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Income Taxes (Notes) | 9 Months Ended
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Sep. 30, 2023
Income Tax Disclosure [Abstract] |
Income Tax Disclosure [Text Block] | 10. INCOME TAXES We adjust our effective tax rate each quarter based on our estimated annual effective tax rate. We also record the tax impact of certain discrete, unusual or infrequently occurring items, including changes in judgment about valuation allowances and the effects of changes in tax laws or rates on deferred tax balances, in the interim period in which they occur. In addition, jurisdictions with a projected loss for the year or a year-to-date loss where no tax benefit can be recognized are excluded from the estimated annual effective tax rate. The impact of such an exclusion could result in a higher or lower effective tax rate during a particular quarter, based upon the mix and timing of actual earnings versus annual projections. Our income tax expense (benefit) and effective income tax rate for the three and nine months ended September 30, 2023 and 2022 are as follows:
|  | Three Months Ended |  | Nine Months Ended
|  | September 30, |  | September 30,
|  | 2023 |  | 2022 |  | 2023 |  | 2022
|  | (in millions)
Income tax expense (benefit) |  | $ | (2.0) |  |  | $ | (5.7) |  |  | $ | 3.3 |  |  | $ | (2.1) |
Effective income tax rate |  | 10.3 | % |  | (27.4) | % |  | (29.5) | % |  | (4.3) | %
For the three and nine months ended September 30, 2023, in computing our estimated annual effective tax rate, we recorded a full valuation allowance against the deferred tax asset on the current year estimated disallowed interest expense in the U.S. In addition, during the nine months ended September 30, 2023, we recorded a valuation allowance against a portion of the deferred tax asset on prior year disallowed interest expense in the U.S. and reduced our liability for unrecognized income tax benefits and related interest and penalties as a result of a change in estimate on previously recorded unrecognized tax benefits in certain jurisdictions, resulting in net tax expense of $3.4 million. This was partially offset by a $3.2 million income tax benefit recognized as a result of the release of a valuation allowance in a foreign jurisdiction during the nine months ended September 30, 2023. For the three and nine months ended September 30, 2022, we recognized a net income tax benefit of approximately $7.5 million related to the release of a valuation allowance in a foreign jurisdiction. Our effective income tax rates for the three and nine months ended September 30, 2023 vary from our effective income tax rates for the three and nine months ended September 30, 2022 primarily as a result of the impact of the discrete items noted above and the mix of earnings on a jurisdictional basis. Our effective income tax rate for the nine months ended September 30, 2023 varies from our effective income tax rate for the nine months ended September 30, 2022 as a result of the $13.0 million gain on bargain purchase of business that was recognized in the nine months ended September 30, 2022, which was not subject to income tax. For the three and nine months ended September 30, 2023, our effective income tax rates vary from the U.S. federal statutory rate primarily due to the unfavorable impact related to the disallowed interest expense deductions in the U.S., net of the impact of the reduction in unrecognized tax benefits, as well as favorable foreign tax rates and the impact of tax credits. For the three and nine months ended September 30, 2022, our effective income tax rates vary from the U.S. federal statutory rate primarily due to a benefit from foreign derived intangible income deductions, the change in jurisdictional mix of earnings, favorable foreign tax rates and the impact of tax credits. For the nine months ended September 30, 2022, our effective income tax rate also varies from the U.S. federal statutory rate as a result of the gain on bargain purchase of business that was recognized. In accordance with the guidance in ASC 740 - Income Taxes, we review the likelihood that we will realize the benefit of deferred tax assets and estimate whether recoverability of our deferred tax assets is "more likely than not" based on the available evidence. Due to the uncertainty associated with the extent and ultimate impact of the UAW work stoppage, as well as the significant supply chain constraints affecting the automotive industry, including volatility in metal and commodity costs, higher utility costs, increased transportation costs, higher labor costs and labor shortages, we may experience lower than projected earnings in certain jurisdictions in future periods, and as a result, it is reasonably possible that changes in valuation allowances could be recognized in future periods and such changes could be material to our financial statements. Other Income Tax Matters During their examination of our 2015 U.S. federal income tax return, the Internal Revenue Service (IRS) asserted that income earned by a Luxembourg subsidiary from its Mexican branch operations should be categorized as foreign base company sales income (FBCSI) under Section 954(d) of the Internal Revenue Code and recognized currently as taxable income on our 2015 U.S. federal income tax return. As a result of this assertion, the IRS issued a Notice of Proposed Adjustment (NOPA). AAM disagreed with the NOPA, believes that the proposed adjustment is without merit and contested the matter through the IRS's administrative appeals process. No resolution was reached in the appeals process and in September 2022, the IRS issued a Notice of Deficiency. The IRS subsequently issued a Notice of Tax Due in December 2022 and AAM paid the assessed tax and interest of $10.1 million in January 2023. We have filed a claim for refund for the amount of tax and interest paid related to this matter for the 2015 tax year and, if necessary, will file suit in the U.S. Court of Federal Claims. We believe it is likely that we will be successful in ultimately defending our position. As such, we have not recorded any impact of the IRS’s proposed adjustment in our condensed consolidated financial statements as of, and for the three and nine months ended, September 30, 2023, with the exception of the cash payment and associated income tax receivable of $10.1 million paid by AAM to the IRS in the first quarter of 2023. As of September 30, 2023, in the event AAM is not successful in defending its position, the potential additional income tax expense, including estimated interest charges, related to tax years 2015 through 2022, is estimated to be in the range of approximately $285 million to $335 million. In a matter of related interest, in May 2020, the U.S Tax Court ruled against another U.S. corporation, finding that the income it earned through a Mexican branch of its Luxembourg subsidiary corporation was FBCSI. In that situation, the taxpayer appealed the U.S. Tax Court decision to the U.S. Court of Appeals for the Sixth Circuit. In December 2021, the U.S. Court of Appeals affirmed, in a split decision, the Tax Court decision in favor of the IRS. In January 2022, the taxpayer in the above referenced matter filed a petition for rehearing and this petition was denied. Finally, in June 2022, the taxpayer filed a petition with the U.S. Supreme Court to review the judgment of the U.S. Court of Appeals for the Sixth Circuit and in November 2022 that petition was also denied. Notwithstanding the decisions rendered in that case, and because our position is based upon different facts and circumstances, including but not limited to, differences in structure, and different income tax regulations in effect for our tax years under examination, we continue to believe, after consultation with tax and legal counsel that it is more likely than not that our structure does not give rise to FBCSI. Negative or unexpected outcomes of tax examinations and audits, and any related litigation, could have a material adverse impact on our results of operations, financial condition and cash flows. We will continue to monitor the progress and conclusions of all ongoing audits and other communications with tax authorities and will adjust our estimated liability as necessary. As of September 30, 2023 and December 31, 2022, we have recorded a liability for unrecognized income tax benefits and related interest and penalties of $29.7 million and $40.5 million, respectively.

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