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INCOME TAXES
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
Income tax expense was $518 million, $382 million, and $348 million in 2021, 2020 and 2019, respectively. The increase in tax expense in 2021 compared to 2020 is primarily due to higher earnings and related tax expense, audits and settlements, partially offset by legal entity restructuring tax benefits. Included in Settlements and changes in unrecognized tax benefits in the table below is $98 million of net tax expense and interest related to an unfavorable ruling discussed in Other Income Tax Matters.
The increase in tax expense in 2020 compared to 2019 is primarily due to changes in valuation allowance, legal entity restructuring tax benefits, and earnings dispersion related to the sale of Embraco. As part of ongoing efforts to reduce costs and simplify the Company's legal entity structure, the Company has completed a statutory legal entity restructuring within our EMEA business. The completion of the restructuring created a tax-deductible loss which was recognized in the fourth quarter of 2019, and resulted in a $147 million tax benefit.
The following table summarizes the difference between an income tax benefit at the United States statutory rate of 21% in 2021, 2020, and 2019, respectively, and the income tax expense at effective worldwide tax rates for the respective periods:
Millions of dollars202120202019
Earnings (loss) before income taxes
United States$1,287 $1,020 $652 
Foreign1,045 427 878 
Earnings (loss) before income taxes$2,332 $1,447 $1,530 
Income tax (benefit) expense computed at United States statutory rate$490 $304 $321 
U.S. government tax incentives(19)(17)(21)
Foreign government tax incentives(23)(20)(13)
Foreign tax rate differential66 30 70 
U.S. foreign tax credits(29)(25)(86)
Valuation allowances1 15 (150)
State and local taxes, net of federal tax benefit57 40 41 
Foreign withholding taxes19 8 54 
U.S. tax on foreign dividends and subpart F income9 34 67 
Settlements and changes in unrecognized tax benefits113 53 113 
U.S. Transition Tax— — 26 
Changes in enacted tax rates(14)(6)42 
Divestiture tax impact(35)— 58 
Legal entity restructuring tax impact(98)(82)(147)
Other items, net(19)48 (27)
Income tax computed at effective worldwide tax rates$518 $382 $348 
Current and Deferred Tax Provision
The following table summarizes our income tax (benefit) provision for 2021, 2020 and 2019:
 202120202019
Millions of dollarsCurrentDeferredCurrentDeferredCurrentDeferred
United States$132 $251 $90 $81 $203 $69 
Foreign184 (126)182 (24)432 (406)
State and local80 (3)42 11 42 8 
$396 $122 $314 $68 $677 $(329)
Total income tax expense$518 $382 $348 
United States Tax on Foreign Dividends
We have historically reinvested all unremitted earnings of the majority of our foreign subsidiaries and affiliates, and therefore have not recognized any U.S. deferred tax liability on those earnings. The Company had cash and cash equivalents of approximately $3.0 billion at December 31, 2021, of which approximately half was held by subsidiaries in foreign countries. Our intent is to permanently reinvest substantially all of these funds outside of the United States and our current plans do not demonstrate a need to repatriate the cash to fund our U.S. operations. However, if these funds were repatriated, they would likely not be subject to United States federal income tax under the previously taxed income or the dividend exemption rules. We would likely be required to accrue and pay United States state and local taxes and withholding taxes payable to various countries. It is not practicable to estimate the tax impact of the reversal of the outside basis difference, or the repatriation of cash due to the complexity of its hypothetical calculation.
Valuation Allowances
At December 31, 2021, we had net operating loss carryforwards of $5.8 billion, $306 million of which were U.S. state net operating loss carryforwards, compared to $5.9 billion and $512 million at December 31, 2020, respectively. Of the total net operating loss carryforwards at December 31, 2021, $3.6 billion do not expire, with substantially all of the remaining carryforwards expiring in various years through 2038. At December 31, 2021, we had $386 million of United States general business credit carryforwards available to offset future payments of federal income taxes, expiring between 2031 and 2041.
