Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income before income tax and the provision for income tax consist of the following (in millions):

	Years Ended December 31
	2023		2022		2021
Income (loss) before income taxes:
Ireland	$	31	$	85	$	15
U.K.	338		502		549
U.S.	219		161		(818)
Other	2,581		2,408		2,185
Total	$	3,169	$	3,156	$	1,931
Income tax expense:
Current:
Ireland	$	4	$	2	$	2
U.K.	185		206		50
U.S. federal	240		195		197
U.S. state and local	74		43		72
Other	411		316		291
Total current tax expense	$	914	$	762	$	612
Deferred tax expense (benefit):
Ireland	$	—	$	—	$	(1)
U.K.	(116)		(152)		131
U.S. federal	(126)		(69)		(83)
U.S. state and local	(39)		(21)		(30)
Other	(92)		(10)		(6)
Total deferred tax expense (benefit)	$	(373)	$	(252)	$	11
Total income tax expense	$	541	$	510	$	623

Income before income taxes shown above may, in some cases, be subject to taxation in more than one country, and as a result the income tax provision shown above as Ireland, U.K., U.S. or Other may not correspond to the geographic attribution of the earnings.

The Company performs a reconciliation of the income tax provisions based on its domicile and statutory rate at each reporting period. The reconciliation of the income tax provisions based on the Irish statutory corporate tax rate of 25% to the provisions reflected in the Consolidated Financial Statements is as follows:

	Years Ended December 31
	2023	2022	2021
Statutory tax rate	25.0%	25.0%	25.0%
U.S. state income taxes, net of U.S. federal benefit	0.6	0.4	1.5
Taxes on international operations (1)	(11.2)	(11.6)	(15.4)
Nondeductible expenses	3.2	2.4	3.3
Adjustments to prior year tax requirements	0.5	(7.0)	(0.2)
Deferred tax adjustments, including statutory rate changes	(0.3)	(0.5)	3.2
Deferred tax adjustments, international earnings	0.7	0.2	1.8
Adjustments to valuation allowances	(2.5)	1.9	(0.2)
Change in uncertain tax positions	2.6	8.6	2.1
Excess tax benefits related to shared based compensation (2)	(1.6)	(1.5)	(2.4)
Capital and other losses	—	(1.4)	—
Non-deductible transaction costs	—	—	1.1
Non-deductible termination fee	—	—	12.9
Other — net	0.1	(0.3)	(0.4)
Effective tax rate	17.1%	16.2%	32.3%

(1)The Company determines the adjustment for taxes on international operations based on the difference between the statutory tax rate applicable to earnings in each foreign jurisdiction and the enacted rate of 25.0%, 25.0% and 25.0% at December 31, 2023, 2022, and 2021, respectively. The benefit to the Company’s effective income tax rate from taxes on international operations relates to benefits from lower-taxed global operations, primarily due to the use of global funding structures and the tax holiday in Singapore.

(2)Excess tax benefits and deficiencies from share-based payment transactions are recognized as income tax expense or benefit in the Company’s Consolidated Statements of Income.

The Company has elected to account for GILTI in the period in which it is incurred, and therefore has not provided deferred tax impacts of GILTI in its Consolidated Financial Statements.

The components of the Company’s deferred tax assets and liabilities are as follows (in millions):

As of December 31	2023		2022
Deferred tax assets:
Net operating loss, capital loss, interest, and tax credit carryforwards	$	1,049	$	952
Employee benefit plans	337		297
Lease liabilities	164		178
Other accrued expenses	155		100
Federal and state benefit of interest from uncertain tax positions	75		57
Accrued interest	52		—
Deferred revenue	25		26
Investment basis differences	49		30
Other (1)	40		39
Total	1,946		1,679
Valuation allowance on deferred tax assets	(197)		(275)
Total	$	1,749	$	1,404
Deferred tax liabilities:
Intangibles and property, plant and equipment	$	(254)	$	(258)
Deferred costs	(149)		(147)
Lease right-of-use asset	(135)		(151)
Unremitted earnings	(44)		(38)
Other accrued expenses	(20)		(20)
Unrealized foreign exchange gains	(18)		(23)
Other	(49)		(42)
Total	$	(669)	$	(679)
Net deferred tax asset	$	1,080	$	725

(1)$1 million of Lease and service guarantees reported for the year-ended Dec 31, 2022 have been reclassified into “Other”.

Deferred income taxes (assets and liabilities have been netted by jurisdiction) have been classified in the Consolidated Statements of Financial Position as follows (in millions):

As of December 31	2023		2022
Deferred tax assets — non-current	$	1,195	$	824
Deferred tax liabilities — non-current	(115)		(99)
Net deferred tax asset	$	1,080	$	725

In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized and adjusts the valuation allowance accordingly. Considerations with respect to the realizability of deferred tax assets include the period of expiration of the deferred tax asset, historical earnings and projected future taxable income by jurisdiction as well as tax liabilities for the tax jurisdiction to which the tax asset relates. Significant management judgment is required in determining the assumptions and estimates related to the amount and timing of future taxable income. Valuation allowances have been established primarily with regard to the tax benefits of certain tax credits, net operating loss carryforwards, and capital loss carryforwards. Valuation allowances decreased by $78 million as of December 31, 2023, when compared to December 31, 2022. The change is primarily attributable to a decrease in valuation allowances related to capital loss carryforwards that expired and certain net operating loss carryforwards.

