Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of income (loss) before income taxes for the years ended December 31, (in millions):

	2023		2022		2021
Domestic	$	(995)	$	(698)	$	(353)
Foreign	452		855		1,113
Total	$	(543)	$	157	$	760

The provision for income taxes consists of the following for the years ended December 31, (in millions):

	2023		2022		2021
Current:
Federal	$	56	$	(245)	$	48
State	1		6		17
Foreign	71		102		97
Total current	128		(137)		162
Deferred:
Federal	(232)		163		(26)
State	(40)		(34)		(20)
Foreign	(11)		(32)		22
Total deferred	(283)		97		(24)
Total income tax provision (benefit)	$	(155)	$	(40)	$	138

A reconciliation of the U.S. statutory rate to the effective income tax rate on a continuing basis is as follows for the years ended December 31:

	2023		2022		2021
Statutory rate	21.0	%	21.0	%	21.0	%
Add (deduct) effect of:
State income taxes, net of federal income tax effect	5.7		(14.8)		(0.5)
U.S. foreign inclusions and foreign tax credit (1)	(2.4)		(43.5)		3.6
Foreign rate differential	12.3		(47.2)		(11.6)
Change in uncertain tax positions	—		16.7		0.1
Change in valuation allowance reserve	(9.2)		(13.8)		(3.8)
Impairments	1.0		20.7		—
Sale of businesses	(0.9)		(21.2)		—
Capital loss	1.4		—		(2.1)
Reversal of outside basis difference	11.2		1.6		0.4
Non-deductible compensation	(1.1)		1.9		0.4
Other taxes	(1.8)		4.5		1.3
U.S. income inclusions on asset transfers	(10.1)		50.3		11.1
Foreign exchange	—		2.0		—
Other tax credits	1.8		1.0		(0.4)
Return to provision	1.5		(11.3)		(1.7)
Other	(1.9)		6.6		0.4
Effective rate	28.5	%	(25.5)	%	18.2	%

(1)The Company accounts for tax on global intangible low-taxed income (“GILTI”) as a period cost and the effects are included herein.

At December 31, 2023, the Company has accumulated unremitted earnings generated by our foreign subsidiaries of approximately $6.0 billion. A portion of these earnings were subject to U.S. federal taxation with the one-time toll charge. The Company does not assert indefinite reinvestment on a portion of its unremitted earnings of certain foreign subsidiaries as of December 31, 2023 and is recognizing deferred income taxes of approximately $12 million, primarily related to the future withholding tax effects of those unremitted foreign earnings. With respect to unremitted earnings of $6.0 billion and any other additional outside basis differences

where the Company is continuing to assert indefinite reinvestment, any future reversals could be subject to additional foreign withholding taxes, U.S. state taxes and certain tax impacts relating to foreign currency exchange effects on any future repatriations of the unremitted earnings. The determination of any unrecognized deferred tax liabilities on the amount of unremitted earnings and other outside basis differences where the Company is asserting indefinite reinvestment is not practicable.

Deferred tax assets (liabilities) consist of the following at December 31, (in millions):

	2023		2022
Deferred tax assets:
Accruals	$	190	$	153
Inventory	74		84
Pension and postretirement benefits	38		49
Net operating losses	322		295
Foreign tax credits	16		27
Capital loss carryforward	43		41
Operating lease liabilities	153		169
Capitalized research and development expenses	68		36
Interest expense carryforward	91		28
Other	122		116
Total gross deferred tax assets	1,117		998
Less valuation allowance	(184)		(148)
Net deferred tax assets after valuation allowance	933		850
Deferred tax liabilities:
Accelerated depreciation	(112)		(119)
Amortizable intangibles	(69)		(114)
Outside basis differences	(12)		(96)
Operating lease assets	(140)		(154)
Other	(35)		(77)
Total gross deferred tax liabilities	(368)		(560)
Net deferred tax assets	$	565	$	290

The net deferred tax amounts have been classified in the balance sheet at December 31, (in millions):

	2023		2022
Noncurrent deferred tax assets	$	806	$	810
Noncurrent deferred tax liabilities	(241)		(520)
Net deferred tax assets	$	565	$	290

At December 31, 2023, the Company has net operating losses (“NOLs”) of approximately $1.3 billion, comprised of $150 million in the U.S. and $1.1 billion outside of the U.S. Approximately $841 million of these NOLs do not expire and approximately $447 million expire between 2024 and 2043. During 2023, the Company utilized approximately $12 million of U.S. federal NOLs that were not previously reflected in the consolidated financial statements. As of December 31, 2023, all U.S. federal NOLs are reflected in the consolidated financial statements. At December 31, 2023, the Company has approximately $1.3 billion of post-apportioned state NOLs, of which $147 million do not expire and $1.1 billion expire between 2024 and 2043.

