Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

Earnings before income taxes consisted of the following:

	December 31,
(DOLLARS IN MILLIONS)	2023		2022		2021
U.S. loss before taxes	$	(1,777)	$	(1,918)	$	(493)
Foreign (loss) income before taxes	(741)		293		847
Total (loss) income before taxes	$	(2,518)	$	(1,625)	$	354

The income tax provision consisted of the following:

	December 31,
(DOLLARS IN MILLIONS)	2023		2022		2021
Current tax provision
Federal	$	55	$	102	$	(5)
State and local	—		49		13
Foreign	359		325		303
Total current tax provision	414		476		311
Deferred tax provision
Federal	(113)		(77)		(121)
State and local	32		(111)		(34)
Foreign	(288)		(49)		(81)
Total deferred tax benefit	(369)		(237)		(236)
Total provision for income taxes	$	45	$	239	$	75

Effective Tax Rate Reconciliation

Reconciliation between the U.S. federal statutory income tax rate to the actual effective tax rate was as follows:

	December 31,
	2023		2022		2021
Statutory tax rate	21.0	%	21.0	%	21.0	%
Tax effect of non-deductible goodwill impairment	(20.4)		(29.1)		—
Difference in effective tax rate on foreign earnings and remittances(1)	(0.2)		—		8.0
Tax benefit from supply chain optimization	0.5		0.8		(5.8)
Unrecognized tax benefit, net of reversals	(0.8)		0.9		0.7
Tax impact on business divestitures	(3.7)		(5.9)		4.0
Deferred taxes on deemed repatriation(2)	0.5		(5.6)		2.7
Global intangible low-taxed income	(0.4)		(0.8)		4.1
Foreign-derived intangible income	—		1.1		(1.6)
U.S. foreign tax credit - general limitation	0.2		0.1		(3.1)
Research and development credit	0.5		0.8		(1.4)
Acquisition costs	—		—		2.4
Establishment (release) of valuation allowance on state deferred	—		—		(3.0)
State and local taxes including rate changes(3)	(1.7)		4.3		(4.8)
Tax impact on internal asset transfer	5.3		—		—
Other, net	(2.6)		(2.3)		(2.0)
Effective tax rate	(1.8)	%	(14.7)	%	21.2	%

_______________________

(1)For 2021, the rate includes rate change impacts related to the Netherlands and United Kingdom.

(2)For 2022 and 2023, the rate includes the establishment of the held for sale deferred tax liabilities due to a change in assertion.

(3)For 2022 and 2023, the rate includes rate change impacts related to the remeasurement of the state tax rate on deferred taxes.

The effective tax rate reflects the recording of the tax effects of the divestitures of the portion of the Savory Solutions business and Flavor Specialty Ingredients business and book to tax differences related to the impairment of goodwill in the Nourish reporting unit.

The Company has elected to treat global intangible low-taxed income (“GILTI”) as a current period cost if and when incurred. This tax position resulted in a net income tax expense of approximately $64 million for the year ended December 31, 2023, offset in part by foreign tax credits of approximately $54 million.

Deferred Taxes

The deferred tax assets and liabilities consisted of the following amounts:

	December 31,
(DOLLARS IN MILLIONS)	2023		2022
Employee and retiree benefits	$	118	$	61
Credit and net operating loss carryforwards	332		315
Amortizable research and development expenses	125		84
Interest limitation	127		3
Inventory	35		19
Lease obligations	170		151
Other, net	114		131
Gross deferred tax assets	1,021		764
Property, plant and equipment, net	(239)		(229)
Intangible assets(1)	(1,792)		(2,049)
Right-of-use assets	(170)		(151)
Loss on foreign currency translation	—		(23)
Deferred taxes on deemed repatriation	(155)		(166)
Gross deferred tax liabilities	(2,356)		(2,618)
Valuation allowance	(324)		(262)
Total net deferred tax liabilities	$	(1,659)	$	(2,116)

_______________________

(1)Includes deferred taxes on intangible assets owned by a fully consolidated partnership.

