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INCOME TAXES
 12 Months Ended
Dec. 31, 2022
INCOME TAXES  
INCOME TAXES

13. INCOME TAXES

​

Income before income taxes consisted of:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(millions)

    

2022

    

2021

    

2020

United States (U.S.)

​

    

$295.6

    

​

    

$277.7

    

​

    

$100.5

    

International

 

​

1,047.8

​

​

​

1,136.5

​

​

​

1,060.9

​

Total

​

​

$1,343.4

​

​

​

$1,414.2

​

​

​

$1,161.4

​

​

The provision (benefit) for income taxes consisted of:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(millions)

    

2022

    

2021

    

2020

U.S. federal and state

​

    

$145.7

​

​

​

$30.9

​

​

​

($43.9)

    

International

 

​

231.4

​

​

​

240.2

​

​

​

259.8

​

Total current

 

​

377.1

​

​

​

271.1

​

​

​

215.9

​

U.S. federal and state

 

​

(78.9)

​

​

​

3.6

​

​

​

12.0

​

International

 

​

(63.7)

​

​

​

(4.5)

​

​

​

(51.3)

​

Total deferred

 

​

(142.6)

​

​

​

(0.9)

​

​

​

(39.3)

​

Provision for income taxes

​

​

$234.5

​

​

​

$270.2

​

​

​

$176.6

​

​

The Company’s overall net deferred tax assets and deferred tax liabilities were comprised of the following:

​

​

​

​

​

​

​

​

​

​

December 31 (millions)

    

2022

    

2021

Deferred tax assets

​

    

​

    

​

    

​

    

Pension and post-retirement benefits

​

​

$87.0

​

​

​

$136.8

​

Other accrued liabilities

​

​

129.6

​

​

​

135.6

​

Lease liability

 

 

109.2

​

​

 

101.3

​

Credit carryforwards

​

​

97.8

​

​

​

81.8

​

Capitalization of R&D costs

​

​

84.5

​

​

​

-

​

Loss carryforwards

 

 

67.2

​

​

 

59.6

​

Share-based compensation

 

 

51.2

​

​

 

44.7

​

Deferred income

​

​

59.6

​

​

​

44.8

​

Other, net

 

 

98.8

​

​

 

71.0

​

Valuation allowance

 

 

(65.2)

​

​

 

(50.3)

​

Total deferred tax assets

 

 

719.7

​

​

 

625.3

​

Deferred tax liabilities

​

​

​

​

​

​

​

​

Intangible assets

 

 

(611.1)

​

​

 

(631.0)

​

Property, plant and equipment

 

 

(319.7)

​

​

 

(333.5)

​

Lease asset

​

​

(109.1)

​

​

​

(100.3)

​

Financing

​

​

(33.5)

​

​

​

(34.2)

​

Other, net

 

 

(43.8)

​

​

 

(27.7)

​

Total deferred tax liabilities

 

 

(1,117.2)

​

​

 

(1,126.7)

​

Net deferred tax liabilities balance

​

​

($397.5)

​

​

​

($501.4)

​

​

As of December 31, 2022 the Company has tax effected federal, state and international net operating loss carryforwards of $2.5 million, $16.1 million and $48.6 million, respectively, and a tax effected federal tax capital loss carryforward of $9.4 million which will be available to offset future taxable income. The federal and state loss carryforwards of $18.6 million expire from 2023 to 2043. The international loss carryforwards of $9.9 million expire from 2023 to 2043 and $38.7 million have no expiration. The federal capital loss carryforwards of $9.4 million expire from 2023 to 2026. The tax loss carryforwards expiring in 2023 are not material.

​

Additionally, the Company has $97.8 million of credit carryforwards that are primarily related to U.S. foreign tax credits and various state credits. The U.S. foreign tax credit carryforwards of $71.1 million expire from 2029 to 2032 and the state credit carryforwards of $21.3 million expire from 2023 to 2037. Other international tax credit carryforwards of $5.4 million do not expire. The tax credit carryforwards expiring in 2023 are not material.

​

The Company has valuation allowances on certain deferred tax assets of $65.2 million and $50.3 million at December 31, 2022 and 2021, respectively. The increase in valuation allowance from year end 2021 to year end 2022 was primarily due to U.S. state tax attributes, foreign net operating losses and other deferred tax assets.

​

The Company obtained tax benefits from a tax holiday in the Dominican Republic. The Company received a permit of operation, which expires in April 2036, from the National Council of Free Zones of Exportation for the Dominican Republic. Companies operating under the Free Zones are not subject to income tax in the Dominican Republic on export income. The Company had a tax incentive awarded by the Signapore Economic Development Board. This incentive provided for a preferential 10% tax rate on certain headquarter income which expired in January 2021. The tax reduction as the result of the tax holidays for 2022 was $5.8 million ($0.02 per diluted share), 2021 was $2.9 million ($0.01 per diluted share) and 2020 was $26.9 million ($0.09 per diluted share).

​

A reconciliation of the statutory U.S. federal income tax rate to the Company’s effective income tax rate is as follows:

​

​

​

​

​

​

​

​

​

​

​

​

    

2022

​

2021

​

2020

Statutory U.S. rate

​

21.0

%  

​

21.0

%

​

21.0

%

State income taxes, net of federal benefit

​

1.3

 

​

0.6

 

​

0.4

​

Foreign operations

​

(0.8)

 

​

(0.6)

 

​

(1.3)

​

Excess stock benefits

​

(0.4)

​

​

(2.0)

​

​

(4.9)

​

R&D credit

​

(1.4)

 

​

(1.3)

 

​

(1.1)

​

Foreign derived intangible income

​

(1.8)

​

​

(1.6)

​

​

(0.2)

​

Change in valuation allowance

​

0.7

 

​

0.5

 

​

0.6

​

Legal entity rationalization

​

(1.5)

​

​

-

​

​

-

​

One-time transfer of intangibles

​

-

​

​

1.8

​

​

-

​

Other, net

​

0.4

 

​

0.7

 

​

0.7

​

Effective income tax rate

​

17.5

%

​

19.1

%

​

15.2

%

​

The change in the Company’s effective income tax rate includes the tax impact of special (gains) and charges and discrete tax items, which have impacted the comparability of the Company’s historical effective income tax rates, as amounts included in special (gains) and charges are derived from tax jurisdictions with rates that vary from the statutory U.S. rate, and discrete tax items are not necessarily consistent across periods. The tax impact of special (gains) and charges and discrete tax items will likely continue to impact comparability of the Company’s effective income tax rate in the future.

