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Income Taxes | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes For financial reporting purposes, income before income taxes includes the following components:
For the Years Ended December 31,
(In millions) |  | 2023 |  | 2022 |  | 2021
Income before income taxes: |  |  |  |  |  |
U.S. |  | $ | 1,823 |  |  | $ | 1,468 |  |  | $ | 1,590 |
Other |  | 3,203 |  |  | 2,614 |  |  | 2,618 |
|  | $ | 5,026 |  |  | $ | 4,082 |  |  | $ | 4,208 |
The expense (benefit) for income taxes is comprised of: |  |  |  |
Current – |  |  |  |  |  |
U.S. Federal |  | $ | 273 |  |  | $ | 262 |  |  | $ | 251 |
Other national governments |  | 838 |  |  | 653 |  |  | 714 |
U.S. state and local |  | 142 |  |  | 123 |  |  | 132 |
|  | 1,253 |  |  | 1,038 |  |  | 1,097 |
Deferred – |  |  |  |  |  |
U.S. Federal |  | 29 |  |  | 38 |  |  | (40) |
Other national governments |  | (73) |  |  | (91) |  |  | (12) |
U.S. state and local |  | 15 |  |  | 10 |  |  | (11) |
|  | (29) |  |  | (43) |  |  | (63) |
Total income taxes |  | $ | 1,224 |  |  | $ | 995 |  |  | $ | 1,034 |
The significant components of deferred income tax assets and liabilities and their balance sheet classifications are as follows:
December 31,
(In millions) |  | 2023 |  | 2022
Deferred tax assets: |  |  |  |
Accrued expenses not currently deductible (a) |  | $ | 679 |  |  | $ | 670 |
Differences related to non-U.S. operations (b) |  | 299 |  |  | 275 |
Accrued U.S. retirement benefits |  | 134 |  |  | 172 |
Net operating losses (c) |  | 297 |  |  | 285 |
Income currently recognized for tax |  | 48 |  |  | 34 |
Other |  | 32 |  |  | 25 |
|  | $ | 1,489 |  |  | $ | 1,461 |
Deferred tax liabilities: |  |  |  |
Differences related to non-U.S. operations |  | $ | 586 |  |  | $ | 543 |
Depreciation and amortization |  | 527 |  |  | 510 |
Accrued retirement & post-retirement benefits – non-U.S. operations |  | 404 |  |  | 408 |
Capitalized expenses currently recognized for tax |  | 120 |  |  | 107 |
Other |  | 38 |  |  | 57 |
|  | $ | 1,675 |  |  | $ | 1,625 |
(a) Net of valuation allowances of $3 million in 2023 and $5 million in 2022. (b) Net of valuation allowances of $53 million in 2023 and $160 million in 2022. (c) Net of valuation allowances of $69 million in 2023 and 2022.
December 31,
(In millions) |  | 2023 |  | 2022
Balance sheet classifications: |  |  |  |
Deferred tax assets |  | $ | 357 |  |  | $ | 358 |
Other liabilities |  | $ | 543 |  |  | $ | 522 |
The amount of cumulative undistributed earnings that are indefinitely reinvested in non-U.S. subsidiaries is approximately $830 million at December 31, 2023. While no additional U.S. federal income tax would be required if such earnings were repatriated, additional state and withholding taxes would apply. The amount of these additional taxes is estimated to be approximately $80 million. Future U.S. federal tax costs related to basis differences in non-U.S. subsidiaries would primarily be realized through the U.S. Global Intangible Low-Taxed Income ("GILTI") minimum tax regime. The Company elected to recognize GILTI tax costs as a period cost and has not provided deferred tax liabilities on these basis differences. A reconciliation from the U.S. federal statutory income tax rate to the Company’s effective income tax rate is as follows:
For the Years Ended December 31, |  | 2023 |  | 2022 |  | 2021
U.S. Federal statutory rate |  | 21.0 | % |  | 21.0 | % |  | 21.0 | %
U.S. state and local income taxes — net of U.S. Federal income tax benefit |  | 2.6 |  |  | 2.7 |  |  | 2.3 |
Differences related to non-U.S. operations |  | 2.2 |  |  | 0.8 |  |  | 0.1 |
Change in valuation allowance |  | (1.4) |  |  | (0.1) |  |  | — |
U.K. statutory rate change |  | — |  |  | — |  |  | 2.6 |
Gain on consolidation of business |  | — |  |  | — |  |  | (1.5) |
Equity compensation |  | (0.7) |  |  | (0.7) |  |  | (0.7) |
Uncertain tax positions |  | (0.1) |  |  | 0.1 |  |  | 0.1 |
Other |  | 0.7 |  |  | 0.6 |  |  | 0.7 |
Effective tax rate |  | 24.3 | % |  | 24.4 | % |  | 24.6 | %
The rates in all periods reflect the effects of tax planning and the ongoing impact of regulatory and other guidance as it became available. The tax rates in all periods include a valuation allowance for certain tax credits, the impact of uncertain tax positions, and certain tax planning benefits. The tax rate in 2023 includes the effect of a release of valuation allowances on deferred tax assets related to the Company’s non-U.S. operations, due to sustained profitability. The tax rate in 2021 also included the effect of a statutory rate change in the U.K. and the tax effect of a gain from the fair value re-measurement of the Company’s previously held equity method investment in Marsh India when the Company increased its ownership interest from 49% to 92%. The Company does not intend to dispose the business and has indefinitely reinvested this gain. A valuation allowance was recorded to adjust deferred tax assets to the amount that the Company believes is more likely than not to be realized. Valuation allowances had a net decrease of $110 million and $1 million in 2023 and 2022, respectively, and an increase of $36 million in 2021. Adjustments of the beginning of the year balances of valuation allowances decreased income tax expense by $94 million in 2023. Adjustments of the beginning