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Income taxes
12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income taxes
20.    Income taxes
The following table presents detail about captions appearing on the statements of operations:
(in millions)
Year ended December 31,
202220212020
Income (loss) before income taxes:
United States$618.0 $555.0 $(2.6)
Foreign233.1 198.0 64.9 
Total$851.1 $753.0 $62.3 
Current income tax (expense) benefit:
Federal$(119.9)$(74.0)$30.4 
State(32.2)(32.3)(4.8)
Foreign(81.6)(91.8)(58.8)
Subtotal(233.7)(198.1)(33.2)
Deferred income tax (expense) benefit:
Federal18.0 (11.6)28.0 
State4.4 (1.9)14.4 
Foreign46.7 31.2 45.1 
Subtotal69.1 17.7 87.5 
Income tax (expense) benefit
$(164.6)$(180.4)$54.3 
The following table reconciles the income tax provision calculated at the United States federal corporate rate to the amounts presented in the statements of operations:
(in millions)
Year ended December 31,
202220212020
Income before income taxes
$851.1$753.0$62.3
United States federal corporate rate21 %21 %21 %
Income tax expense at federal corporate rate
(178.7)(158.2)(13.1)
State income taxes, net of federal benefit(23.3)(27.0)7.6
Rate changes related to foreign jurisdictions1.3(9.7)(4.0)
Stock-based compensation3.514.510.1
Foreign taxes12.81.45.7
Valuation allowance4.84.1(1.1)
Changes to uncertain tax positions1.1(10.7)40.8
Foreign-derived intangible income12.18.26.9
Transaction costs(2.1)
Other, net1.8(0.9)1.4
Income tax (expense) benefit
$(164.6)$(180.4)$54.3
As a result of the new tax reform legislation, in 2018 we finalized the provisional accounting of previously recognized provisional one-time income tax effects based on new transition tax rules and interpretations issued that year, as shown in the table above. After the utilization of tax attributes such as net operating loss carryforwards, our transition tax payable was $46.4 million at December 31, 2022.
Deferred taxes
The following table presents the components of deferred tax assets and liabilities:
(in millions)
December 31,
20222021
Deferred tax assets:
Reserves and accrued expenses$61.7 $51.6 
Pension, postretirement and environmental liabilities1.1 14.7 
Net operating loss and research and development carryforwards325.7 312.4 
Other6.1 10.2 
Deferred tax assets, gross394.6 388.9 
Less: valuation allowances(179.7)(187.6)
Deferred tax assets, net214.9 201.3 
Deferred tax liabilities:
Intangibles(810.4)(892.8)
Property, plant and equipment(51.3)(52.0)
Investment in partnerships(44.1)(148.0)
Deferred tax liabilities(905.8)(1,092.8)
Net deferred tax liability
$(690.9)$(891.5)
Classification on balance sheets:
Other assets$40.5 $21.5 
Deferred income tax liabilities(731.4)(913.0)
The (decrease) increase to the valuation allowance was $(7.9) million in 2022, $(22.3) million in 2021 and $16.0 million in 2020.
At December 31, 2022, $155.0 million of the valuation allowances presented above relate to foreign net operating loss carryforwards that are not expected to be realized. We evaluate the realization of deferred tax assets by considering such factors as the reversal of existing taxable temporary differences, expected profitability by tax jurisdiction and available carryforward periods. The extent and timing of any such reversals will influence the extent of tax benefits recognized in a particular year. Should applicable losses, credits and deductions ultimately be realized, the resulting reduction in the valuation allowance would generally be recognized as an income tax benefit.
Uncertain tax positions
We file federal income tax returns in the United States and other tax returns in various states and international jurisdictions. In the normal course of business, we are subject to examination by taxing authorities throughout the world. We provide reserves for positions that are more likely than not to be overturned by a tax authority upon examination. Tax years are subject to examination in the United States since 2009 at the federal level, since 2005 for certain states and in certain international jurisdictions since 2008.
The following table reflects changes to the reserve for uncertain tax positions, excluding accrued interest and penalties:
(in millions)
Year ended December 31,
202220212020
Beginning balance$55.3 $46.7 $83.6 
Additions:
Tax positions related to the current year1.2 5.1 3.4 
Tax positions related to prior years— 7.3 3.6 
Reductions:
Tax positions related to prior years— — (0.1)
Settlements with taxing authorities(0.1)(0.9)(43.1)
Lapse of statutes of limitations(2.4)(1.6)(1.8)
Currency translation(2.2)(1.3)1.1 
Ending balance$51.8 $55.3 $46.7 
Accrued interest and penalties related to the reserve for uncertain tax positions were $6.7 million at December 31, 2022, $5.3 million at December 31, 2021 and $3.9 million at December 31, 2020. We believe that it is reasonably possible that the reserve for uncertain tax positions could decrease by up to $1.3 million over the next twelve months.
The development of reserves for uncertain tax positions requires judgments about tax issues, potential outcomes and the timing of settlement discussions with tax authorities. If we were to prevail on all uncertain tax positions, we would recognize an income tax benefit.
Other matters
Undistributed earnings of foreign subsidiaries that are deemed to be permanently invested amount to $2,712.8 million at December 31, 2022. In addition to the one-time transition tax imposed on all accumulated foreign undistributed earnings through December 31, 2017, undistributed earnings of foreign subsidiaries as of December 31, 2022 is subject to certain taxes upon repatriation, primarily where foreign withholding taxes apply. We assert indefinite reinvestment related to investments in foreign subsidiaries. It is not practicable to calculate the unrecognized deferred tax liability on undistributed foreign earnings due to the complexity of the hypothetical calculation.
At December 31, 2022, we had federal net operating loss carryforwards of $25.1 million that primarily expire in 2040 and state net operating loss carryforwards of $193.5 million that expire at various times through 2040. In addition, we had foreign net operating loss carryforwards of $621.0 million, which predominantly have indefinite expirations. The increase in U.S. Federal and State net operating losses is related to the 2021 acquisition of Masterflex.