We routinely review the future realization of deferred tax assets based on projected future reversal of taxable temporary differences, available tax planning strategies and projected future taxable income. We have recorded a valuation allowance to reflect the net estimated amount of certain deferred tax assets associated with net operating loss and other deferred tax assets we believe will be realized. Our recorded valuation allowance of $195 million at December 31, 2021 consists of $131 million of net operating loss carryforward deferred tax assets and $64 million of other deferred tax assets. Our recorded valuation allowance was $214 million at December 31, 2020 and consisted of $126 million of net operating loss carryforward deferred tax assets and $88 million of other deferred tax assets. The increase in our valuation allowance includes $1 million recognized in net earnings, with the remaining change related to reclassification within our net deferred tax asset. During 2019, the Company used proceeds from a bond offering to recapitalize various entities in EMEA which resulted in a reduction in the valuation allowance. In addition, the Company has established tax planning strategies and transfer pricing policies to provide sufficient future taxable income to realize these deferred tax assets. We believe that it is more likely than not that we will realize the benefit of existing deferred tax assets, net of valuation allowances mentioned above.
Deferred Tax Liabilities and Assets
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities used for financial reporting purposes and the amounts used for income tax purposes. The following table summarizes the significant components of our deferred tax liabilities and assets at December 31, 2021 and 2020:
Millions of dollars20212020
Deferred tax liabilities
Intangibles$404 $461 
Property, net181 196 
Right of use assets245 265 
Inventory Reserves41 116 
Other207 252 
Total deferred tax liabilities$1,078 $1,290 
Deferred tax assets
U.S. general business credit carryforwards, including Energy Tax Credits$386 $680 
Lease liabilities255 275 
Pensions70 114 
Loss carryforwards1,347 1,336 
Postretirement obligations41 49 
Foreign tax credit carryforwards33 25 
Research and development capitalization130 121 
Employee payroll and benefits104 118 
Accrued expenses80 96 
Product warranty accrual54 76 
Receivable and inventory allowances61 112 
Other597 646 
Total deferred tax assets3,158 3,648 
Valuation allowances for deferred tax assets(195)(214)
Deferred tax assets, net of valuation allowances2,963 3,434 
Net deferred tax assets$1,885 $2,144 
Unrecognized Tax Benefits
The following table represents a reconciliation of the beginning and ending amount of unrecognized tax benefits that if recognized would impact the effective tax rate, excluding federal benefits of state and local tax positions, and interest and penalties:
Millions of dollars202120202019
Balance, January 1$427 $394 $278 
Additions for tax positions of the current year17 17 20 
Additions for tax positions of prior years179 21 138 
Reductions for tax positions of prior years(34)(2)(26)
Settlements during the period(7)— (4)
Lapses of applicable statute of limitation(2)(3)(12)
Balance, December 31$580 $427 $394 
Interest and penalties associated with unrecognized tax benefits resulted in a net expense of $14 million at December 31, 2021, a net expense of $10 million and net benefit of $(4) million in 2020 and 2019, respectively. We have accrued a total of $66 million, $52 million and $42 million at December 31, 2021, 2020 and 2019, respectively.
It is reasonably possible that certain unrecognized tax benefits of $74 million could be settled with various related jurisdictions during the next 12 months.
We are in various stages of tax disputes (including audits, appeals and litigation) with certain governmental tax authorities. We establish liabilities for the difference between tax return provisions and the benefits recognized in our financial statements. Such amounts represent a reasonable provision for taxes ultimately expected to be paid, and may need to be adjusted over time as more information becomes known. We are no longer subject to any significant tax disputes (including audits, appeals and litigation) for the years before 2009 relating to US Federal income taxes and for the years before 2003 relating to any state, local or foreign income taxes.
Other Income Tax Matters
As previously disclosed, 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 appealed the US Tax Court decision to the United States Court of Appeals for the Sixth Circuit, and, on December 6, 2021, a three-judge panel, in a divided decision, affirmed the U.S. Tax Court decision (the “Ruling”). On January 20, 2022, the Company filed a petition for rehearing with the Sixth Circuit. The Company recorded a reserve of $98 million in the fourth quarter of 2021, which represents the expected increase in the Company’s net income tax expense, plus interest, for 2009 through 2019, which represents all of the Company’s tax years that were affected by the Ruling.