Net operating loss carryforwards were approximately $311 million and $301 million as of December 31, 2023 and 2022, respectively. If unused, approximately $106 million will expire between 2024 and 2043. The remainder, totaling approximately $205 million, may be carried forward indefinitely. Tax credit carryforwards were approximately $21 million and $14 million as of December 31, 2023 and 2022, respectively. If unused, the $21 million will expire between 2024 and 2043.

Of the deferred tax assets at December 31, 2023, the Company considers it unlikely that a portion of the tax benefit will be realized. Accordingly, a valuation allowance of approximately $324 million has been established against these deferred tax assets.

Uncertain Tax Positions

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	December 31,
(DOLLARS IN MILLIONS)	2023		2022		2021
Balance of unrecognized tax benefits at beginning of year	$	112	$	130	$	99
Gross amount of increases in unrecognized tax benefits as a result of positions taken during a prior year(1)	1		1		42
Gross amount of decreases in unrecognized tax benefits as a result of positions taken during a prior year	—		(18)		(3)
Gross amount of increases in unrecognized tax benefits as a result of positions taken during the current year	19		31		5
The amounts of decreases in unrecognized benefits relating to settlements with taxing authorities	(3)		(27)		(1)
Reduction in unrecognized tax benefits due to the lapse of applicable statute of limitation	(6)		(5)		(12)
Balance of unrecognized tax benefits at end of year	$	123	$	112	$	130

_______________________

(1)For 2021, the amount includes positions related to N&B opening balance sheet amounts.

As of December 31, 2023, 2022 and 2021, there were approximately $123 million, $98 million and $130 million, respectively, of unrecognized tax benefits recorded to Other liabilities. There were no amounts recorded to Other current liabilities for 2023. There were approximately $14 million and less than $1 million recorded to Other current liabilities for 2022 and 2021, respectively. If these unrecognized tax benefits were recognized, all the benefits and related interest and penalties would be recorded as a benefit to income tax expense.

The Company increased its liabilities for interest and penalties by approximately $12 million, net, for the year ended December 31, 2023. The Company decreased its liabilities for interest and penalties by approximately $1 million, net, and increased its liabilities for interest and penalties by approximately $19 million, net, for the years ended December 31, 2022 and 2021, respectively. As of December 31, 2023, 2022 and 2021, the Company had accrued approximately $47 million, $31 million and $36 million, respectively, of interest and penalties classified as Other liabilities. As of December 31, 2023, the Company had no accruals of interest and penalties classified as Other current liabilities. As of December 31, 2022 and 2021, the Company had accrued approximately $4 million and less than $1 million, respectively, of interest and penalties classified as Other current liabilities.

As of December 31, 2023, the Company’s aggregate provision for unrecognized tax benefits, including interest and penalties, was approximately $170 million associated with various tax positions principally asserted in foreign jurisdictions.

As of December 31, 2023, all the unrecognized tax benefits, if recognized, would affect the effective tax rate. The total changes to uncertain tax positions over the next 12 months is impracticable to estimate and is dependent on the resolution of new or existing tax disputes.

Other

Tax benefits credited to Shareholders’ equity were not material for the years ended December 31, 2023, 2022 and 2021 associated with stock option exercises and PRSU dividends.

The Company regularly repatriates earnings from non-U.S. subsidiaries. As the Company repatriates these funds to the U.S., there will be required income taxes payable in certain U.S. states and applicable foreign withholding taxes during the period when such repatriation occurs. Accordingly, as of December 31, 2023, the Company had a deferred tax liability of approximately $155 million for the effect of repatriating the funds to the U.S., attributable to various non-U.S. subsidiaries. There is no deferred tax liability associated with non-U.S. subsidiaries where the Company intends to indefinitely reinvest the earnings to fund local operations and/or capital projects.

The Company has ongoing income tax audits and legal proceedings which are at various stages of administrative or judicial review. In addition, the Company has other ongoing tax audits and legal proceedings that relate to indirect taxes, such as value-added taxes, capital tax, sales and use and property taxes, which are discussed in Note 19.

The Company also has several other tax audits in process and has open tax years with various taxing jurisdictions that range primarily from 2010 to 2022.