The Company has U.S. foreign tax credits of $16 million which expire between 2028 and 2033. The Company has approximately $126 million of U.S. capital loss carryforwards of which approximately $84 million were generated at December 31, 2020, $42 million were generated at December 31, 2021, and can be carried back three years and carried forward five years. The Company has approximately $188 million of post-apportioned state capital loss of which $26 million was generated at December 31, 2018, $146 million was generated at December 31, 2020, $13 million was generated at December 31, 2021 and $3 million was generated at December 31, 2022. Of these post-apportioned state capital loss carryforwards, $131 million can be carried back three years and carried forward five years, and $57 million can be carried forward five years.

The Company had a noncurrent income tax receivable of $290 million and $271 million as of December 31, 2023 and 2022, respectively. In 2023, the Company paid $19 million of tax for the one-time toll charge (defined hereafter) incurred in 2017 related

to the Tax Credits and Jobs Act due to the IRS having not yet processed the amended 2017 tax return. During the year ended December 31, 2022, the Company amended its 2017 U.S. federal income tax return to carryback foreign tax credits generated in 2018 and capital losses generated in 2018 and 2020. The Company also paid $10 million of tax for the one-time toll charge. This resulted in an increase in noncurrent income tax receivable of approximately $271 million, a decrease in income taxes payable of approximately $95 million, and an increase in deferred tax liabilities of approximately $356 million.

The Company routinely reviews valuation allowances recorded against deferred tax assets on a more likely than not basis as to whether the Company will realize the deferred tax assets. In making such a determination, the Company takes into consideration all available and appropriate positive and negative evidence, including projected future taxable income, future reversals of existing taxable temporary differences, the ability to carryback net operating losses, and available tax planning strategies. Although realization is not assured, based on this existing evidence, the Company believes it is more likely than not that the Company will realize the benefit of existing deferred tax assets, net of the valuation allowances.

At December 31, 2023, the Company has a valuation allowance recorded against certain deferred tax assets, primarily state and foreign NOLs, foreign capital losses and U.S. foreign tax credits, which the Company believes do not meet the more likely than not threshold to be realized due to uncertainty of future taxable income within the applicable tax jurisdictions. A valuation allowance of $184 million and $148 million was recorded against certain deferred tax asset balances at December 31, 2023 and 2022, respectively. For 2023, the Company recorded a net valuation allowance increase of $36 million, primarily related to NOLs in Switzerland, Luxembourg, and Argentina and capital losses in Hong Kong netted with a write-off of NOLs and the related valuation allowance resulting from the liquidation of various subsidiaries in Luxembourg, Netherlands and China, as well as other miscellaneous changes in the U.S., state and non-U.S. valuation allowances related to ongoing operations. For 2022, the Company recorded a net valuation allowance decrease of $38 million, primarily related to NOLs in Brazil, China and Luxembourg and other miscellaneous changes in the U.S., state and non-U.S. valuation allowance related to ongoing operations.

The following table summarizes the changes in gross unrecognized tax benefits periods indicated are as follows (in millions):

	2023		2022		2021
Unrecognized tax benefits, January 1,	$	476	$	457	$	452
Increases (decreases):
Increases in tax positions for prior years	—		1		1
Decreases in tax positions for prior years	(19)		(3)		(4)
Increase in tax positions for the current period	12		44		23
Settlements with taxing authorities	—		(13)		(2)
Lapse of statute of limitations	(6)		(10)		(12)
Cumulative translation adjustments	—		—		(1)
Unrecognized tax benefits, December 31,	$	463	$	476	$	457

If recognized, $387 million, $412 million and $387 million of unrecognized tax benefits at December 31, 2023, 2022 and 2021, respectively, would affect the effective tax rate. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as a component of income tax expense. During 2023, 2022 and 2021 the Company recognized income tax expense on interest and penalties of $9 million, $5 million and $7 million, respectively, due to the accrual of current year interest on existing positions offset by the resolution of certain tax contingencies.

The Company anticipates approximately $39 million of unrecognized tax benefits will reverse within the next 12 months. It is reasonably possible due to statutes of limitation expiration, as well as activities of various worldwide taxing authorities, including proposed assessments of additional tax and possible settlement of audit issues, that additional changes to the Company’s unrecognized tax benefits could occur. In the normal course of business, the Company is subject to audits by worldwide taxing authorities regarding various tax liabilities. The Company’s U.S. federal income tax returns for 2011 to 2015 and 2017 to 2020, as well as certain state and non-U.S. income tax returns for various years, are under examination.

The Company files numerous consolidated and separate income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The statute of limitations for the Company’s U.S. federal income tax returns has expired for years prior to 2011 and for 2016. With few exceptions, the Company is no longer subject to other income tax examinations for years before 2016.