Note 17 - Income Taxes

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note 17.  Income Taxes

Income tax expense —

	2023			2022			2021
Current
U.S. federal and state	$	38		$	19		$	(31	)
Non-U.S.		187			112			104
Total current		225			131			73
Deferred
U.S. federal and state		(94	)		160			54
Non-U.S.		(10	)		(7	)		(55	)
Total deferred		(104	)		153			(1	)
Total expense	$	121		$	284		$	72

We record interest and penalties related to uncertain tax positions as a component of income tax expense or benefit. Net interest expense for the periods presented herein is not significant.

Income before income taxes —

	2023			2022			2021
U.S. operations	$	(246	)	$	(343	)	$	(170	)
Non-U.S. operations		424			312			414
Earnings (loss) before income taxes	$	178		$	(31	)	$	244

Income tax audits — We conduct business globally and, as a result, file income tax returns in multiple jurisdictions that are subject to examination by taxing authorities throughout the world. With few exceptions, we are no longer subject to U.S. federal, state and local or foreign income tax examinations for years before 2008.

We are currently under audit by U.S. and foreign authorities for certain taxation years. When the issues related to these periods are settled, the total amounts of unrecognized tax benefits for all open tax years may be modified. Audit outcomes and the timing of the audit settlements are subject to uncertainty and we cannot make an estimate of the impact on our financial position at this time.

GILTI Policy Elections — The SEC staff has indicated that a company should make and disclose certain policy elections related to accounting for global intangible low-taxed income (GILTI). As to whether we will recognize deferred taxes for basis differences expected to reverse as GILTI or account for the effect of GILTI as a period cost when incurred, we intend to account for the tax effect of GILTI as a period cost. As to the realizability of the tax benefit provided by net operating losses, we are electing to utilize the tax law ordering approach. Recent macroeconomic factors have resulted in losses in the United States. A valuation allowance has been provided for deferred tax assets where GILTI is not a source of income; however, the GILTI tax law ordering approach provides positive evidence for certain other deferred tax assets without a valuation allowance.

Foreign income repatriation — We continue to analyze and adjust the estimated impact of the non-U.S. income and withholding tax liabilities based on the amount and source of these earnings, as well as the expected means through which those earnings may be taxed. We recognized net expense of $7 in 2023, net benefit of $1 in 2022 and de minimis net expense in 2021, related to future income taxes and non-U.S. withholding taxes on repatriations from operations that are not permanently reinvested. We also paid withholding taxes of $12, $6 and $8 during 2023, 2022 and 2021 related to the actual transfer of funds to the U.S. The unrecognized tax liability associated with the operations in which we are permanently reinvested is $6 at December 31, 2023.

Effective tax rate reconciliation —

	2023						2022						2021
	$			%			$			%			$			%
U.S. federal income tax rate		37			21			(7	)		21			51			21
Adjustments resulting from:
State and local income taxes, net of federal benefit		(5	)		(3	)		(6	)		19
Non-U.S. income / expense		35			20			(2	)		7			15			6
Credits and tax incentives		9			5			(27	)		87			1
U.S. foreign derived intangible income														(1	)
U.S. tax and withholding tax on non-US earnings		41			23			42			(135	)		14			6
Intercompany sale of certain operating assets		(54	)		(30	)		(1	)		3			(1	)
Settlement and return adjustments		23			13			(7	)		23			5			2
Enacted change in tax rates								(4	)		13			(5	)		(2	)
Goodwill impairment								47			(151	)
Miscellaneous items		7			4			(6	)		19			(7	)		(3	)
Valuation allowance adjustments		28			15			255			(822	)
Effective income tax rate		121			68			284			(916	)		72			30

During 2023, we recorded tax expense of $19 for income tax reserves associated with prior tax years in foreign jurisdictions. In addition, we recorded net benefit of $55 on the intercompany sale of intangible assets to the U.S.

