Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of the income tax expense from continuing operations are as follows:

	Years Ended December 31,
	2023		2022	2021
	(Dollars in millions)
Income tax expense:
Federal and foreign
Current	$	432	514	553
Deferred	19		6	17
State and local
Current	107		137	129
Deferred	3		14	10
Income tax expense	$	561	671	709

The effective income tax rate for continuing operations differs from the statutory tax rate as follows:

	Years Ended December 31,
	2023		2022		2021
	(in percent)
Effective income tax rate:
Federal statutory income tax rate	21.0	%	21.0	%	21.0	%
State income taxes-net of federal effect	(31.3)	%	4.3	%	3.7	%
Goodwill impairment	(187.2)	%	—	%	—	%
Change in liability for unrecognized tax position	(8.9)	%	0.6	%	0.4	%
Other	(1.4)	%	—	%	0.1	%
Effective income tax rate	(207.8)	%	25.9	%	25.2	%

For the years ended December 31, 2023 and 2022, our effective income tax rate was (207.8)% and 25.9%, respectively. The effective tax rate for the year ended December 31, 2023 includes a $505 million unfavorable aggregate impact of non-deductible goodwill impairment.

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities were as follows:

	As of December 31,
	2023		2022
	(Dollars in millions)
Deferred tax liabilities:
Property, plant and equipment	$	(1,464)	(1,414)
Intangible assets	(95)		(114)
Other	(50)		(54)
Total deferred tax liabilities	(1,609)		(1,582)
Deferred tax assets:
Payable to affiliate due to post-retirement benefit plan participation	292		302
Gross deferred tax assets	292		302
Less valuation allowance on deferred tax assets	—		—
Net deferred tax assets	292		302
Net deferred tax liabilities	$	(1,317)	(1,280)

At December 31, 2023, we had no established valuation allowance based on our assessment of whether it is not more likely than not that our deferred tax assets will be realized.

As of December 31, 2023 and 2022, the $1.3 billion and $1.3 billion net deferred tax liabilities are included in long-term liabilities on our consolidated balance sheet.

With few exceptions, we are no longer subject to U.S. federal, state and local or non-U.S. income tax examinations by tax authorities for years before 2016. The Internal Revenue Service and state and local taxing authorities reserve the right to audit any period where net operating loss carryforwards are available.

A reconciliation of the change in our gross unrecognized tax benefits (excluding both interest and any related federal benefit) from January 1 to December 31 for 2023 and 2022 are as follows:

	Years ended December 31,
	2023		2022
	(Dollars in millions)
Unrecognized tax benefits at beginning of period	$	332	360
Decrease due to tax positions taken in a prior year	(1)		(28)
Decrease due to tax positions taken in a current year	(14)		—
Unrecognized tax benefits at end of period	$	317	332

As of December 31, 2023, the total amount of unrecognized tax benefits that, if recognized, would impact the effective income tax rate is immaterial. The unrecognized tax benefits also includes tax positions that, if recognized, would result in adjustments to other tax accounts, primarily deferred taxes, that would not impact the effective tax rate but could impact cash tax amounts payable to taxing authorities.

Our policy is to reflect interest expense associated with unrecognized tax benefits in income tax expense. We had accrued interest (presented before related tax benefits) of approximately $125 million and $95 million as of December 31, 2023 and 2022, respectively.

Based on our current assessment of various factors, including (i) the potential outcomes of these ongoing examinations, (ii) the expiration of statute of limitations for specific jurisdictions, (iii) the negotiated settlement of certain disputed issues, and (iv) the administrative practices of applicable taxing jurisdictions, it is reasonably possible that the related unrecognized tax benefits for uncertain tax positions previously taken may not change in the next 12 months. The actual amount of changes, if any, will depend on future developments and events, many of which are outside our control.

We paid $509 million, $673 million, and $697 million related to income taxes for the years ended December 31, 2023, 2022, and 2021, respectively.

In August 2022, the Inflation Reduction Act was signed into law and which, among other things, implemented a corporate alternative minimum tax (“CAMT”) on adjusted financial statement income effective for tax periods occurring after December 31, 2022. The CAMT had no material impact on our financial results as of December 31, 2023. In addition, the Organization for Economic Co-operation and Development has issued Pillar Two model rules introducing a new global minimum tax of 15% intended to be effective on January 1, 2024. While the US has not yet adopted the Pillar Two rules, various other governments around the world are enacting legislation, some of which are effective for tax periods after December 31, 2023. While the global minimum tax will increase our administrative and compliance burdens, it is expected to have an immaterial impact to our financial statements.