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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes
Note 16. Income Taxes

Earnings/(losses) from continuing operations before income taxes and the provision for income taxes consisted of:
 For the Years Ended December 31,
 202220212020
 (in millions)
Earnings/(losses) from continuing operations before income taxes:
United States$463 $519 $514 
Outside United States2,765 3,850 2,869 
$3,228 $4,369 $3,383 
Provision for income taxes:
United States federal:
Current$187 $297 $440 
Deferred(17)(31)(82)
170 266 358 
State and local:
Current78 89 98 
Deferred2 9 (7)
80 98 91 
Total United States250 364 449 
Outside United States:
Current642 599 756 
Deferred(27)227 19 
Total outside United States615 826 775 
Total provision for income taxes$865 $1,190 $1,224 

The effective income tax rate on pre-tax earnings differed from the U.S. federal statutory rate as follows:
 For the Years Ended December 31,
 202220212020
U.S. federal statutory rate21.0%21.0%21.0%
Increase/(decrease) resulting from:
State and local income taxes, net of federal tax benefit1.6%1.1%1.6%
Tax impacts from our foreign operations2.0%(1.6)%1.1%
Changes in judgment on realizability of deferred tax assets(1.1)%0.1%(2.2)%
Reversal of other tax accruals no longer required(1.4)%(0.5)%(0.8)%
Tax accrual on investment in KDP (including tax impact of
   share sales)		0.5%4.7%6.7%
Excess tax benefits from equity compensation(0.8)%(0.7)%(1.0)%
Tax legislation 0.5%2.3%1.0%
Business sales (including tax impact from JDE Peet's transaction)0.1%—%7.4%
Foreign tax provisions under TCJA (GILTI, FDII and BEAT) (1)
0.1%0.8%1.1%
Non-deductible expenses, including buyout of Clif Bar ESOP and European Commission legal matter4.1%0.1%0.1%
Other0.2%(0.1)%0.2%
Effective tax rate26.8%27.2%36.2%
(1)The Tax Cuts and Jobs Act of 2017 (“TCJA”) established the Global Intangible Low-Tax Income (“GILTI”) provision, which taxes U.S. allocated expenses and certain income from foreign operations; the Foreign-Derived Intangible Income (“FDII”) provision, which allows a
deduction against certain types of U.S. taxable income resulting in a lower effective U.S. tax rate on such income; and the Base Erosion Anti-abuse Tax (“BEAT”), which is a minimum tax based on cross-border service payments by U.S. entities.

Our 2022 effective tax rate of 26.8% was higher due to the buyout of the Clif Bar ESOP that was recorded to earnings before income taxes and the European Commission legal matter, for which there is no associated income tax benefits. Excluding these impacts, our effective tax rate was 22.6%, which reflects unfavorable provisions from the U.S. tax code and the establishment of a valuation allowance related to a deferred tax asset arising from the 2022 Ukraine loss, largely offset by favorable impacts from the mix of pre-tax income in various non-U.S. jurisdictions. The 22.6% includes a favorable discrete net tax benefit of $96 million, driven by a $72 million net benefit from the release of liabilities for uncertain tax positions due to expirations of statutes of limitations and audit settlements in several jurisdictions and a $51 million net benefit from the Chipita acquisition, partially offset by $17 million expense from tax law changes in various jurisdictions.

Our 2021 effective tax rate of 27.2% was higher due to the $187 million net tax expense incurred in connection with the KDP share sales during the second and third quarters. Excluding this impact, our effective tax rate was 23.0%, which reflects unfavorable provisions from the 2017 U.S. tax reform and taxes on earnings from equity method investments (these earnings are reported separately on our consolidated statements of earnings and not within earnings before income taxes), largely offset by favorable impacts from the mix of pre-tax income in various non-U.S. jurisdictions. The 23.0% includes a discrete net tax benefit of $2 million, primarily driven by a $47 million net benefit from the release of liabilities for uncertain tax positions due to expirations of statutes of limitations and audit settlements in several jurisdictions and a $44 million benefit from two U.S. tax returns amended to reflect new guidance from the U.S. Treasury Department, offset by $100 million net tax expense from the increase of our deferred tax liabilities resulting from enacted tax legislation (mainly in the United Kingdom).

