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Income Taxes (Notes)
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
We recognize income tax-related penalties in Provision for/(Benefit from) income taxes on our consolidated income statements. We recognize income tax-related interest income and interest expense in Other income/(loss), net on our consolidated income statements.

We account for U.S. tax on global intangible low-taxed income in the period incurred, and we account for investment tax credits using the deferral method.

Valuation of Deferred Tax Assets and Liabilities

Deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences that exist between the financial statement carrying value of assets and liabilities and their respective tax bases, and operating loss and tax credit carryforwards on a taxing jurisdiction basis. We measure deferred tax assets and liabilities using enacted tax rates that will apply in the years in which we expect the temporary differences to be recovered or paid.
NOTE 7. INCOME TAXES (Continued)

Our accounting for deferred tax consequences represents our best estimate of the likely future tax consequences of events that have been recognized on our consolidated financial statements or tax returns and their future probability.  In assessing the need for a valuation allowance, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets.  If, based on the weight of available evidence, it is more likely than not that the deferred tax assets will not be realized, we record a valuation allowance.

Components of Income Taxes

Components of income taxes excluding cumulative effects of changes in accounting principles, other comprehensive income/(loss), and equity in net results of affiliated companies accounted for after-tax for the years ended December 31 were as follows:
 202120222023
Income/(Loss) before income taxes (in millions)
   
U.S.$10,043 $(6,548)$3,395 
Non-U.S.7,737 3,532 572 
Total$17,780 $(3,016)$3,967 
Provision for/(Benefit from) income taxes (in millions) 
Current 
Federal$102 $68 $62 
Non-U.S.598 781 948 
State and local26 123 229 
Total current726 972 1,239 
Deferred 
Federal2,290 (2,292)(413)
Non-U.S.(3,254)688 (1,149)
State and local108 (232)(39)
Total deferred(856)(1,836)(1,601)
Total$(130)$(864)$(362)
Reconciliation of effective tax rate 
U.S. statutory tax rate21.0 %21.0 %21.0 %
Non-U.S. tax rate differential1.3 (8.7)(3.4)
State and local income taxes0.5 2.3 1.9 
General business credits(2.3)13.0 (15.9)
Nontaxable foreign currency gains and losses— (4.2)— 
Dispositions and restructurings (a)(18.8)(7.0)(14.7)
U.S. tax on non-U.S. earnings2.4 2.8 7.7 
Prior year settlements and claims(0.3)1.5 1.2 
Tax incentives(0.6)2.0 (3.9)
Enacted change in tax laws1.1 (2.0)0.1 
Valuation allowances(4.7)6.2 (0.7)
Other(0.3)1.7 (2.4)
Effective tax rate(0.7)%28.6 %(9.1)%
__________
(a)2021 includes a benefit of $2.9 billion to recognize deferred tax assets resulting from changes in our global tax structure; 2023 includes benefits of $610 million associated with legal entity restructuring within our leasing operations and China.

In 2021, we reversed $918 million of previously established U.S. valuation allowances. The reversal primarily reflected a change in our intent to pursue planning actions involving cash outlays to preserve tax credits. During 2022, we reversed an additional $405 million of U.S. valuation allowances, primarily as a result of planning actions.

At December 31, 2023, $14.5 billion of non-U.S. earnings are considered indefinitely reinvested in operations outside the United States, for which deferred taxes have not been provided. Quantification of the deferred tax liability, if any, associated with indefinitely reinvested basis differences is not practicable.
NOTE 7. INCOME TAXES (Continued)

Components of Deferred Tax Assets and Liabilities

The components of deferred tax assets and liabilities at December 31 were as follows (in millions):
 20222023
Deferred tax assets  
Employee benefit plans$1,953 $2,470 
Net operating loss carryforwards6,809 7,262 
Tax credit carryforwards9,354 8,944 
Research expenditures3,240 3,799 
Dealer and dealers’ customer allowances and claims2,192 2,752 
Other foreign deferred tax assets3,107 3,456 
All other2,201 2,299 
Total gross deferred tax assets28,856 30,982 
Less: Valuation allowances(4,052)(4,187)
Total net deferred tax assets24,804 26,795 
Deferred tax liabilities 
Leasing transactions2,992 3,253 
Depreciation and amortization (excluding leasing transactions)3,116 3,389 
Finance receivables792 699 
Carrying value of investments487 — 
Other foreign deferred tax liabilities1,110 1,255 
All other2,304 2,219 
Total deferred tax liabilities10,801 10,815 
Net deferred tax assets/(liabilities)$14,003 $15,980 

Operating loss carryforwards for tax purposes were $22 billion at December 31, 2023, resulting in a deferred tax asset of $7.3 billion.  There is no expiration date for $6.1 billion of these losses. A substantial portion of the remaining losses will expire beyond 2027. Tax credits available to offset future tax liabilities are $8.9 billion. The majority of these credits have a remaining carryforward period of nine years or more. Tax benefits of operating loss and tax credit carryforwards are evaluated on an ongoing basis, including a review of historical and projected future operating results, the eligible carryforward period, and available tax planning strategies. In our evaluation, we anticipate making tax elections that change the order of tax credit carryforward utilization on U.S. tax returns.
NOTE 7. INCOME TAXES (Continued)

Other

A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31 were as follows (in millions):
 20222023
Beginning balance$2,910 $2,939 
Increase – tax positions in prior periods338 103 
Increase – tax positions in current period17 45 
Decrease – tax positions in prior periods(236)(79)
Settlements(2)(115)
Lapse of statute of limitations(1)(33)
Foreign currency translation adjustment(87)53 
Ending balance$2,939 $2,913 

The amount of unrecognized tax benefits that would affect the effective tax rate if recognized was $2.9 billion as of December 31, 2022 and 2023.

Examinations by tax authorities have been completed through 2008 in Germany; 2014 in the United States; 2018 in Canada, China, Spain, and the United Kingdom; and 2019 in India and Mexico.  

Net interest on income taxes was $7 million of income, $23 million of expense, and $16 million of expense for the years ended December 31, 2021, 2022, and 2023, respectively. These were reported in Other income/(loss), net on our consolidated income statements. Tax-related interest was $17 million of a net payable and $25 million of a net receivable as of December 31, 2022 and 2023, respectively.

Cash paid for income taxes was $568 million, $801 million, and $1,027 million in 2021, 2022, and 2023, respectively.