Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income from continuing operations, before taxes for the years ended December 31 was as follows:

	2022		2021		2020
United States	$	(23.8)	$	19.3	$	(89.6)
Foreign	(293.5)		(178.1)		(214.0)
Total	$	(317.3)	$	(158.8)	$	(303.6)

The provision for income taxes for the years ended December 31 was as follows:

	2022		2021		2020
Federal:
Current	$	—	$	0.2	$	(9.5)
Deferred	—		—		8.9
Total Federal	—		.2		(0.6)
Foreign:
Current	25.6		35.5		31.4
Deferred	11.8		(20.0)		2.6
Total Foreign	37.4		15.5		34.0
State and Local:
Current	—		.5		.6
Deferred	—		—		—
Total State and other	—		.5		.6
Total	$	37.4	$	16.2	$	34.0

The continuing operations effective tax rate for the years ended December 31 was as follows:

	2022		2021		2020
Statutory federal rate	21.0	%	21.0	%	21.0	%
State and local taxes, net of federal tax benefit	—		(.3)		(.2)
Tax on foreign income	10.8		67.1		(1.8)
Tax on uncertain tax positions	.6		3.7		1.1
Reorganizations	—		—		(10.0)
Net change in valuation allowances	(44.6)		(103.1)		(21.4)
Other	.4		1.4		.1
Effective tax rate	(11.8)	%	(10.2)	%	(11.2)	%

In 2022, the Company’s effective tax rate continues to be impacted by the country mix of earnings. The country mix includes losses in certain jurisdictions that cannot be benefited and income tax expense in certain jurisdictions where taxable income is generated. In 2022, the Company increased its reserves for uncertain tax positions associated with current year activity and reduced reserves due to events, including settlements and the expiration of statutes of limitation. Included in Tax on Foreign Income is the effect of the Colombia Goodwill impairment which could not be benefitted.

In 2022, the Net Change in Valuation Allowances line in the rate reconciliation above includes $141.4 of net benefits that could not be recognized. The $141.4 of benefits which were not recognized consisted of the following key items: 1) $115.0 of increased Valuation Allowances due to additional Deferred Tax Assets generated during 2022 which cannot be benefitted; and 2) $26.4 of increased Valuation Allowances due to changes in judgment regarding the ability to use certain Deferred Tax Assets which existed at the beginning of 2022.

In 2021, the Company’s effective tax rate continued to be impacted by the country mix of earnings. The country mix includes losses in certain jurisdictions that cannot be benefited and income tax expense in certain jurisdictions where taxable income is generated. In 2021, the Company increased its reserves for uncertain tax positions associated with current year activity and reduced reserves due to events, primarily restructuring and the expiration of statutes of limitation. Included in Tax on Foreign Income is the effect of tax rate changes including the increase in the United Kingdom tax rate from 19% to 25% which resulted in a deferred tax benefit of $89.1.

In 2021, the Net Change in Valuation Allowances line in the rate reconciliation above includes $163.7 of net benefits that could not be recognized. The $163.7 of benefits which were not recognized consisted of the following key items: 1) $70.9 of increased Valuation Allowances due to additional Deferred Tax Assets generated during 2021 which cannot be benefitted; 2) $89.1 of increased Valuation Allowances on Deferred Tax Assets due to a tax rate change offsetting equivalent and associated accruals of deferred tax benefits reflected in the “Tax on Foreign Income” line above; and 3) $3.7 of increased Valuation Allowances due to changes in judgment regarding the ability to use certain Deferred Tax Assets which existed at the beginning of 2021.

In 2020, the Company’s effective tax rate continues to be impacted by the country mix of earnings. The country mix includes losses in certain jurisdictions that cannot be benefited and income tax expense in certain jurisdictions where taxable income is generated. In 2020, the Company increased its reserves for uncertain tax positions associated with current year activity and reduced reserves due to events, primarily the expiration of statutes of limitation. Included in Tax on Foreign Income is the effect of tax rate changes including the increase in the United Kingdom tax rate from 17% to 19% which resulted in a deferred tax benefit of $21.0. Included in the Re-organizations line is the effect of a true-up for a change in estimate of $30.5 regarding the amount of net operating losses generated as part of the 2018 restructuring transactions.

