Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Beginning January 1, 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development expenditures currently and requires taxpayers to capitalize and amortize them over five or fifteen years, dependent upon the geography in which the expenditures are incurred. Although Congress has considered legislation that would defer, modify, or repeal the capitalization and amortization requirement, as of year-end no such deferral has been passed. The income tax provision has been prepared according to currently enacted tax legislation.

In August 2022, the Inflation Reduction Act was signed into law, which made a number of changes to the Internal Revenue Code, including adding a 1% excise tax on stock buybacks by publicly traded corporations and a 15% minimum tax on adjusted financial statement income of certain large companies. We are subject to the new 1% excise tax beginning January 1, 2023, but the amount will vary depending upon various factors. The 15% minimum tax only applies to corporations with average book income in excess of $1 billion, so is not currently applicable.

The following table summarizes the provision (benefit) for U.S. federal, state, and foreign taxes on income from continuing operations:

	Year Ended December 31,
In thousands	2022		2021		2020
Current:
Federal	$	(2,692)	$	20,197	$	(963)
State and local	3,698		7,271		1,731
Foreign	25,433		12,594		12,409
Total current	26,439		40,062		13,177
Deferred:
Federal	(24,167)		(36,196)		(2,852)
State and local	(4,723)		(12,186)		(3,340)
Foreign	(23,832)		(12,657)		(60,444)
Total deferred	(52,722)		(61,039)		(66,636)
Change in valuation allowance	20,087		(24,535)		53,697
Total provision (benefit) for income taxes	$	(6,196)	$	(45,512)	$	238

The change in the valuation allowance does not include the impacts of currency translation adjustments, acquisitions, or significant intercompany transactions.

Our tax provision (benefit) as a percentage of income before tax was 39%, 37%, and less than 1% for 2022, 2021, and 2020. A reconciliation of income taxes at the U.S. federal statutory rate of 21% to the consolidated actual tax rate is as follows:

	Year Ended December 31,
In thousands	2022		2021		2020
Income (loss) before income taxes
Domestic	$	(19,104)	$	(91,579)	$	24,010
Foreign	3,361		(32,231)		(80,649)
Total income (loss) before income taxes	$	(15,743)	$	(123,810)	$	(56,639)
Expected federal income tax provision (benefit)	$	(3,306)	$	(26,000)	$	(11,894)
Divestitures	1,578		—		10,936
Change in valuation allowance	20,087		(24,535)		53,697
Onshoring of international operations	—		(10,933)		—
Stock-based compensation	1,611		(2,465)		(163)
Foreign earnings	(22,244)		25,738		(58,649)
Tax credits	(10,967)		(8,988)		(9,101)
Uncertain tax positions, including interest and penalties	(2,053)		6,693		11,144
Change in tax rates	385		(1,919)		557
State income tax provision (benefit), net of federal effect	(2,873)		(5,722)		(1,997)
U.S. tax provision on foreign earnings	146		58		142
Nondeductible goodwill impairment	6,375		—		—
Local foreign taxes	551		667		1,298
Other, net	4,514		1,894		4,268
Total provision (benefit) from income taxes	$	(6,196)	$	(45,512)	$	238

Deferred tax assets and liabilities consist of the following:

	December 31,
In thousands	2022		2021
Deferred tax assets
Loss carryforwards(1)	$	405,674	$	412,023
Tax credits(2)	44,790		39,767
Accrued expenses	18,774		39,511
Pension plan benefits expense	7,037		17,140
Warranty reserves	8,535		9,302
Depreciation and amortization	72,505		94,917
Equity compensation	7,061		6,126
Inventory valuation	5,356		2,593
Deferred revenue	13,346		11,534
Interest	11,721		17,971
Leases	9,543		9,460
Capitalized research costs	74,058		29,246
Other deferred tax assets, net	7,986		9,062
Total deferred tax assets	686,386		698,652
Valuation allowance	(427,423)		(443,593)
Total deferred tax assets, net of valuation allowance	258,963		255,059
Deferred tax liabilities
Depreciation and amortization	(34,909)		(56,897)
Leases	(8,274)		(8,489)
Other deferred tax liabilities, net	(4,631)		(10,201)
Total deferred tax liabilities	(47,814)		(75,587)
Net deferred tax assets	$	211,149	$	179,472

(1)For tax return purposes at December 31, 2022, we had U.S. federal loss carryforwards of $4.2 million, which begin to expire in the year 2023. At December 31, 2022, we have net operating loss carryforwards in Luxembourg of $1.3 billion, the majority of which can be carried forward indefinitely, offset by a full valuation allowance. The remaining portion of the loss carryforwards are composed primarily of losses in various other state and foreign jurisdictions. The majority of these losses can be carried forward indefinitely. At December 31, 2022, there was a valuation allowance of $427.4 million primarily associated with foreign loss carryforwards.

