Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of the provision (benefit) for income taxes for each of the three years in the period ended December 31, 2023 are as follows:

	Year ended December 31,
	2023		2022		2021
Current
Federal	$	561	$	(34)	$	78
Foreign	66		100		26
State and local	125		94		88
	752		160		192
Deferred
Federal	5		525		260
Foreign	13		(16)		14
State and local	17		28		(6)
	35		537		268
Total	$	787	$	697	$	460

A reconciliation of the provision (benefit) for income taxes and the amount computed by applying the statutory federal income tax rate of 21 percent to the income before provision (benefit) for income taxes for each of the three years in the period ended December 31, 2023 is as follows:

	Year ended December 31,
	2023		2022		2021
Computed tax at statutory tax rate	$	674	$	588	$	388
State income taxes, net of federal tax benefit	116		102		64
Other permanent items	(3)		18		1
Change in federal valuation allowance	(15)		15		—
Foreign restructuring (1)	—		(37)		—
Foreign tax rate differential	15		11		7
Total	$	787	$	697	$	460

 

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(1)    Reflects the impact of aligning the legal entity structure in Australia and New Zealand with our other foreign operations, which resulted in a tax depreciation benefit.

The components of deferred income tax assets (liabilities) are as follows:

	December 31, 2023		December 31, 2022
Reserves and allowances	$	193	$	186
Debt cancellation and other	17		18
Net operating loss and credit carryforwards	97		171
Interest carryforward (1)	—		84
Operating lease assets	287		216
Total deferred tax assets	594		675
Less: valuation allowance (2)	(4)		(19)
Total net deferred tax assets	590		656
Property and equipment, including rental equipment	(2,921)		(2,986)
Operating lease liabilities	(285)		(216)
Intangibles	(85)		(125)
Total deferred tax liability	(3,291)		(3,327)
Total net deferred tax liability	$	(2,701)	$	(2,671)

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(1)    Relates to the limitation of deductible interest, and is primarily due to tax depreciation benefits associated with the Ahern Rentals acquisition (see note 6 to the consolidated financial statements for further discussion of the tax depreciation benefits).

(2)    Relates to federal foreign tax credits, state net operating loss carryforwards and state tax credits that may not be realized.

The following table summarizes the activity related to unrecognized tax benefits, some of which would impact our effective tax rate if recognized:

	2023		2022		2021
Balance at January 1	$	16	$	13	$	12
Additions for tax positions related to the current year	3		1		2
Additions for tax positions of prior years	8		7		—
Settlements	(1)		(5)		(1)
Balance at December 31	$	26	$	16	$	13

We include interest accrued on the underpayment of income taxes in interest expense, net, and penalties, if any, related to unrecognized tax benefits in selling, general and administrative expense. The amounts of such interest or penalties were not material (approximately $1 or less) in each of the years ended December 31, 2023, 2022 and 2021. We believe that it is reasonably possible that a decrease of up to $10 in federal and state unrecognized tax benefits may be necessary within the next year, as a result of settlements.

We file income tax returns in the U.S., Canada and Europe. Without exception, we have completed our domestic and international income tax examinations, or the statute of limitations has expired in the respective jurisdictions, for years prior to 2012.

For financial reporting purposes, income before provision for income taxes for our foreign subsidiaries was $285, $233 and $134 for the years ended December 31, 2023, 2022 and 2021, respectively.

We have historically considered the undistributed earnings of our foreign subsidiaries to be indefinitely reinvested, and, accordingly, no taxes were provided on such earnings prior to the fourth quarter of 2020. In 2021, we remitted the cumulative amount of identified cash in our foreign operations in excess of near-term working capital needs. The taxes recorded associated with the remitted cash were immaterial. We continue to expect that the remaining balance of our undistributed foreign earnings will be indefinitely reinvested. If we determine that all or a portion of such foreign earnings are no longer indefinitely reinvested, we may be subject to additional foreign withholding taxes and U.S. state income taxes. At December 31, 2023, unremitted earnings of foreign subsidiaries were $1.276 billion. Determination of the amount of unrecognized deferred tax liability on these unremitted earnings is not practicable.

We have net operating loss carryforwards (“NOLs”) of $57 for federal income tax purposes, $10 of which will expire in 2037 (while the remaining federal NOLs have an indefinite life), $15 for foreign income tax purposes (the majority of which has an indefinite life) and $425 for state income tax purposes that expire from 2024 through 2034.

The European Union (“EU”) member states formally adopted the EU’s Pillar Two Directive, which was established by the Organization for Economic Co-operation and Development, and which generally provides for a 15 percent minimum effective tax rate for multinational enterprises, in every jurisdiction in which they operate. While we do not anticipate that this will have a material impact on our tax provision or effective tax rate, we continue to monitor evolving tax legislation in the jurisdictions in which we operate.