additions | 37 |
| | 25 |
| | 14 |
| Prior year tax positions - additions | 26 |
| | 8 |
| | 5 |
| Pre-acquisition unrecognized tax benefits | — |
| | — |
| | 4 |
| Prior year tax positions - reductions | — |
| | (11 | ) | | (3 | ) | Statute of limitations expirations | (8 | ) | | (8 | ) | | (1 | ) | Settlements | (10 | ) | | — |
| | (3 | ) | Foreign currency translation | 9 |
| | (2 | ) | | (5 | ) | December 31 |
| $148 |
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| $94 |
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| $82 |
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The Company expects that any reasonably possible change in the amount of unrecognized tax benefits in the next 12 months would not be significant. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $140 million as of December 31, 2017. Interest and penalties | | | | | | | | | | | | | ($ in millions) | 2017 |
| | 2016 |
| | 2015 |
| Accrued interest and penalties related to unrecognized tax benefits |
| $15 |
| |
| $9 |
| |
| $8 |
| Loss recognized in income tax expense related to interest and penalties |
| $4 |
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| $1 |
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| $2 |
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The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. |
| X |
- DefinitionThe entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
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