(2)For tax return purposes at December 31, 2022, we had: U.S. general business credits of $47.1 million, which begin to expire in 2037; and state tax credits of $41.9 million, which begin to expire in 2023.

Changes in the valuation allowance for deferred tax assets are summarized as follows:

	Year Ended December 31,
In thousands	2022		2021		2020
Balance at beginning of period	$	443,593	$	503,859	$	427,030
Other adjustments	(36,257)		(35,731)		23,132
Additions charged to costs and expenses	20,087		(24,535)		53,697
Balance at end of period, noncurrent	$	427,423	$	443,593	$	503,859

We recognize valuation allowances to reduce deferred tax assets to the extent we believe it is more likely than not that a portion of such assets will not be realized. In making such determinations, we consider all available favorable and unfavorable evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and our ability to carry back losses to prior years. We are required to make assumptions and judgments about potential outcomes that lie outside management's control. Our most sensitive and critical factors are the projection, source, and character of future taxable income. Although realization is not assured, management believes it is more likely than not that deferred tax assets, net

of valuation allowance, will be realized. The amount of deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward periods are reduced.

We do not provide U.S. deferred taxes on temporary differences related to our foreign investments that are considered permanent in duration. These temporary differences include undistributed foreign earnings of $43.0 million and $25.7 million at December 31, 2022 and 2021. Foreign taxes have been provided on these undistributed foreign earnings. As a result of recent changes in U.S. tax legislation, any repatriation of these earnings would not result in additional U.S. federal income tax.

We are subject to income tax in the United States and numerous foreign jurisdictions. Significant judgment is required in evaluating our tax positions and determining our provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. We establish reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These reserves are established when we believe that certain positions might be challenged despite our belief that our tax return positions are fully supportable. We adjust these reserves in light of changing facts and circumstances, such as the outcome of tax audits. The provision for income taxes includes the impact of reserve positions and changes to reserves that are considered appropriate.

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

In thousands	Total
Unrecognized tax benefits at January 1, 2020	$	121,715
Gross increase to positions in prior years	633
Gross decrease to positions in prior years	(2,140)
Gross increases to current period tax positions	14,821
Audit settlements	(795)
Decrease related to lapsing of statute of limitations	(2,381)
Effect of change in exchange rates	4,057
Unrecognized tax benefits at December 31, 2020	$	135,910
Gross increase to positions in prior years	570
Gross decrease to positions in prior years	(19,709)
Gross increases to current period tax positions	31,456
Audit settlements	—
Decrease related to lapsing of statute of limitations	(4,535)
Effect of change in exchange rates	(4,163)
Unrecognized tax benefits at December 31, 2021	$	139,529
Gross increase to positions in prior years	14,450
Gross decrease to positions in prior years	(2,786)
Gross increases to current period tax positions	4,702
Audit settlements	—
Decrease related to lapsing of statute of limitations	(23,164)
Effect of change in exchange rates	(2,587)
Unrecognized tax benefits at December 31, 2022	$	130,144

	At December 31,
In thousands	2022		2021		2020
The amount of unrecognized tax benefits that, if recognized, would affect our effective tax rate	$	130,137	$	139,503	$	134,473

If certain unrecognized tax benefits are recognized they would create additional deferred tax assets. These assets would require a full valuation allowance in certain locations based upon present circumstances.

We classify interest expense and penalties related to unrecognized tax benefits and interest income on tax overpayments as components of income tax expense. The net interest and penalties expense recognized were as follows:

	Year Ended December 31,
In thousands	2022		2021		2020
Net interest and penalties expense (benefit)	$	4,665	$	(1,097)	$	400

	At December 31,
In thousands	2022		2021
Accrued interest	$	7,575	$	2,964
Accrued penalties	567		747

At December 31, 2022, we are under examination by certain tax authorities. Subsequent to year end we expect to receive an assessment from German tax authorities for years 2014-2017. We have agreed to settle certain issues with Germany, and plan to appeal or litigate others. We believe we have appropriately accrued for the expected outcome of all tax matters and do not currently anticipate that the ultimate resolution of these examinations will have a material adverse effect on our financial condition, future results of operations, or cash flows.

Based upon the timing and outcome of examinations, litigation, the impact of legislative, regulatory, and judicial developments, and the impact of these items on the statute of limitations, it is reasonably possible that the related unrecognized tax benefits could change from those recognized within the next twelve months. However, at this time, an estimate of the range of reasonably possible adjustments to the balance of unrecognized tax benefits cannot be made.

We file income tax returns in various jurisdictions. We are subject to income tax examination by tax authorities in our major tax jurisdictions as follows:

Tax Jurisdiction	Years Subject to Audit
U.S. federal	Subsequent to 2002
France	Subsequent to 2018
Germany	Subsequent to 2013
United Kingdom	Subsequent to 2018
Indonesia	Subsequent to 2017
Italy	Subsequent to 2016