Income Taxes

12 Months Ended

Dec. 31, 2023

Income Taxes

Income Taxes

Note 12 − Income Taxes

Earnings before income taxes were as follows:

	Years ended December 31,
(Millions of dollars)	2023		2022		2021
United States	$	(403)	$	(205)	$	337
Foreign		509		782		298
Total earnings before income taxes excluding noncontrolling interests		106		577		635
Net earnings attributable to noncontrolling interests		1		2		1
Total earnings before income taxes	$	107	$	579	$	636

The components of total income taxes were as follows:

	Years ended December 31,
(Millions of dollars)	2023		2022		2021
Current:
Federal	$	(36)	$	54	$	35
Foreign		65		42		33
State and local		5		12		10
Deferred:
Federal		(118)		(94)		3
Foreign		(1)		5		(7)
State and local		(35)		(22)		(9)
Income tax expense (benefit)		(120)		(3)		65
Unrealized changes in other comprehensive income		4		8		8
Total income taxes	$	(116)	$	5	$	73

Income taxes for the years ended December 31, 2023, 2022 and 2021 differed from the amounts computed by applying the statutory U.S. federal income tax rate of 21% to earnings before income taxes excluding noncontrolling interests for the following reasons:

	Years ended December 31,
(Millions of dollars)	2023		2022		2021
Computed “expected” tax expense excluding noncontrolling interests	$	22	$	121	$	133
Adjustments to tax expense attributable to:
Foreign tax differences		(26)		(60)		(35)
Tax-exempt income		(22)		(17)		(15)
State income taxes, net of federal benefit		(28)		—		—
Foreign entity repatriation		—		10		—
Federal tax credits		(67)		(57)		(39)
Unrecognized tax benefits		(1)		7		14
Valuation allowance		(3)		(7)		6
IRS audit settlement		6		—		—
Other		(1)		—		1
Total income tax expense (benefit)	$	(120)	$	(3)	$	65

Certain of Seaboard’s foreign operations are subject to no income tax or a tax rate that is lower than the U.S. corporate tax rate. Fluctuation of earnings or losses incurred from certain foreign operations conducting business in these jurisdictions impact the mix of taxable earnings. State income taxes were lower than prior years primarily due to higher domestic losses and a decrease in certain state income tax rates.

Tax-exempt income is primarily related to federal blender’s credits on the biodiesel and renewable diesel that the Pork segment blends. As a result of these credits, Seaboard recognized non-taxable revenue of $103 million, $79 million and $69 million in net sales for the years ended December 31, 2023, 2022 and 2021, respectively. The receivable from the U.S. government was $42 million and $53 million as of December 31, 2023 and 2022, respectively, included in other receivables. The federal blender’s credits are available through 2024.

Seaboard has invested in research and development activities, capital expenditures and other investments that generate federal tax credits. During 2023, Seaboard’s capital expenditures related to renewable biogas recovery and solar facilities generated $30 million of federal investment tax credits. During 2022, Seaboard invested $52 million in a solar renewable energy project in Guam and received $46 million of federal investment tax credits. Seaboard accounted for this solar investment using the flow-through method and recognized the impact of the investment tax credits in the period earned on a gross basis, with the charge related to the reduction of the investment recorded in other investment income (loss) offset by the benefit of the credits recorded in income tax benefit (expense). Research and development activities primarily accounted for the remainder of the federal tax credits generated.

As of December 31, 2023 and 2022, Seaboard had income taxes receivable of $67 million and $54 million, respectively, primarily related to domestic tax jurisdictions, and had income taxes payable of $41 million and $18 million, respectively, primarily related to foreign tax jurisdictions. Income taxes receivable and income taxes payable are included in other receivables and other current liabilities in the consolidated balance sheets, respectively.

