INCOME TAXES

6 Months Ended

Jun. 30, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Income tax expense was $114 million and $182 million for the three and six months ended June 30, 2023, compared to income tax expense of $37 million and $143 million for the same periods of 2022. For the three and six months ended June 30, 2023, the increase in income tax expense from the prior periods is primarily due to overall higher level of earnings and related tax expense, audits and settlements, and impacts of non-deductible impairments, including loss on sale and disposal and non-deductible fines and penalties.

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	2023		2022		2023		2022
Earnings (Loss) before income taxes	$	204	$	(332)	$	95	$	95
Income tax expense (benefit) computed at United States statutory tax rate	43		(70)		20		20
State and local taxes, net of federal tax benefit	4		7		5		16
Valuation allowances	17		(1)		21		6
Audit and Settlements	34		(29)		54		(26)
U.S. foreign income items, net of credits	—		(2)		2		(10)
Non deductible impairments	1		150		51		150
Non deductible fines and penalties	10		—		20		—
Other	5		(18)		9		(13)
Income tax expense (benefit) computed at effective worldwide tax rates	$	114	$	37	$	182	$	143

(1) Prior year amounts on the table above have been reclassified to conform with current year presentation.

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.

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.