of the year valuation allowances decreased income tax expense by $5 million in 2022 and increased tax expense by $2 million in 2021. Approximately 10% of the Company’s net operating loss carryforwards expire from 2023 through 2038, and the remaining 90% are unlimited. The gross deferred tax assets of the potential tax benefit from net operating loss carryforwards at the end of 2023 comprised of federal, state and local, and non-U.S. tax benefits of $1 million, $4 million, and $363 million, respectively. Changes in tax laws, rulings, policies or related legal and regulatory interpretations occur frequently and may also have significant favorable or adverse impacts on our effective tax rate. In July 2023, the U.K. enacted legislation to implement Pillar 2 of the Organization for Economic Cooperation and Development's ("OECD") framework, effective from January 1, 2024. This minimum tax will be treated as a period cost in future years and does not impact operating results for 2023. Other countries in the European Union (E.U.) and elsewhere have similarly adopted legislation. The Company is continuing to monitor legislative developments, especially in the E.U. countries, and is in the process of evaluating the potential impact of the U.K. and other enacted legislation on its results of future operations. On August 16, 2022, the Inflation Reduction Act of 2022 ("IRA") was enacted into law. The Company evaluated the provisions of the IRA, the most significant of which are the corporate alternative minimum tax and the share repurchase tax. The IRA was effective as of January 1, 2023, and does not have a significant impact on the Company's financial results of operations for the current year. Following is a reconciliation of the Company’s total gross unrecognized tax benefits for the years ended December 31, 2023, 2022 and 2021:
(In millions) |  | 2023 |  | 2022 |  | 2021
Balance at January 1, |  | $ | 97 |  |  | $ | 94 |  |  | $ | 98 |
Additions, based on tax positions related to current year |  | 6 |  |  | 1 |  |  | 2 |
Additions for tax positions of prior years |  | 44 |  |  | 15 |  |  | 11 |
Reductions for tax positions of prior years |  | (8) |  |  | (2) |  |  | (1) |
Settlements |  | (8) |  |  | (2) |  |  | (1) |
Lapses in statutes of limitations |  | (7) |  |  | (9) |  |  | (15) |
Balance at December 31, |  | $ | 124 |  |  | $ | 97 |  |  | $ | 94 |
Of the total unrecognized tax benefits at December 31, 2023, 2022, and 2021, $122 million, $94 million and $87 million, respectively, represent the amount that, if recognized, would favorably affect the effective tax rate in any future periods. The total gross amount of accrued interest and penalties, before any applicable federal benefit, was $48 million at December 31, 2023 and 2022, and $45 million at December 31, 2021. The Company is routinely examined by the jurisdictions in which it has significant operations. In the U.S. federal jurisdiction, the Company participates in the Internal Revenue Service’s ("IRS") Compliance Assurance Process ("CAP"), which is structured to be, in effect, a real-time audit. In 2021, the IRS concluded its examination of the Company’s 2017, 2018, and 2019 tax returns. The Company was accepted into the Bridge phase of the CAP program for tax years 2020 and 2021, and generally will not be audited by the IRS for those years. The IRS CAP Maintenance Audit for tax year 2022 is ongoing. In 2023, the IRS began its pre-filing examination of the Company's 2023 tax year. New York is a significant tax jurisdiction for the Company. New York State and New York City have continuing examinations underway in 2023 for various entities covering the years 2015 through 2019. In 2023, the New York State audits for 2013-2014 and the New York City audits for 2010-2014 were finalized. The New York State audits for 2010-2012 were finalized in 2022. We conduct business through multiple legal entities in significant jurisdictions outside the U.S. Separate audits for individual entities within a jurisdiction may open or close within a particular year. The status of audits for significant jurisdictions outside the U.S. are summarized in the table below:
Tax Audit (Years) |  |  |  |  |  |  |
Jurisdiction: |  | Initiated in 2023 |  | Ongoing |  | Concluded in 2023 |
Germany |  | 2017 - 2020 |  | 2013 - 2016 |  |  |
Italy |  | 2017 |  | 2015, 2016 |  |  |
Singapore |  | 2019, 2020 |  | 2017 - 2021 |  | 2020 |
United Kingdom |  | 2021 |  | 2016 - 2020 |  |  |
Mexico |  | 2017 |  |  |  |  |
Canada |  | 2019 - 2021 |  |  |  |  |
India |  | 2021 |  | 2007 - 2020 |  |  |
The Company has established liabilities for uncertain tax positions in relation to potential assessments in the jurisdictions in which it operates. The Company believes the resolution of tax matters will not have a material effect on the consolidated financial position of the Company. However, an adverse resolution of tax matters from current or future audits or tax litigation could have a material impact on the Company's net income or cash flows and on its effective tax rate in a particular future period. It is reasonably possible that the total amount of unrecognized tax benefits could decrease up to approximately $58 million wit hin the next 12 months due to settlement of audits and expiration of statutes of limitati ons.

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