Income Taxes

3 Months Ended

Mar. 31, 2023

Income Tax Disclosure [Abstract]

Income Tax Disclosure

Note 10: Income Taxes

Our effective tax rate was 16.8% and 9.3% in the quarters ended March 31, 2023 and 2022, respectively. The increase in the effective tax rate for the quarter ended March 31, 2023 as compared to the quarter ended March 31, 2022 is primarily driven by a higher forecasted annualized effective tax rate for 2023 principally due to a lower forecasted Foreign Derived Intangible Income (FDII) benefit in addition to a lower tax benefit from stock based compensation in the current quarter.

We conduct business globally and, as a result, Raytheon Technologies or one or more of our subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business we are subject to examination by taxing authorities throughout the world, including such major jurisdictions as Canada, China, France, Germany, India, Poland, Saudi Arabia, Singapore, Switzerland, the United Kingdom, and the United States. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations for years before 2013.

The Examination Divisions of the Internal Revenue Service (IRS) are currently auditing Raytheon Technologies (formerly United Technologies Corporation) tax years 2017 and 2018, pre-merger Raytheon Company tax years 2017, 2018, and 2019 as well as certain refund claims of Raytheon Company for tax years 2014, 2015, and 2016 filed prior to the Raytheon merger, and pre-acquisition Rockwell Collins fiscal tax years 2016, 2017, and 2018. The examination phases of these audits are expected to close in 2023. It is reasonably possible that the expected closure of the examination phase of the Raytheon Technologies 2017 and 2018 tax audit will result in a net income benefit in the range of $185 million to $225 million in 2023. This range includes the effects of adjusting interest accruals and certain tax related indemnity receivables related to the separation and distributions

of Carrier Global Corporation (Carrier) and Otis Worldwide Corporation (Otis). The tax components of this range are included in the revaluation range included below.In the ordinary course of business, there is inherent uncertainty in quantifying our income tax positions. We assess our income tax positions and record tax benefits for all years subject to examination based upon management’s evaluation of the facts, circumstances, and information available at the reporting date. It is reasonably possible that a net reduction within the range of $250 million to $375 million of unrecognized tax benefits may occur within the next 12 months as a result of the revaluation of uncertain tax positions arising from developments in examinations, in appeals, or in the courts, or the closure of tax statutes.