Income Taxes

6 Months Ended

Jun. 30, 2021

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

Income tax expense was $94 million and $253 million for the three and six months ended June 30, 2021, respectively, compared to income tax expense of $17 million and $89 million in the same periods of 2020.

For the three and six months ended June 30, 2021, the increase in tax expense from the prior period is due to higher overall earnings and related tax expense, partially offset by the tax effect of divestitures and legal entity restructuring.

The following table summarizes the difference between income tax expense (benefit) at the U.S. statutory rate of 21% and the income tax expense (benefit) at effective worldwide tax rates for the respective periods:

	Three Months Ended June 30,				Six Months Ended June 30,
Millions of dollars	2021		2020		2021		2020
Earnings before income taxes	$	674	$	37	$	1,273	$	258
Income tax expense computed at United States statutory tax rate	142		8		267		54
Valuation allowances	(1)		5		2		6
Audit and Settlements	8		5		15		17
U.S. foreign income items, net of credits	—		(2)		7		1
Changes in enacted tax rates	(14)		—		(14)		—
Divestiture tax impact	(21)		—		(21)		—
Legal entity restructuring tax impact	(46)		—		(46)		—
Other	26		1		43		11
Income tax expense (benefit) computed at effective worldwide tax rates	$	94	$	17	$	253	$	89

At the end of each interim period, we estimate the effective tax rate expected to be applicable for the full fiscal year and the impact of discrete items, if any, and adjust the quarterly rate as necessary.

Divestiture Tax Impact

For the second quarter of 2021, the divestitures detailed in Note 15 generated an overall gain of $120 million, however for tax purposes, a taxable loss was incurred with no tax benefit recognized, resulting in a corresponding impact to tax expense of $21 million. As part of the legal entity restructuring associated with the Whirlpool China divestment, a tax deductible loss was generated in a separate jurisdiction with a related tax benefit in the amount of $46 million.

Other Income Tax Matters

During its examination of Whirlpool’s 2009 U.S. federal income tax return, the IRS asserted that income earned by a Luxembourg subsidiary via its Mexican branch should be recognized as income on its 2009 U.S. federal income tax return. The Company believed the proposed assessment was without merit and contested the matter in United States Tax Court (US Tax Court). Both Whirlpool and the IRS moved for partial summary judgment on this issue. On May 5, 2020, the US Tax Court granted the IRS’s motion for partial summary judgment and denied Whirlpool’s. The Company has appealed the US Tax Court decision to the United States Court of Appeals for the Sixth Circuit, which heard arguments in June 2021. The Company believes that it will be successful and has not recorded any impact of the US Tax Court’s decision in its consolidated financial statements.