Income Taxes (Tables)

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Before Income Taxes

Income from continuing operations before income taxes is as follows:

(In millions)	2022		2021		2020
U.S.	$	810	$	699	$	202
Non-U.S.	206		174		80
Income from continuing operations before income taxes	$	1,016	$	873	$	282

Income Tax Expense For Continuing Operations

Income tax expense (benefit) is summarized as follows:

(In millions)	2022		2021		2020
Current expense (benefit):
Federal	$	272	$	41	$	(1)
State	33		15		(76)
Non-U.S.	69		47		57
	374		103		(20)
Deferred expense (benefit):
Federal	(182)		35		3
State	(29)		(10)		5
Non-U.S.	(9)		(2)		(15)
	(220)		23		(7)
Income tax expense (benefit)	$	154	$	126	$	(27)

Federal Statutory Income Tax Rate To Effective Income Tax Rate

The following table reconciles the federal statutory income tax rate to our effective income tax rate:

	2022	2021	2020
U.S. Federal statutory income tax rate	21.0%	21.0%	21.0%
Increase (decrease) resulting from:
Research and development tax credits (a)	(5.0)	(7.0)	(18.2)
Foreign-derived intangible income deduction (b)	(2.5)	—	—
State income taxes (net of federal impact)	0.3	0.5	(1.2)
Non-U.S. tax rate differential and foreign tax credits (c)	1.8	1.3	10.8
State income tax audit settlement (net of federal impact)	—	—	(18.6)
Outside basis difference in assets held for sale	—	—	(2.7)
Other, net	(0.4)	(1.4)	(0.7)
Effective income tax rate	15.2%	14.4%	(9.6)%

(a)In 2020, the benefit of research and development tax credits as a percentage of pre-tax income was higher than other periods primarily due to lower pre-tax income.

(b)In 2022, the foreign-derived intangible income deduction is primarily due to the impact of capitalizing research and development expenditures for tax-purposes effective on January 1, 2022 as part of the Tax Cuts and Jobs Act of 2017.

(c)In 2020, the effective tax rate was unfavorably impacted by a $55 million inventory charge and special charges in a non-U.S. jurisdiction where tax benefits cannot be realized, along with a $10 million tax expense related to a decision to dividend back cash from select non-U.S. jurisdictions to the U.S., partially offset by a $14 million valuation allowance release.

Reconciliation of Unrecognized Tax Benefits

A reconciliation of these unrecognized tax benefits is as follows:

(In millions)	2022		2021		2020
Balance at beginning of year	$	207	$	183	$	221
Additions for tax positions related to current year	24		21		11
Additions for tax positions of prior years	—		10		21
Reductions for settlements and expiration of statute of limitations (a)	—		(3)		(69)
Reductions for tax positions of prior years	—		(4)		(1)
Balance at end of year	$	231	$	207	$	183

(a)In 2020, certain tax positions related to state tax attributes were reduced by $68 million based on an audit settlement with respect to certain state income tax returns.

Deferred Tax Assets and Liabilities

The significant components of our net deferred tax assets/(liabilities) are provided below:

(In millions)	December 31, 2022		January 1, 2022
Capitalized research and development expenditures (a)	$	319	$	—
U.S. operating loss and tax credit carryforwards (b)	257		313
Accrued liabilities (c)	209		191
Obligation for pension and postretirement benefits	117		175
Deferred compensation	108		108
Operating lease liabilities	102		103
Non-U.S. operating loss and tax credit carryforwards (d)	53		48
Prepaid pension benefits (e)	(348)		(269)
Property, plant and equipment, principally depreciation	(222)		(204)
Amortization of goodwill and other intangibles	(194)		(183)
Valuation allowance on deferred tax assets	(99)		(109)
Operating lease right-of-use assets	(99)		(101)
Other leasing transactions, principally leveraged leases	(53)		(73)
Other, net	(22)		20
Deferred taxes, net	$	128	$	19

(a)Effective for tax years beginning after December 31, 2021, research and development expenditures must be capitalized and amortized for tax-purposes as part of the Tax Cuts and Jobs Act of 2017.

(b)At December 31, 2022, U.S. operating loss and tax credit carryforward benefits of $218 million expire through 2042 if not utilized and $39 million may be carried forward indefinitely.

(c)Accrued liabilities include warranty reserves, self-insured liabilities and interest.

(d)At December 31, 2022, non-U.S. operating loss and tax credit carryforward benefits of $50 million may be carried forward indefinitely.

(e)Prepaid pension benefits increased due to the annual valuation adjustment.

The following table presents the breakdown of our deferred taxes:

(In millions)	December 31, 2022		January 1, 2022
Manufacturing group:
Deferred tax assets, net of valuation allowance	$	223	$	129
Deferred tax liabilities	(52)		(49)
Finance group – Deferred tax liabilities	(43)		(61)
Net deferred tax asset	$	128	$	19