Our 2020 effective tax rate of 36.2% was higher due to the $452 million net tax expense incurred in connection with the JDE Peet's transaction and four KDP share sales that occurred during 2020 (the related gains were reported as gains on equity method investments). Excluding these impacts, our effective tax rate was 22.8%, which reflects unfavorable provisions from U.S. tax reform and taxes on earnings from equity method investments (these earnings are reported separately on our consolidated statements of earnings and not within earnings before income taxes), largely offset by favorable impacts from the mix of pre-tax income in various non-U.S. jurisdictions and discrete net tax benefits of $119 million. The discrete net benefits were primarily driven by the $70 million net benefit from the release of the China valuation allowance and a $50 million net benefit from the release of liabilities for uncertain tax positions due to expirations of statutes of limitations and audit settlements in several jurisdictions.
Tax effects of temporary differences that gave rise to deferred income tax assets and liabilities consisted of:
 As of December 31,
 20222021
 (in millions)
Deferred income tax assets:
Accrued postretirement and postemployment benefits$83 $114 
Other employee benefits156 150 
Accrued expenses649 454 
Loss carryforwards664 685 
Tax credit carryforwards786 786 
Other481 468 
Total deferred income tax assets2,819 2,657 
Valuation allowance(1,257)(1,280)
Net deferred income tax assets$1,562 $1,377 
Deferred income tax liabilities:
Intangible assets, including impact from Swiss tax reform$(3,279)$(3,214)
Property, plant and equipment(708)(638)
Accrued pension costs(57)23 
Other(482)(451)
Total deferred income tax liabilities(4,526)(4,280)
Net deferred income tax liabilities$(2,964)$(2,903)

Our significant valuation allowances are in the U.S. and Switzerland. The U.S. valuation allowance mainly relates to excess foreign tax credits generated by the deemed repatriation under U.S. tax reform while the Swiss valuation allowance brings the allowed step-up of intangible assets recorded under Swiss tax reform to the amount more likely than not to be realized. Our total valuation allowance was $1,280 million as of January 1, 2022 and $1,257 million as of December 31, 2022. The $23 million net change consisted of $79 million additions less $102 million reductions.

At December 31, 2022, the Company has tax-effected loss carryforwards of $664 million, of which $34 million will expire at various dates between 2023 and 2042 and the remaining $630 million can be carried forward indefinitely.

As of December 31, 2022, the company is indefinitely reinvested in unremitted earnings of approximately $4.4 billion, of which approximately $1.2 billion has already been subject to U.S. tax but would incur approximately $90 million of local costs if repatriated, which has not been recognized in our financial statements. It is not practicable to quantify the total U.S. tax impact from all our indefinitely reinvested earnings. Future tax law changes or changes in the needs of our non-U.S. subsidiaries could require us to recognize deferred tax liabilities on a portion, or all, of our accumulated earnings that are currently indefinitely reinvested.
The changes in our unrecognized tax benefits were:

 For the Years Ended December 31,
 202220212020
 (in millions)
January 1$446 $442 $426 
Increases from positions taken during prior periods16 31 35 
Decreases from positions taken during prior periods(9)(21)(17)
Increases from positions taken during the current period48 47 48 
Decreases relating to settlements with taxing authorities(54)(13)(27)
Reductions resulting from the lapse of the applicable
   statute of limitations
(22)(26)(29)
Currency/other(1)(14)6 
December 31$424 $446 $442 

As of January 1, 2022, our unrecognized tax benefits were $446 million. If we had recognized all of these benefits, the net impact on our income tax provision would have been $372 million. Our unrecognized tax benefits were $424 million at December 31, 2022, and if we had recognized all of these benefits, the net impact on our income tax provision would have been $352 million. Within the next 12 months, our unrecognized tax benefits could increase by approximately $40 million due to unfavorable audit developments or decrease by approximately $70 million due to audit settlements and the expiration of statutes of limitations in various jurisdictions. We include accrued interest and penalties related to uncertain tax positions in our tax provision. We had accrued interest and penalties of $173 million as of January 1, 2022 and $162 million as of December 31, 2022. Our 2022 provision for income taxes included $1 million expense for interest and penalties.

In connection with the 2017 enacted U.S. tax reform, we recorded a $1.3 billion transition tax liability that is payable in installments through 2026. As of December 31, 2022, the remaining liability was approximately $570 million.

Our income tax filings are regularly examined by federal, state and non-U.S. tax authorities. U.S. federal, state and non-U.S. jurisdictions have statutes of limitations generally ranging from three to five years; however, these statutes are often extended by mutual agreement with the tax authorities. The earliest year still open to examination by U.S. federal and state tax authorities is 2016 and years still open to examination by non-U.S. tax authorities in major jurisdictions include (earliest open tax year in parentheses): India (2005), Switzerland (2018), China (2012), the United Kingdom (2015), and Greece (2017).