The Company generally intends to limit distributions from foreign subsidiaries in excess of U.S. tax earnings and profits (except where distributions would be limited by available cash) and to limit repatriations from certain other jurisdictions that would otherwise generate a U.S. tax liability. As of December 31, 2023, the Company has accrued $44 million for local country income taxes, withholding taxes and state income taxes on those undistributed earnings that are not indefinitely reinvested. The Company has not provided for deferred taxes on outside basis differences in our investments in our foreign subsidiaries that are unrelated to these accumulated undistributed earnings, as these outside basis differences are indefinitely reinvested. A

determination of the unrecognized deferred taxes related to these other components of our outside basis differences is not practicable.

The Company had the following carryforwards (in millions):

As of December 31	2023		2022
U.K.
Operating loss carryforwards	$	1,033	$	608
Capital loss carryforwards	$	550	$	533
U.S.
Federal operating loss carryforwards	$	1	$	1
Federal capital loss carryforwards	$	—	$	112
Federal interest carryforwards	$	2,303	$	2,269
Federal foreign tax credit carryforwards	$	24	$	20
State operating loss carryforwards	$	493	$	473
State capital loss carryforwards	$	—	$	123
State interest carryforwards	$	1,209	$	1,187
Other Non-U.S.
Operating loss carryforwards	$	461	$	490
Capital loss carryforwards	$	7	$	8
Interest carryforwards	$	129	$	26
Other carryforwards	$	3	$	5

The U.K. operating losses and capital losses have an indefinite carryforward period. The federal operating loss carryforwards generated through December 31, 2017 expire at various dates between 2034 and 2036 while federal operating loss carryforwards generated after this date have indefinite carryforward periods. State net operating losses as of December 31, 2023 have various carryforward periods and will begin to expire in 2024. Federal and state interest carryforwards have indefinite carryforward periods. Foreign tax credits can be carried forward for ten years and will begin to expire in 2029. Operating, capital losses, and other carryforwards in other non-U.S. jurisdictions have various carryforward periods and will begin to expire in 2024. The interest carryforwards in other non-U.S. jurisdictions have an indefinite carryforward period.

During 2012, the Company was granted a tax holiday for the period from October 1, 2012 through September 30, 2022, with respect to withholding taxes and certain income derived from services in Singapore. The Company has been granted a new incentive for the period October 1, 2022 to September 30, 2032. The new incentive provides for a reduced withholding tax rate and a reduced tax rate on certain income derived from services in Singapore, as long as certain conditions are met.

The benefit realized was approximately $93 million, $115 million, and $104 million during the years ended December 31, 2023, 2022, and 2021, respectively. The impact of this tax holiday on diluted earnings per share was $0.45, $0.54, and $0.46 during the years ended December 31, 2023, 2022, and 2021, respectively.

Uncertain Tax Positions

The following is a reconciliation of the Company’s beginning and ending amount of uncertain tax positions (in millions):

	2023		2022
Balance at January 1	$	601	$	347
Additions based on tax positions related to the current year	40		35
Additions for tax positions of prior years	2		226
Reductions for tax positions of prior years	(3)		(1)
Settlements	—		(1)
Business combinations	—		—
Lapse of statute of limitations	(3)		(5)
Foreign currency translation	—		—
Balance at December 31	$	637	$	601

The Company’s liability for uncertain tax positions as of December 31, 2023, 2022, and 2021, includes $570 million, $535 million, and $295 million, respectively, related to amounts that would impact the effective tax rate if recognized. It is possible that the amount of unrecognized tax benefits may change in the next twelve months; however, the Company does not expect the change to have a significant impact on its consolidated statements of income or consolidated balance sheets. These changes may be the result of settlements of ongoing audits. At this time, an estimate of the range of the reasonably possible outcomes within the next twelve months cannot be made.

The Company recognizes interest and penalties related to uncertain tax positions in its provision for income taxes. The Company accrued potential interest and penalties of $62 million, $40 million, and $22 million in 2023, 2022, and 2021, respectively. The Company recorded a liability for interest and penalties of $244 million, $181 million, and $142 million as of December 31, 2023, 2022, and 2021, respectively.

The Company and its subsidiaries file income tax returns in their respective jurisdictions. The Company has substantially concluded all U.S. federal income tax matters for years through 2007. Material U.S. state and local income tax jurisdiction examinations have been concluded for years through 2015. The Company has concluded income tax examinations in its primary non-U.S. jurisdictions through 2008.