Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Following is a summary of earnings (loss) before income taxes for United States and foreign operations:

	2023		2022	2021
United States	$	(440,556)	(233,208)	380,632
Foreign	86,047		417,101	909,361
Earnings (loss) before income taxes	$	(354,509)	183,893	1,289,993

Income tax (benefit) expense for the years ended December 31, 2023, 2022 and 2021 consists of the following:

	2023		2022	2021
Current income taxes:
U.S. federal	$	67,054	91,948	93,085
State and local	11,851		11,230	24,904
Foreign	115,903		106,032	143,385
Total current	194,808		209,210	261,374
Deferred income taxes:
U.S. federal	(50,089)		(27,756)	(2,655)
State and local	(5,251)		9,586	13,306
Foreign	(54,606)		(32,930)	(15,580)
Total deferred	(109,946)		(51,100)	(4,929)
Total income tax expense	$	84,862	158,110	256,445

The geographic dispersion of earnings and losses contributes to the annual changes in the Company’s effective tax rates. A substantial portion of the Company’s business activities are conducted in the United States, which gave rise to a loss in the current year. The Company is also subject to taxation in other jurisdictions where it has operations, including Australia, Belgium, Brazil, Bulgaria, France, Ireland, Italy, Luxembourg, Malaysia, Mexico, the Netherlands, New Zealand, Poland, Russia, Spain and the United Kingdom. The effective tax rates that the Company accrues in these jurisdictions vary widely, but they are generally lower than the Company’s overall effective tax rate. The Company’s domestic effective tax rates for the years ended December 31, 2023, 2022 and 2021 were (5.3)%, (36.5)%, and 33.8%, respectively, and its non-U.S. effective tax rates for the years ended December 31, 2023, 2022 and 2021 were 71.2%, 17.5%, and 14.1%, respectively. The difference in rates applicable in foreign jurisdictions results from many factors, including lower statutory rates, increase in valuation allowance, historical loss carry-forwards, financing arrangements, and other factors. The Company’s effective tax rate has been and will continue to be impacted by the geographical dispersion of the Company’s earnings and losses. To the extent that domestic earnings increase while the foreign earnings remain flat or decrease, or increase at a lower rate, the Company’s effective tax rate will increase.

Income tax expense (benefit) attributable to earnings before income taxes differs from the amounts computed by applying the U.S. statutory federal income tax rate to earnings before income taxes as follows:

	2023		2022	2021
Income taxes at statutory rate	$	(74,447)	38,618	270,898
State and local income taxes, net of federal income tax benefit	5,655		4,858	25,658
Foreign income taxes (1)	(58,984)		(50,483)	(34,981)
Change in valuation allowance	302,825		44,814	5,947
Impairment of non-deductible goodwill	183,059		132,497	—
Carryback rate differential (2)	—		—	(15,743)
Fixed asset adjustments	(6,562)		(7,289)	(7,113)
Non-deductible expenses	9,350		11,250	8,128
General business credits and incentives	(316,329)		(21,833)	(3,958)
Global intangible low-taxed income	215		7,200	34,400
Italy step-up adjustment (3)	—		—	(22,163)
Prior period adjustments	(5,638)		4,510	1,133
Tax impact of restructuring	25,428		—	—
Tax contingencies and audit settlements, net	26,331		(96)	12,505
Other, net	(6,041)		(5,936)	(18,266)
Income tax expense	$	84,862	158,110	256,445

(1) Foreign income taxes include statutory rate differences, financing arrangements, withholding taxes, local income taxes, notional deductions, and other miscellaneous items.

(2) The CARES Act permits the Company to carry back its 2020 U.S. taxable loss to a tax year before the corporate income tax rate was lowered by the Tax Cuts and Jobs Act.

(3) The Company realized a one-time Italian step-up benefit allowing for the realignment of tax asset values.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2023 and 2022 are presented below:

	2023		2022
Deferred tax assets:
Accounts receivable	$	26,179	15,783
Inventories	54,590		53,088
Employee benefits	49,671		47,089
Accrued expenses and other	123,968		95,682
Deductible state tax and interest benefit	12,256		7,584
Intangibles	122,621		122,710
Lease liabilities	100,389		108,596
Interest expense	44,153		10,749
Federal, foreign and state net operating losses and credits	814,384		448,759
Gross deferred tax assets	1,348,211		910,040
Valuation allowance	(582,683)		(284,347)
Net deferred tax assets	765,528		625,693
Deferred tax liabilities:
Inventories	(18,260)		(17,415)
Plant and equipment	(477,074)		(463,810)
Intangibles	(181,433)		(175,788)
Right of use operating lease assets	(93,801)		(102,959)
Prepaids	(52,528)		(47,079)
Other liabilities	(75,770)		(58,799)
Gross deferred tax liabilities	(898,866)		(865,850)
Net deferred tax liability	$	(133,338)	(240,157)

