Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income from continuing operations before income taxes consisted of the following:

	Years ended December 31
In millions	2023		2022		2021
Federal (1)	$	(9.9)	$	(10.1)	$	(11.2)
International (2)	628.8		560.7		638.0
Income from continuing operations before income taxes	$	618.9	$	550.6	$	626.8

(1) “Federal” reflects United Kingdom (“U.K.”) loss from continuing operations before income taxes, given U.K. tax residency.

(2) “International” reflects non-U.K. income from continuing operations before income taxes.

The (benefit) provision for income taxes consisted of the following:

	Years ended December 31
In millions	2023		2022		2021
Currently payable (receivable)
International (1)	$	88.5	$	112.2	$	79.8
Total current taxes	88.5		112.2		79.8
Deferred
International (1)	(92.5)		(44.8)		(9.0)
Total deferred taxes	(92.5)		(44.8)		(9.0)
Total (benefit) provision for income taxes	$	(4.0)	$	67.4	$	70.8

(1) “International” represents non-U.K. taxes.

Reconciliations of the federal statutory income tax rate to our effective tax rate were as follows:

	Years ended December 31
Percentages	2023		2022		2021
U.K. federal statutory income tax rate (1)	23.5	%	19.0	%	19.0	%
Tax effect of international operations (2)	(13.2)		(7.6)		(5.1)
Change in valuation allowances	2.2		1.0		(0.2)
Excess tax benefits on stock-based compensation	(0.1)		(0.2)		(1.1)
Unrecognized tax benefits	—		—		(1.3)
Worthless stock deduction	(5.0)		—		—
Change in tax basis in foreign assets (3)	(8.0)		—		—
Effective tax rate	(0.6)	%	12.2	%	11.3	%

(1) The U.K. Finance Act of 2021 increased the statutory tax rate from 19.0% to 25.0%, effective April 1, 2023. Given this change, a prorated U.K. federal statutory income tax rate was utilized for 2023.

(2) The tax effect of international operations consists of non-U.K. jurisdictions.

(3) The 2023 impact primarily represents the initial recognition of tax basis in intangible assets in foreign jurisdictions and the related valuation allowance.

Reconciliations of the beginning and ending gross unrecognized tax benefits were as follows:

	Years ended December 31
In millions	2023		2022		2021
Beginning balance	$	39.6	$	37.3	$	46.3
Gross increases for tax positions in prior periods	0.6		3.6		2.5
Gross decreases for tax positions in prior periods	(0.2)		(0.9)		(0.7)
Gross increases based on tax positions related to the current year	1.6		0.2		0.2
Gross decreases related to settlements with taxing authorities	(3.0)		(0.6)		(0.9)
Reductions due to statute expiration	—		—		(10.1)
Ending balance	$	38.6	$	39.6	$	37.3

We record gross unrecognized tax benefits in Other current liabilities and Other non-current liabilities in the Consolidated Balance Sheets. Included in the $38.6 million of total gross unrecognized tax benefits as of December 31, 2023 was $38.3 million of tax benefits that, if recognized, would impact the effective tax rate. It is reasonably possible that the gross unrecognized tax benefits as of December 31, 2023 may decrease by a range of zero to $33.6 million during 2024, primarily as a result of the expiration of U.S. statute of limitations, and resolution of Germany and U.S. state examinations.

Based on the outcome of these examinations, or as a result of the expiration of statutes of limitations for specific jurisdictions, it is reasonably possible that certain unrecognized tax benefits for tax positions taken on previously filed tax returns will materially change from those recorded as liabilities in our financial statements. A number of tax periods from 2009 to present

are under audit by tax authorities in various jurisdictions, including Belgium, Germany and India. We anticipate that several of these audits may be concluded in the foreseeable future.

We record penalties and interest related to unrecognized tax benefits in (Benefit) provision for income taxes and Net interest expense, respectively, in the Consolidated Statements of Operations and Comprehensive Income. At December 31, 2023 and 2022, we have liabilities of $0.3 million and $0.6 million, respectively, for the possible payment of penalties and $6.4 million and $4.9 million, respectively, for the possible payment of interest expense, which are recorded in Other current liabilities in the Consolidated Balance Sheets.

Deferred taxes arise because of different treatment between financial statement accounting and tax accounting, known as “temporary differences.” We record the tax effect of these temporary differences as “deferred tax assets” (generally items that can be used as a tax deduction or credit in future periods) and “deferred tax liabilities” (generally items for which we received a tax deduction but the tax impact has not yet been recorded in the Consolidated Statements of Operations and Comprehensive Income).

Deferred taxes were recorded in the Consolidated Balance Sheets as follows:

	December 31
In millions	2023		2022
Other non-current assets	$	113.2	$	26.0
Deferred tax liabilities	40.0		43.3
Net deferred tax assets (liabilities)	$	73.2	$	(17.3)

The tax effects of the major items recorded as deferred tax assets and liabilities were as follows:

	December 31
In millions	2023		2022
Deferred tax assets
Accrued liabilities and reserves	$	58.8	$	68.1
Pension and other post-retirement compensation and benefits	20.1		19.4
Employee compensation and benefits	28.6		26.5
Research and development costs	28.4		18.1
Tax loss and credit carryforwards	769.4		752.4
Interest limitations	168.4		104.9
Total deferred tax assets	1,073.7		989.4
Valuation allowance	816.6		756.9
Deferred tax assets, net of valuation allowance	257.1		232.5
Deferred tax liabilities
Property, plant and equipment	17.9		18.1
Goodwill and other intangibles	149.7		213.0
Other liabilities	16.3		18.7
Total deferred tax liabilities	183.9		249.8
Net deferred tax assets (liabilities)	$	73.2	$	(17.3)

Included in tax loss and credit carryforwards in the table above is a foreign tax credit deferred tax asset of $30.7 million as of December 31, 2023. The $30.7 million foreign tax credit carryover consists of $29.6 million from the tax period ended December 31, 2017 related to the transition tax and $1.1 million from the tax period ended December 31, 2023. The foreign tax credit carryover from the tax period ended December 31, 2017 will expire December 31, 2027, and the foreign tax credit carryover from the period ended December 31, 2023 will expire December 31, 2033. The entire amount of foreign tax credit carryovers generated from both periods are subject to a valuation allowance.

As of December 31, 2023, tax loss carryforwards of $3,044.4 million were available to offset future income. A valuation allowance of $732.5 million exists for deferred income tax benefits related to the tax loss carryforwards which may not be realized. We believe sufficient taxable income will be generated in the respective jurisdictions to allow us to fully recover the remainder of the tax losses. The tax losses primarily relate to non-U.S. carryforwards of $2,982.3 million of which

$1,857.1 million are located in jurisdictions with unlimited tax loss carryforward periods, while the remainder will begin to expire in 2024. In addition, there were $62.1 million of U.S. state tax loss carryforwards as of December 31, 2023. U.S. state tax losses of $8.6 million are in jurisdictions with unlimited tax loss carryforward periods, while the remainder will expire in future years through 2043.

Deferred taxes in the amount of $0.6 million have been provided on undistributed earnings of certain subsidiaries. Taxes have not been provided on undistributed earnings of subsidiaries where it is our intention to reinvest these earnings permanently or to repatriate the earnings only when it is tax effective to do so. It is not practicable to estimate the amount of tax that might be payable if such earnings were to be remitted.