In 2020, the Net Change in Valuation Allowances line in the rate reconciliation above includes $65.1 of net benefits that could not be recognized. The $65.1 of benefits which were not recognized consisted of the following key items: 1) $69.9 of increased Valuation Allowances due to additional Deferred Tax Assets generated during 2020 which cannot be benefitted; 2) $21.0 of increased Valuation Allowances on Deferred Tax Assets due to a tax rate change offsetting equivalent and associated accruals of deferred tax benefits reflected in the “Tax on Foreign Income” line above; 3) $4.7 of increased Valuation Allowances due to changes in judgment regarding the ability to use certain Deferred Tax Assets which existed at the beginning of 2020; and 4) $30.5 decrease which offsets the true-up effect for the change in estimate of the benefit of net operating losses generated as part of the 2018 restructuring transactions.

Deferred tax assets (liabilities) at December 31 consisted of the following:

	2022		2021
Deferred tax assets:
Tax loss and deduction carryforwards	$	478.5	$	425.0
Intangibles	187.6		218.5
Tax credit carryforwards	120.3		119.7
Interest carryforwards	93.6		76.3
All other future deductions	168.4		199.8
Valuation allowance	(941.4)		(815.4)
Total deferred tax assets	107.0		223.9
Deferred tax liabilities	$	(59.2)	$	(105.0)
Net deferred tax assets	$	47.8	$	118.9

Deferred tax assets (liabilities) at December 31 were classified as follows:

	2022		2021
Deferred tax assets:
Other assets	$	52.1	$	121.4
Total deferred tax assets	52.1		121.4
Deferred tax liabilities:
Long-term income taxes	$	(4.3)	$	(2.5)
Total deferred tax liabilities	(4.3)		(2.5)
Net deferred tax assets	$	47.8	$	118.9

We monitor the realizability of our deferred tax assets on a continuous basis. Should macroeconomic and socio-political conditions change or our business operations do not improve, some or all of our remaining deferred tax assets could potentially need to be offset with the recording of a valuation allowance during the next 12 months.

At December 31, 2022, the valuation allowance primarily represents amounts for certain foreign tax loss carryforwards, substantially all U.S. deferred tax assets and certain other foreign deferred tax assets. The recognition of deferred tax assets was based on the evaluation of current and estimated future profitability of the operations, reversal of deferred tax liabilities and the likelihood of utilizing tax credit and/or loss carryforwards. Tax planning strategies were also considered and evaluated as support for the realization of deferred tax assets. Where these sources of income existed along with sufficient positive evidence that indicated it was more likely than not that such sources of income could be relied upon, then the deferred tax assets were not reduced by a valuation allowance.

At December 31, 2022, we had deferred tax assets of $120.3 relating to tax credit carryforwards (U.S. foreign tax credits, research and experimentation credits and other tax credits) for which a valuation allowance of $120.3 has been provided. The tax credit carryforwards consist of U.S. foreign tax credits of $87.6 which are substantially all subject to expiration between 2023 and 2027; U.S. research and experimentation credits of $24.8 which are subject to expiration between 2027 and 2042 and other tax credits of $7.9 which are subject to expiration between 2023 and 2036.

At December 31, 2022, we had deferred tax assets of $432.2 relating to foreign loss carryforwards. The $432.2 of recognized deferred tax assets includes a $77.5 reduction for unrecognized tax benefits in accordance with ASU2013-11. The $432.2 of recognized deferred tax assets are further reduced by a valuation allowance of $414.2 resulting in a net deferred tax asset of $18.0 for foreign loss carryforwards. At December 31, 2022, we had recognized deferred tax assets of $46.3 relating to federal loss carryforwards for which a valuation allowance of $46.3 has been provided.

At December 31, 2022 we had foreign tax loss carryforwards of $2,480.8, of which $924.9 are not subject to expiration and $1,555.9 are subject to expiration between 2023 and 2052. At December 31, 2022, we had federal tax loss carryforwards of $220.4 which are not subject to expiration.