The Company evaluates its ability to realize the tax benefits associated with deferred tax assets by analyzing its forecasted taxable income using both historic and projected future operating results, the reversal of existing temporary differences, taxable income in prior carry-back years (if permitted) and the availability of tax planning strategies. The valuation allowance as of December 31, 2023, and 2022 is $582,683 and $284,347, respectively. The valuation allowance as of December 31, 2023 relates to the net deferred tax assets of certain of the Company’s foreign subsidiaries as well as certain state net operating losses and tax credits. The total change in the 2023 valuation allowance was an increase of $298,336 primarily related to a $300,000 credit received in Switzerland where realizability is uncertain as of December 31, 2023. The total change in the 2022 valuation allowance was an increase of $47,990 related to increased losses, foreign currency translation, and other activities.

Management believes it is more likely than not that the Company will realize the benefits of its deferred tax assets, net of valuation allowances, based upon the expected reversal of deferred tax liabilities and the level of historic and forecasted taxable income over periods in which the deferred tax assets are deductible.

As of December 31, 2023, the Company has state net operating loss carry forwards and state tax credits with potential tax benefits of $50,368, net of federal income tax benefit. A valuation allowance totaling $37,970 has been recorded against these state deferred tax assets as of December 31, 2023. In addition, as of December 31, 2023, the Company has credits and net operating loss carry forwards in the U.S. with potential tax benefits of $7,811 and in various foreign jurisdictions with potential tax benefits of $1,962,774. A valuation allowance of $6,242 and $538,471, respectively, has been recorded against these deferred tax assets as of December 31, 2023. A portion of the carryforwards expire over various periods beginning in 2024 and the remaining carryforwards have an indefinite life.

The Company has no intentions or plans to repatriate foreign earnings and continues to assert that historical earnings of its foreign subsidiaries as of December 31, 2023 are permanently reinvested. Should the remaining earnings be distributed in the form of dividends in the future, the Company might be subject to withholding taxes (possibly offset by U.S. foreign tax credits) in various foreign jurisdictions, but the Company would not expect incremental U.S. federal or state taxes to be accrued on these previously taxed earnings.

Tax Uncertainties

In the normal course of business, the Company’s tax returns are subject to examination by various taxing authorities. Such examinations may result in future tax and interest assessments by these taxing jurisdictions. Accordingly, the Company accrues liabilities when it believes that it is not more likely than not that it will realize the benefits of tax positions that it has taken in its tax returns or for the amount of any tax benefit that exceeds the cumulative probability threshold in accordance with ASC 740-10. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties related to unrecognized tax benefits in income tax expense (benefit). Differences between the estimated and actual amounts determined upon ultimate resolution, individually or in the aggregate, are not expected to have a material adverse effect on the Company’s consolidated financial position but could possibly be material to the Company’s consolidated results of operations or cash flow in any given quarter or annual period.

As of December 31, 2023, the Company’s gross amount of unrecognized tax benefits is $1,304,874, excluding interest and penalties. If the Company were to prevail on all uncertain tax positions, $75,299 of the unrecognized tax benefits would affect the Company’s effective tax rate, exclusive of any benefits related to interest and penalties.

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

	2023		2022
Balance as of January 1	$	1,230,632	1,296,523
Additions based on tax positions related to the current year	4,139		1,439
Additions for tax positions of acquired companies	11,728		—
Additions for tax positions of prior years	21,744		4,678
Reductions resulting from the lapse of the statute of limitations	(422)		(3,419)
Settlements with taxing authorities	(873)		—
Effects of foreign currency translation	37,926		(68,589)
Balance as of December 31	$	1,304,874	1,230,632

As a result of the redemption of hybrid instruments in response to changes in global tax regimes, the Company has an ASC 740-10 liability for the full tax effected loss on hybrid instruments. This ASC 740-10-45 liability is recorded as a reduction to the related deferred tax asset in the financial statements as a result of management’s determination that it is not more likely than not that the benefit will be realized. The tax effected loss was adjusted for foreign currency translation changes in 2023, resulting in an updated balance of $1,206,569 as of December 31, 2023.

As of December 31, 2023 and 2022, the Company has $26,926 and $14,801, respectively, accrued for the payment of interest and penalties, excluding the federal tax benefit of interest deductions where applicable. During the years ended December 31, 2023, 2022 and 2021, the Company accrued interest and penalties through income tax expense of $6,463, $437 and $3,236, respectively.

The Company believes that its unrecognized tax benefits could decrease by $22,680 within the next twelve months. The Company’s 2018, 2019 and 2020 federal tax returns are currently under audit by the Internal Revenue Service. As permitted by the CARES Act, the company carried back its 2020 taxable losses to tax years before the corporate income tax rate was lowered by the Tax Cut and Jobs Act. Federal income tax matters related to years prior to 2014 have been effectively settled. Various other state and foreign income tax returns are open to examination for various years.