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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
An analysis of the provision for income taxes follows:
Year Ended December 31
202120202019
Current income taxes
  United States$179 $252 $215 
  State35 81 94 
  Other countries335 298 238 
    Total549 631 547 
Deferred income taxes
  United States(18)62 50 
  State(1)5 (16)
  Other countries(51)(22)(5)
    Total(70)45 29 
Total provision for income taxes$479 $676 $576 
Income before income taxes is earned in the following tax jurisdictions:
Year Ended December 31
202120202019
United States$1,580 $2,336 $2,252 
Other countries645 594 398 
Total income before income taxes$2,225 $2,930 $2,650 
Deferred income tax assets and liabilities are composed of the following:
December 31
20212020
Deferred tax assets
Pension and other postretirement benefits$215 $239 
Tax credits and loss carryforwards 531 477 
Lease liability116 117 
Prepaid royalties117 1 
Other355 464 
1,334 1,298 
Valuation allowances(279)(272)
Total deferred tax assets 1,055 1,026 
Deferred tax liabilities
Property, plant and equipment, net921 900 
Investments in subsidiaries105 111 
Intangible assets156 159 
Lease asset114 117 
Other228 200 
Total deferred tax liabilities1,524 1,487 
Net deferred tax assets (liabilities)$(469)$(461)
Valuation allowances at the end of 2021 primarily relate to tax credits, capital loss carryforwards, and income tax loss carryforwards of $1,286. If these items are not utilized against taxable income, $682 of the income tax loss carryforwards will expire from 2022 through 2041. The remaining $604 has no expiration date.
Realization of income tax loss carryforwards is dependent on generating sufficient taxable income prior to expiration of these carryforwards. Although realization is not assured, we believe it is more likely than not that all of the deferred tax assets, net of applicable valuation allowances, will be realized. The amount of the deferred tax assets considered realizable could be reduced or increased due to changes in the tax environment or if estimates of future taxable income change during the carryforward period.
Presented below is a reconciliation of the income tax provision computed at the U.S. federal statutory tax rate to the actual effective tax rate:
Year Ended December 31
202120202019
U.S. statutory rate applied to income before income taxes21.0 %21.0 %21.0 %
State income taxes, net of federal tax benefit1.2 2.3 2.5 
Routine tax incentives(5.8)(4.3)(3.5)
Nondeductible expenses1.5 0.8 0.4 
Net tax cost on foreign income2.4 2.7 1.5 
Valuation allowance2.4 0.7 1.0 
Nonrecurring capital loss— — (1.8)
Other - net(a)
(1.2)(0.1)0.6 
Effective income tax rate21.5 %23.1 %21.7 %
(a)    Other - net is composed of numerous items, none of which is greater than 1.05 percent of income before income taxes.
In December 2019, we generated a nonrecurring capital loss from a legal entity restructuring and recorded a net benefit of $47.
As of December 31, 2021, we have accumulated undistributed earnings generated by our foreign subsidiaries of approximately $7.8 billion.  Earnings of $4.4 billion were previously subject to tax, primarily due to the one-time transition tax on foreign earnings required by the 2017 U.S. Tax Cuts and Jobs Act.  Any additional taxes due with respect to such previously-taxed earnings, if repatriated, would generally be limited to foreign and U.S. state income taxes.  Deferred taxes have been recorded on $0.8 billion of earnings, most of which were previously taxed for U.S. federal income tax purposes, of foreign consolidated subsidiaries expected to be repatriated.  We do not intend to distribute the remaining $3.6 billion of previously-taxed foreign earnings and therefore have not recorded deferred taxes for foreign and U.S. state income taxes on such earnings. 
We consider any excess of the amount for financial reporting over the tax basis in our foreign subsidiaries to be indefinitely reinvested. The determination of deferred tax liabilities on the amount of financial reporting over tax basis or the $3.6 billion of previously taxed foreign earnings is not practicable.
Presented below is a reconciliation of the beginning and ending amounts of unrecognized income tax benefits:
202120202019
Balance at January 1$497 $383 $298 
Gross increases for tax positions of prior years62 144 36 
Gross decreases for tax positions of prior years(37)(34)(13)
Gross increases for tax positions of the current year42 36 87 
Settlements(39)(22)(13)
Other(19)(10)(12)
Balance at December 31$506 $497 $383 
Of the amounts recorded as unrecognized tax benefits at December 31, 2021, $432 would reduce our effective tax rate if recognized.
We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. During each of the three years ended December 31, 2021, the net impact of interest and penalties was not significant. Total accrued penalties and net accrued interest was $24 and $20 at December 31, 2021 and 2020, respectively.
It is reasonably possible that a number of uncertainties could be resolved within the next 12 months. The aggregate resolution of the uncertainties could be up to $210, while none of the uncertainties is individually significant. Resolution of these matters is not expected to have a material effect on our financial condition, results of operations or liquidity.
As of December 31, 2021, the following tax years remain subject to examination for the major jurisdictions where we conduct business:
JurisdictionYears
United States2016to2021
United Kingdom2017to2021
Brazil2015to2021
China2009to2021
South Korea2019to2021
Our U.S. federal income tax returns have been audited through 2015 and U.S. federal income tax amended returns are subject to audit for 2013-2015.
State income tax returns are generally subject to examination for a period of 3 to 5 years after filing of the respective return. The state effect of any changes to filed federal positions remains subject to examination by various states for a period of up to two years after formal notification to the states. We have various state income tax return positions in the process of examination, administrative appeals or litigation.
The Brazilian tax authority, Secretaria da Receita Federal do Brasil ("RFB"), concluded an audit for the taxable periods from 2008-2013. This audit included a review of our determinations of amortization of certain goodwill arising from prior acquisitions in Brazil, and the RFB has proposed adjustments that effectively eliminate the goodwill amortization benefits related to these transactions. Administrative appeals have been exhausted, and the dispute is moving into the judicial phase. The amount of the proposed tax adjustments and penalties is approximately $80 as of December 31, 2021 (translated at the December 31, 2021 currency exchange rate).  The amount ultimately in dispute will be significantly greater because of interest. We believe we have meritorious defenses and intend to vigorously defend against these proposed adjustments; however, it is expected to take a number of years to reach resolution of this matter.
The U.S. Internal Revenue Service ("IRS") is currently auditing our federal tax return for the taxable years ended December 31, 2017 and 2018. As part of this tax audit, the IRS is reviewing our one-time transition tax on certain undistributed earnings of foreign subsidiaries. The IRS has proposed an adjustment that would increase the amount of the transition tax owed by us. We believe we have adequate reserves and meritorious defenses and intend to vigorously defend against the proposed adjustment; however, it is expected to take a number of years to reach resolution of this matter.