During 2022, we recognized tax expense of $240 to record valuation allowance in the U.S., which includes $189 on U.S. federal credits and attributes and $51 related to U.S. state attributes. In addition, we recorded a tax benefit of $32 to adjust U.S. tax credits. A pre-tax goodwill impairment charge of $191 with an associated income tax benefit of $2 was also recorded.

During 2021, we recognized tax expense of $46 to record valuation allowance in the U.S. due to reduced income projections. We also recognized tax benefit of $46 for the release of valuation allowances in several foreign jurisdictions based on recent history of profitability and increased income projections. The contrast of these two positions is representative of the jurisdictional mix of results and relative attributes. We also recognized tax expense of $18 related to the expiration of federal tax credits.

Deferred tax assets and liabilities — Temporary differences and carryforwards give rise to the following deferred tax assets and liabilities.

	2023			2022
Net operating loss carryforwards	$	218		$	181
Postretirement benefits, including pensions		65			49
Research and development costs		238			208
Expense accruals		65			49
Other tax credits recoverable		217			241
Capital loss carryforwards		53			51
Inventory reserves		37			32
Postemployment and other benefits		5			4
Intangibles		56
Leasing activities		77			69
Other		75			71
Total		1,106			955
Valuation allowances		(550	)		(512	)
Deferred tax assets		556			443
Unremitted earnings		(16	)		(9	)
Intangibles					(1	)
Depreciation		(58	)		(66	)
Deferred tax liabilities		(74	)		(76	)
Net deferred tax assets	$	482		$	367

Carryforwards — Our deferred tax assets include benefits expected from the utilization of net operating loss (NOL), capital loss and credit carryforwards in the future. The following table identifies the net operating loss deferred tax asset components and the related allowances that existed at  December 31, 2023. Due to time limitations on the ability to realize the benefit of the carryforwards, additional portions of these deferred tax assets may become unrealizable in the future.

	Deferred						Earliest
	Tax		Valuation			Carryforward	Year of
	Asset		Allowance			Period	Expiration
Net operating losses
U.S. state	$	55	$	(55	)	Various	2023
Brazil		17		(5	)	Unlimited
France		6				Unlimited
Australia		18				Unlimited
Italy		18		(18	)	Unlimited
Germany		5		(5	)	Unlimited
Sweden		3		(3	)	Unlimited
South Africa		8		(8	)	Unlimited
U.K.		16		(10	)	Unlimited
Canada		67		(57	)	20	2026
India		3				5	2028
China		2		(1	)	5	2025
Total	$	218	$	(162	)

In addition to the NOL carryforwards listed in the table above, we have deferred tax assets related to capital loss carryforwards of $53 which are fully offset with valuation allowances at  December 31, 2023. We also have deferred tax assets of $229 related to other credit carryforwards which are largely offset with valuation allowances of $218 at  December 31, 2023. The capital losses can generally be carried forward indefinitely while the other credits are generally available for 10 to 20 years.

Unrecognized tax benefits — Unrecognized tax benefits are the difference between a tax position taken, or expected to be taken, in a tax return and the benefit recognized for accounting purposes. Interest income or expense, as well as penalties relating to income tax audit adjustments and settlements, are recognized as components of income tax expense or benefit. Interest of $21 and $7 was accrued on the uncertain tax positions at  December 31, 2023 and 2022.

Reconciliation of gross unrecognized tax benefits —

	2023			2022			2021
Balance, beginning of period	$	102		$	126		$	104
Decrease related to expiration of statute of limitations		(8	)		(6	)		(5	)
Decrease related to prior years tax positions		(5	)		(43	)		(2	)
Increase related to prior years tax positions		5			7			16
Increase related to current year tax positions		18			18			13
Balance, end of period	$	112		$	102		$	126

We anticipate that the change in our gross unrecognized tax benefits will not be significant in the next twelve months as a result of examinations in various jurisdictions. The settlement of these matters will not impact the effective tax rate. Gross unrecognized tax benefits of $86 would impact the effective tax rate if recognized. If other open matters are settled with the IRS or other taxing jurisdictions, the total amounts of unrecognized tax benefits for open tax years may be modified.