Components of the net deferred income tax asset were as follows:

	December 31,
(Millions of dollars)	2023		2022
Deferred income tax assets:
Reserves/accruals	$	80	$	68
Research and development capitalization		172		75
Unrealized loss on investments		21		40
Deferred earnings of foreign subsidiaries		3		3
Net operating and capital loss carry-forwards		18		28
Tax credit carry-forwards		95		22
Other		10		8
Gross deferred income tax assets before valuation allowance		399		244
Less: Valuation allowance		30		33
Total deferred income tax assets, net of valuation allowance	$	369	$	211
Deferred income tax liabilities:
Property, plant and equipment	$	139	$	106
Domestic partnerships		62		59
Inventory		—		14
Foreign basis difference		—		13
Other		1		2
Gross deferred income tax liabilities		202		194
Net deferred income tax asset	$	167	$	17

The activity within the valuation allowance account was as follows:

	Balance at		Charge (credit)	Balance at
(Millions of dollars)	beginning of year		to expense	end of year
Allowance for Deferred Tax Assets:
Year Ended December 31, 2023	$	33	(3)	$	30
Year Ended December 31, 2022	$	60	(27)	$	33
Year Ended December 31, 2021	$	55	5	$	60

Management believes Seaboard’s future taxable income will be sufficient for full realization of the net deferred tax assets. The valuation allowance relates to the tax benefits from state net operating losses, foreign net operating losses and tax credits. Management does not believe these benefits are more likely than not to be realized due to limitations imposed on the utilization of these losses and credits. As of December 31, 2023, Seaboard had state net operating loss carry-forwards of approximately $287 million and foreign net operating loss carry-forwards of approximately $35 million, a portion of which expire in varying amounts between 2024 and 2043, while others have indefinite expiration periods. As of December 31, 2023, Seaboard had federal tax credit carry-forwards of approximately $82 million which expire between 2042 and 2043, and state tax credit carry-forwards of approximately $40 million, a portion of which expire in varying amounts between 2024 and 2030 with the remainder available for indefinite carry-forward.

Historically, Seaboard has considered substantially all foreign profits as being permanently invested in its foreign operations, including all cash and short-term investments held by foreign subsidiaries. During 2022, Seaboard reversed its indefinite reinvestment assertion in connection with certain previously-taxed undistributed earnings of its Seaboard Marine subsidiary due to the tax effectiveness of repatriating. As a result, Seaboard recorded a deferred tax liability of $13 million for federal and state incremental tax costs associated with the repatriation of Seaboard Marine’s previously-taxed foreign undistributed earnings. For all other foreign subsidiaries, Seaboard intends to continue permanently reinvesting their funds outside the U.S. as they continue to demonstrate no need to repatriate them to fund Seaboard’s U.S. operations for the foreseeable future. Seaboard has not recorded deferred taxes for state or foreign withholding taxes that would result upon repatriation of these funds to the U.S. because determination of the tax that might be paid on unremitted earnings if eventually remitted is not practical due to the complexity of the multi-jurisdictional tax environment in which Seaboard operates.

Seaboard’s tax returns are regularly audited by federal, state and foreign tax authorities, which may result in material adjustments. U.S federal tax years prior to 2019 are no longer subject to IRS tax assessment with the exception of certain provisions under the Tax Cuts and Jobs Act that have a statute of limitations of six years. The IRS examination of Seaboard’s 2018 and 2019 U.S. income tax returns was finalized in the fourth quarter of 2023. In the U.S., typically the

three most recent tax years are subject to IRS audits, unless an agreement is made to extend the statute of limitations for an audit in progress or the statute is specifically extended by law for certain specialized items. In Seaboard’s major non-U.S. jurisdictions, including Argentina, the Dominican Republic, Ivory Coast and Senegal, tax years are typically subject to examination for three to six years.

As of December 31, 2023 and 2022, Seaboard had $49 million and $51 million, respectively, in total unrecognized tax benefits, all of which, if recognized, would affect the effective tax rate. Seaboard does not have any material uncertain tax positions in which it is reasonably possible that the total amounts of the unrecognized tax benefits will significantly increase or decrease within 12 months of the reporting date.

The following table is a reconciliation of the beginning and ending amount of unrecognized tax benefits:

(Millions of dollars)	2023		2022
Beginning balance at January 1	$	51	$	41
Additions for uncertain tax positions of prior years		2		1
Decreases for uncertain tax positions of prior years		(14)		(4)
Additions for uncertain tax positions of current year		18		23
Decreases related to audit settlements with taxing authorities		(6)		—
Lapse of statute of limitations		(2)		(10)
Ending balance as of December 31	$	49	$	51

Seaboard accrues interest and penalties related to unrecognized tax benefits in income tax expense and had approximately $10 million and $9 million accrued as of December 31, 2023 and 2022, respectively.