Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Substantially all of the Company’s pre-tax earnings are derived from domestic operations in all years presented. The income tax provision was as follows:

	Year Ended December 31,
(In millions)	2023		2022		2021
Components of income tax provision (benefit):
Current:
Federal	$	913	$	802	$	378
State	148		175		138
Foreign	204		132		109
	1,265		1,109		625
Deferred:
Federal	(380)		(339)		(186)
State	(12)		(84)		(106)
Foreign	(119)		(135)		30
	(511)		(558)		(262)
Income tax provision	$	754	$	551	$	363

A reconciliation of the statutory federal income tax rate to the Company’s effective income tax rate is as follows:

	Year Ended December 31,
	2023		2022		2021
Statutory federal income tax rate	21.0	%	21.0	%	21.0	%
State income taxes, net of federal effect	2.8	%	2.5	%	1.6	%
Foreign tax law changes (1)	—	%	—	%	8.0	%
Foreign derived intangibles income deduction	(0.4)	%	(0.9)	%	(3.1)	%
Excess tax benefit from share-based awards	(0.8)	%	(0.8)	%	(2.2)	%
Sale of businesses and subsidiary restructuring	(1.3)	%	(2.2)	%	(2.1)	%
Unrecognized tax benefits	(0.2)	%	(0.5)	%	(2.7)	%
Nondeductible executive compensation	0.2	%	0.4	%	0.7	%
Transferable federal tax credits (2)	(1.4)	%	—	%	—	%
Valuation allowance	(0.6)	%	(0.5)	%	(1.3)	%
Other, net	—	%	(0.1)	%	1.9	%
Effective income tax rate	19.3	%	18.9	%	21.8	%

(1)     Foreign tax law changes during the year ended December 31, 2021 included $134 million of income tax expense attributed to the revaluation of certain net deferred tax liabilities in connection with enacted corporate income tax rate changes in foreign countries. In 2021, the enacted tax rate in the United Kingdom increased from 19% to 25% starting in 2023, and the tax rate in Argentina increased from 25% to 35%.

(2)     Pursuant to provisions under the Inflation Reduction Act, the Company purchased transferable federal tax credits during 2023 from various counterparties. Such federal tax credits were purchased at negotiated discounts, resulting in an income tax benefit recorded during the year ended December 31, 2023. Receivables associated with transferable federal tax credits are recorded within prepaid expenses and other current assets, and amounts owed to counterparties for the purchased credits are recorded within accounts payable and accrued expenses within the consolidated balance sheet at December 31, 2023.

Significant components of deferred tax assets and liabilities consisted of the following:

	December 31,
(In millions)	2023		2022
Accrued expenses	$	193	$	170
Share-based compensation	122		116
Net operating loss and credit carry-forwards	642		805
Leasing liabilities	183		170
Other	252		163
Subtotal	1,392		1,424
Valuation allowance	(467)		(620)
Total deferred tax assets	925		804
Capitalized software development costs	(331)		(481)
Intangible assets	(2,047)		(2,319)
Property and equipment	(341)		(308)
Capitalized commissions	(112)		(106)
Investments in joint ventures	(562)		(597)
Leasing right-of-use assets	(144)		(134)
Other	(386)		(405)
Total deferred tax liabilities	(3,923)		(4,350)
Total	$	(2,998)	$	(3,546)

The Company maintained a valuation allowance of $467 million and $620 million at December 31, 2023 and 2022, respectively, against its deferred tax assets. Substantially all of the valuation allowance relates to certain foreign and state net operating loss carryforwards.

Deferred tax assets and liabilities are reported in the consolidated balance sheets as follows:

	December 31,
(In millions)	2023		2022
Noncurrent assets	$	80	$	56
Noncurrent liabilities	(3,078)		(3,602)
Total	$	(2,998)	$	(3,546)

Noncurrent deferred tax assets are included in other long-term assets in the consolidated balance sheets at December 31, 2023 and 2022.

The following table presents the amounts of federal, state and foreign net operating loss carryforwards and foreign tax credit carryforwards:

	December 31,
(In millions)	2023		2022
Net operating loss carryforwards: (1)
Federal	$	86	$	214
State	3,074		2,810
Foreign	1,880		2,373
Foreign tax credit carryforwards	16		17

(1)At December 31, 2023, the Company had federal net operating loss carryforwards of $86 million, most of which do not expire, state net operating loss carryforwards of $3.1 billion, most of which expire in 2024 through 2043, and foreign net operating loss carryforwards of $1.9 billion, of which $162 million expire in 2024 through 2043, and the remainder of which do not expire.

The Company asserts that its investment in its foreign subsidiaries is intended to be indefinitely reinvested. Undistributed historical and future earnings of its foreign subsidiaries are not considered to be indefinitely reinvested. Should these earnings be distributed in the future in the form of dividends or otherwise, the Company may be subject to foreign or U.S. taxes. The Company has the ability and intent to limit distributions so as to not make a distribution in excess of its investment in those subsidiaries. The Company will continue to monitor its global cash requirements and the need to recognize a deferred tax liability.

Unrecognized tax benefits were as follows:

	December 31,
(In millions)	2023		2022		2021
Unrecognized tax benefits - Beginning of year	$	96	$	124	$	171
Increases for tax positions taken during the current year	2		3		16
Increases for tax positions taken in prior years	8		—		5
Decreases for tax positions taken in prior years	(10)		(18)		(41)
Decreases for settlements	(3)		(2)		(1)
Lapse of the statute of limitations	(9)		(11)		(26)
Unrecognized tax benefits - End of year	$	84	$	96	$	124

At December 31, 2023, unrecognized tax benefits of $49 million, net of federal and state benefits, would affect the effective income tax rate if recognized. The Company believes it is reasonably possible that the liability for unrecognized tax benefits may decrease by up to $5 million over the next twelve months as a result of possible closure of federal tax audits, potential settlements with certain states and foreign countries, and the lapse of the statute of limitations in various state and foreign jurisdictions.

The Company classifies interest expense and penalties related to income taxes as components of its income tax provision. The income tax provision included interest expense (benefits) and penalties on unrecognized tax benefits of $2 million in 2023, less than $1 million in 2022 and $(6) million in 2021. Accrued interest expense and penalties related to unrecognized tax benefits totaled $15 million and $13 million at December 31, 2023 and 2022, respectively.

The Company’s U.S. federal income tax returns for 2022 and 2023, and tax returns in certain states and foreign jurisdictions for 2017 through 2023, remain subject to examination by taxing authorities.