INCOME TAXES

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Income tax expense was $265 million, $518 million, and $382 million in 2022, 2021 and 2020, respectively. The change in tax expense in 2022 compared to 2021 includes overall lower level of earnings, partially offset by the impact of non-deductible charges, including loss on sale and disposal as well as goodwill impairment, and increases in valuation allowances.

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 following table summarizes the difference between an income tax benefit and tax expense at the United States statutory rate of 21% in 2022, 2021, and 2020, respectively, and the income tax expense at effective worldwide tax rates for the respective periods:

Millions of dollars	2022		2021		2020
Earnings (loss) before income taxes
United States	$	(158)	$	1,287	$	1,020
Foreign	(1,069)		1,045		427
Earnings (loss) before income taxes	$	(1,227)	$	2,332	$	1,447
Income tax (benefit) expense computed at United States statutory rate	$	(258)	$	490	$	304
U.S. government tax incentives	(19)		(19)		(17)
Foreign government tax incentives	(23)		(23)		(20)
Foreign tax rate differential	(3)		66		30
U.S. foreign tax credits	11		(29)		(25)
Valuation allowances	222		1		15
State and local taxes, net of federal tax benefit	(21)		57		40
Foreign withholding taxes	52		19		8
U.S. tax on foreign dividends and subpart F income	22		9		34
Settlements and changes in unrecognized tax benefits	3		100		50
Changes in enacted tax rates	(2)		(14)		(6)
Nondeductible loss on sale and disposal of businesses	421		—		—
Nondeductible goodwill impairments	59		—		—
Legal Entity Debt Restructuring	(159)		—		—
Divestiture tax impact	—		(35)		—
Legal entity restructuring tax impact	—		(98)		(82)
Other items, net	(40)		(6)		51
Income tax computed at effective worldwide tax rates	$	265	$	518	$	382

Current and Deferred Tax Provision

The following table summarizes our income tax (benefit) provision for 2022, 2021 and 2020:

	2022				2021				2020
Millions of dollars	Current		Deferred		Current		Deferred		Current		Deferred
United States	$	(40)	$	65	$	132	$	251	$	90	$	81
Foreign	180		85		184		(126)		182		(24)
State and local	(9)		(16)		80		(3)		42		11
	$	131	$	134	$	396	$	122	$	314	$	68
Total income tax expense			$	265			$	518			$	382

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 $2.0 billion at December 31, 2022, of which approximately $1.3 billion 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, 2022, we had net operating loss carryforwards of $5.8 billion, $578 million of which were U.S. state net operating loss carryforwards, compared to $5.8 billion and $306 million at December 31, 2021, respectively. Of the total net operating loss carryforwards at December 31, 2022, $3.5 billion do not expire, with substantially all of the remaining carryforwards expiring in various years through 2039. At December 31, 2022, we had $421 million of United States general business credit carryforwards available to offset future payments of federal income taxes, expiring between 2032 and 2042.

Net operating loss carryforwards of $2.0 billion relates to the European major domestic appliance business as of December 31, 2022. Net deferred tax assets of $602 million, including $62 million of valuation allowances, associated with the disposal group has been transferred to assets held for sale in the fourth quarter of 2022. For additional information, see Notes 11 and 17 to the Consolidated Financial Statements.

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 $412 million at December 31, 2022 consists of $334 million of net operating loss carryforward deferred tax assets and $78 million of other deferred tax assets. Our recorded valuation allowance was $195 million at December 31, 2021 and consisted of $131 million of net operating loss carryforward deferred tax assets and $64 million of other deferred tax assets. The increase in our valuation allowance was primarily driven by the European major domestic appliance business transaction and includes $222 million recognized in net earnings, with the remaining change related to reclassification within our net deferred tax asset.

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, 2022 and 2021:

Millions of dollars	2022		2021
Deferred tax liabilities
Intangibles	$	329	$	404
Property, net	185		181
Right of use assets	220		245
Inventory Reserves	20		41
Other	168		207
Total deferred tax liabilities	$	922	$	1,078
Deferred tax assets
U.S. general business credit carryforwards, including Energy Tax Credits	$	421	$	386
Lease liabilities	231		255
Pensions	40		70
Loss carryforwards	1,300		1,347
Postretirement obligations	30		41
Foreign tax credit carryforwards	9		33
Research and development capitalization	194		130
Employee payroll and benefits	46		104
Accrued expenses	52		80
Product warranty accrual	48		54
Receivable and inventory allowances	61		61
Other	552		597
Total deferred tax assets	2,984		3,158
Valuation allowances for deferred tax assets	(412)		(195)
Deferred tax assets, net of valuation allowances	2,572		2,963
Reclassification of net deferred tax assets to held for sale	$	(602)	$	—
Net deferred tax assets	$	1,048	$	1,885

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 dollars	2022		2021		2020
Balance, January 1	$	580	$	427	$	394
Additions for tax positions of the current year	24		17		17
Additions for tax positions of prior years	32		179		21
Reductions for tax positions of prior years	(45)		(34)		(2)
Settlements during the period	(1)		(7)		—
Lapses of applicable statute of limitation	(1)		(2)		(3)
Balance, December 31	$	589	$	580	$	427

Interest and penalties associated with unrecognized tax benefits resulted in a net expense of $24 million, $14 million, $10 million in December 31, 2022, 2021 and 2020, respectively. We have accrued a total of $90 million, $66 million and $52 million at December 31, 2022, 2021 and 2020, respectively.

It is reasonably possible that certain unrecognized tax benefits of $78 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

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, the three-judge panel, in a divided decision, affirmed the U.S. Tax Court decision (the "Ruling"). 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. On January 20, 2022, the Company filed a petition for rehearing with the Sixth Circuit, which was denied on March 2, 2022. On June 30, 2022, the Company filed a petition for certiorari with the U.S. Supreme Court, which was denied on November 21, 2022. The Company considers this tax dispute settled and no adjustments to the reserve have been recognized.