​

The Company’s 2022 effective tax rate of 17.5% includes $53.7 million of net tax benefits on special (gains) and charges, and net tax benefit of $11.8 million associated with discrete items. Discrete items included a deferred tax benefits of $14.6 million associated with utilization of tax attributes as a result of legal entity rationalization and share-based compensation excess tax benefits of $6.0 million. The amount of the excess tax benefit is subject to variation in stock price and award exercises. The remaining discrete tax expense of $8.8 million was primarily related to the filing of federal, state and foreign tax returns and other income tax adjustments including the impact of changes in tax laws, audit settlements and other changes in estimates.

​

The Company’s 2021 effective tax rate of 19.1% includes $53.3 million of net tax benefits on special (gains) and charges, and net tax expense of $5.8 million associated with discrete items. During 2021, the Company recorded a discrete tax benefit of $29.1 million related to share-based compensation excess tax benefits. Additionally, the Company recorded $34.9 million discrete tax charges including a non-cash deferred tax charge of $25.1 million associated with transferring certain intangible property between affiliates. The remaining $9.8 million tax expense primarily related to the filing of federal, state and foreign tax returns and other income tax adjustments including the impact of changes in tax laws, audit settlements and other changes in estimates.

​

The Company’s 2020 effective tax rate of 15.2% includes $57.9 million of net tax benefits on special (gains) and charges, and net tax benefits of $55.8 million associated with discrete items. During 2020, the Company recorded a discrete tax benefit of $57.3 million related to share-based compensation excess tax benefits. The Company recorded changes in reserves in non-U.S. and U.S. jurisdictions due to audit settlements and the expiration of statutes of limitations which resulted in a $9.8 million tax benefit. Additionally, the Company recognized a net tax expense of $11.3 million primarily related to the filing of prior year federal, state and foreign tax returns and other income tax adjustments.

​

During 2022, the Company recorded a deferred tax liability of $12.1 million as part of purchase accounting associated with the pre-acquisition undistributed earnings of Purolite that are not considered permanently reinvested. A deferred tax liability of $6.8 million remains as of December 31, 2022. The Company otherwise continues to assert permanent reinvestment of the undistributed earnings of international affiliates unless the earnings can be remitted in a net income tax benefit or tax-neutral manner. If there are policy changes, the Company would record the applicable taxes in the period of change. Due to the complexity of the legal entity structure, the number of legal entities and jurisdictions involved, and the complexity of the laws and regulations, the Company believes it is not practicable to estimate the amount of additional taxes which may be payable upon distribution of these undistributed earnings. Accordingly, no deferred taxes have been provided for withholding taxes or other taxes on permanently reinvested earnings.

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(millions)

    

2022

    

2021

​

2020

Balance at beginning of year

​

​

$25.1

​

​

​

$20.7

​

​

​

$27.0

​

Additions based on tax positions related to the current year

    

​

2.7

​

​

 

3.8

​

​

 

3.3

​

Additions for tax positions of prior years

 

 

3.6

​

​

 

3.0

​

​

 

-

​

Current year acquisitions

​

​

-

​

​

​

4.4

​

​

​

-

​

Reductions for tax positions of prior years

 

 

(1.5)

​

​

 

-

​

​

 

(1.1)

​

Reductions for tax positions due to statute of limitations

 

 

(0.7)

​

​

 

(3.0)

​

​

 

(9.1)

​

Settlements

 

 

(3.4)

​

​

 

(3.7)

​

​

 

-

​

Foreign currency translation

 

 

(0.9)

​

​

 

(0.1)

​

​

 

0.6

​

Balance at end of year

​

​

$24.9

​

​

​

$25.1

​

​

​

$20.7

​

​

The total amount of unrecognized tax benefits, if recognized would affect the effective tax rate by $23.1 million as of December 31, 2022, $22.8 million as of December 31, 2021 and $18.3 million as of December 31, 2020.

​

The Company files U.S. federal income tax returns and income tax returns in various U.S. state and non- U.S. jurisdictions. With few exceptions, the Company is no longer subject to state and foreign income tax examinations by tax authorities for years before 2017. The IRS has completed examinations of the Company’s U.S. federal income tax returns through 2016, and the years 2017 through 2020 are currently under audit. In addition to the U.S. federal examination, there is ongoing audit activity in several U.S. state and foreign jurisdictions. The Company anticipates changes to uncertain tax positions due to closing of various audits and statutes closing on years mentioned above. The Company does not believe these changes will result in a material impact during the next twelve months. Decreases in the Company’s gross liability could result in offsets to other balance sheet accounts, cash payments, and adjustments to tax expense. The occurrence of these events and/or other events not included above within the next twelve months could change depending on a variety of factors.

​

The Company recognizes interest and penalties related to unrecognized tax benefits in its provision for income taxes. The Company had $4.0 million, $3.2 million and $4.1 million of accrued interest, including minor amounts for penalties, at December 31, 2022, 2021 and 2020, respectively.