In prior years, we had previously recorded valuation allowances against certain deferred tax assets associated with the U.S. and various foreign jurisdictions. We intend to continue maintaining these valuation allowances on our deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances. Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of any such valuation allowance release is subject to change depending on the level of profitability that we are able to achieve. The Company continuously monitors its operational and capital structure changes, business performance, tax planning actions and tax planning strategies that could potentially allow for the recognition

of deferred tax assets which are currently subject to a valuation allowance. There is the possibility that, in the foreseeable future, certain deferred tax asset could be recognized related to improvements in actual and/or expected operating results.

The ultimate realization of deferred tax assets depends upon generating sufficient taxable income of the right character during the periods in which the temporary differences become deductible, or before net operating loss and tax credit carryforwards expire. Evaluating the need for and quantifying the valuation allowance often requires significant judgment and extensive analysis of all the weighted positive and negative evidence available to the Company in order to determine whether all or some portion of the deferred tax assets will not be realized. Management continuously monitors the performance of entities and assesses the need for any further valuation allowances based on market performance and executability of tax planning actions and opportunities (including corporate restructuring). Should macroeconomic and sociopolitical conditions change, or our business operations not improve, or tax planning actions and opportunities not be implemented, up to approximately $52.1 of the Company's recognized deferred tax assets could potentially need to be offset with the recording of a valuation allowance in the future.

At December 31, 2022, we continue to assert that substantially all of our foreign earnings are indefinitely reinvested. At December 31, 2022 the company’s undistributed foreign earnings of approximately $1.2 billion and would generate an approximate $10.2 of income tax if repatriated from the local subsidiaries.

Uncertain Tax Positions

At December 31, 2022, we had $249.8 of total gross unrecognized tax benefits of which approximately $14.1 would favorably impact the provision for income taxes, if recognized.

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

Balance at December 31, 2019	331.7
Additions based on tax positions related to the current year	90.6
Additions for tax positions of prior years	.6
Reductions for tax positions of prior years	(34.1)
Reductions due to lapse of statute of limitations	(16.5)
Reductions due to settlements with tax authorities	(.2)
Balance at December 31, 2020	372.1
Additions based on tax positions related to the current year	6.8
Additions for tax positions of prior years	24.1
Reductions for tax positions of prior years	(136.8)
Reductions due to lapse of statute of limitations	(11.2)
Reductions due to settlements with tax authorities	(3.3)
Balance at December 31, 2021	251.7
Additions based on tax positions related to the current year	3.3
Additions for tax positions of prior years	—
Reductions for tax positions of prior years	(1.8)
Reductions due to lapse of statute of limitations	(1.1)
Reductions due to settlements with tax authorities	(2.3)
Balance at December 31, 2022	$	249.8

We accrue interest and penalties related to unrecognized tax benefits in the provision for income taxes. We reversed previously recorded expenses for interest and penalties, net of tax of $0.2 for the year ended December 31, 2022 and accrued interest and penalties, net of taxes of $0.5 and $1.0, for the years ended December 31, 2021 and 2020, respectively.

At December 31, 2022 and 2021 we had $6.3 and $7.1, respectively, recorded for interest and penalties, net of tax benefit. The unrecognized tax benefits, including interest and penalties, were classified within long-term income taxes in our Consolidated Balance Sheets.

We file income tax returns in the U.S. and foreign jurisdictions. As of December 31, 2022, the tax years that remained subject to examination by major tax jurisdiction for our most significant subsidiaries were as follows:

Jurisdiction	Open Years
Brazil	2017-2022
Philippines	2017, 2019-2022
Poland	2014-2022
Russia	2020-2022
United Kingdom	2020-2022
United States (Federal)	2017-2022

We anticipate that it is reasonably possible that the total amount of unrecognized tax benefits could decrease in the range of approximately $85 to $90 within the next twelve months. Substantially all of these unrecognized tax benefits relate to an uncertain tax position resulting from characterization of revenue as indirect tax which is non-taxable rather than revenue that contributed to taxable income. In the past, this lack of recognition of the taxable income also resulted in an increase in net operating losses. In the next twelve months, approximately $85 to $90 of taxable income is anticipated to be triggered by certain legal entity restructurings. The resulting taxable income will be substantially all offset with net operating losses and other deferred tax assets. Approximately $0.8 of the anticipated reduction in the reserve would favorably impact the provision for income taxes.