Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Taxes

Note 12. Taxes

The components of income before provision for income taxes are as follows:

	(dollars in millions)
Years Ended December 31,	2023		2022		2021
Domestic	$	15,668	$	26,822	$	27,607
Foreign	1,319		1,449		1,813
Total	$	16,987	$	28,271	$	29,420

The components of the provision for income taxes are as follows:

	(dollars in millions)
Years Ended December 31,	2023		2022		2021
Current
Federal	$	2,070	$	2,411	$	1,876
Foreign	219		201		248
State and Local	215		938		414
Total	2,504		3,550		2,538
Deferred
Federal	1,799		2,529		3,354
Foreign	28		(22)		(97)
State and Local	561		466		1,007
Total	2,388		2,973		4,264
Total income tax provision	$	4,892	$	6,523	$	6,802

The following table shows the principal reasons for the difference between the effective income tax rate and the statutory federal income tax rate:

Years Ended December 31,	2023		2022		2021
Statutory federal income tax rate	21.0	%	21.0	%	21.0	%
State and local income tax rate, net of federal tax benefits	3.6		3.9		3.8
Noncontrolling interest	(0.6)		(0.4)		(0.4)
Goodwill impairment	7.0		—		—
Divestitures	—		—		(0.6)
Tax credits	(0.8)		(0.5)		(0.5)
Other, net	(1.4)		(0.9)		(0.2)
Effective income tax rate	28.8	%	23.1	%	23.1	%

The effective income tax rate for 2023 was 28.8% compared to 23.1% for 2022. The increase in the effective income tax rate was primarily due to the Verizon Business Group goodwill impairment charge of $5.8 billion that substantially decreased income before income taxes and is not deductible. The decrease in the provision for income taxes was primarily due to the decrease in income before income taxes in the current period.

The effective income tax rate for 2022 and 2021 was 23.1%. The effective income tax rate for the twelve months ended December 31, 2022 was comparable to the similar period in 2021. The decrease in the provision for income taxes was primarily due to the decrease in income before income taxes in the current period.

The amounts of cash taxes paid by Verizon are as follows:

	(dollars in millions)
Years Ended December 31,	2023		2022		2021
Income taxes, net of amounts refunded	$	2,343	$	2,736	$	3,040
Employment taxes	1,016		1,245		1,225
Property and other taxes	2,007		1,959		1,756
Total	$	5,366	$	5,940	$	6,021

Deferred Tax Assets and Liabilities

Deferred taxes arise because of differences in the book and tax bases of certain assets and liabilities. Significant components of deferred tax assets and liabilities are as follows:

	(dollars in millions)
At December 31,	2023		2022
Deferred Tax Assets
Employee benefits	$	3,913	$	3,888
Tax loss, credit, and other carry forwards	1,922		1,940
Lease liabilities	5,480		5,395
Other - assets	1,708		1,591
	13,023		12,814
Valuation allowances	(1,341)		(1,347)
Deferred tax assets	11,682		11,467
Deferred Tax Liabilities
Spectrum and other intangible amortization	28,535		25,851
Depreciation	20,884		21,388
Lease right-of-use assets	5,200		5,007
Other - liabilities	2,696		2,489
Deferred tax liabilities	57,315		54,735
Net deferred tax liability	$	45,633	$	43,268

At December 31, 2023, undistributed earnings of our foreign subsidiaries indefinitely invested outside the U.S. amounted to approximately $2.4 billion. The majority of Verizon's cash flow is generated from domestic operations and we are not dependent on foreign cash or earnings to meet our funding requirements, nor do we intend to repatriate these undistributed foreign earnings to fund U.S. operations. Furthermore, a portion of these undistributed earnings represents amounts that legally must be kept in reserve in accordance with certain foreign jurisdictional requirements and are unavailable for distribution or repatriation. As a result, we have not provided U.S. deferred taxes on these undistributed earnings because we intend that they will remain indefinitely reinvested outside of the U.S. and, therefore unavailable for use in funding U.S. operations. Determination of the amount of unrecognized deferred taxes related to these undistributed earnings is not practicable.

At December 31, 2023, we had net after-tax loss, credit, and other carry forwards for income tax purposes of approximately $1.9 billion that relate to federal, state and foreign taxes. Of these net after-tax loss, credit, and other carry forwards, approximately $1.0 billion will expire between 2024 and 2043 and approximately $911 million may be carried forward indefinitely.

During 2023, the valuation allowance decreased by an insignificant amount. The $1.3 billion valuation allowance at December 31, 2023 is primarily related to state and foreign taxes.

Unrecognized Tax Benefits

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

			(dollars in millions)
	2023		2022		2021
Balance at January 1,	$	2,812	$	3,134	$	2,944
Additions based on tax positions related to the current year	114		123		150
Additions for tax positions of prior years	185		122		621
Reductions for tax positions of prior years	(154)		(419)		(330)
Settlements	(50)		(92)		(163)
Lapses of statutes of limitations	(202)		(56)		(88)
Balance at December 31,	$	2,705	$	2,812	$	3,134

Included in the total unrecognized tax benefits at December 31, 2023, 2022 and 2021 is $2.3 billion, $2.5 billion and $2.8 billion, respectively, that if recognized, would favorably affect the effective income tax rate.

We recognized the following net after-tax expenses (benefit) related to interest and penalties in the provision for income taxes:

Years Ended December 31,	(dollars in millions)
2023	$	86
2022	35
2021	(21)

The after-tax accruals for the payment of interest and penalties in the consolidated balance sheets are as follows:

At December 31,	(dollars in millions)
2023	$	630
2022	544

The decrease in unrecognized tax benefits in 2023 was primarily due to lapses of statutes of limitations in the current period. The decrease in unrecognized tax benefits for 2022 was primarily related to the resolution of issues with the Internal Revenue Service (IRS) involving tax years 2015-2016 as well as final purchase accounting adjustments made in connection with the 2021 acquisition of TracFone.

Verizon and/or its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various state, local and foreign jurisdictions. As a large taxpayer, we are under audit by the IRS and multiple state and foreign jurisdictions for various open tax years. The IRS is currently examining the Company’s U.S. income tax returns for tax years 2017 through 2019 and Cellco's U.S. income tax return for tax years 2017 through 2020. Tax controversies are ongoing for tax years as early as 2011 in certain states and as early as 2000 outside the U.S. The amount of the liability for unrecognized tax benefits will change in the next twelve months due to the expiration of the statute of limitations in various jurisdictions and it is reasonably possible that various current tax examinations will conclude or require reevaluations of the Company’s tax positions during this period. An estimate of the range of the possible change cannot be made until these tax matters are further developed or resolved.