XML 29 R16.htm IDEA: XBRL DOCUMENT
v3.22.4

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Components of Income Tax Expense Components of earnings before income taxes are as follows:
Years ended December 31 | 2022 |  | 2021 |  | 2020
United States | $ | 1,312 |  |  | $ | 1,030 |  |  | $ | 1,029 |
Other nations | 203 |  |  | 522 |  |  | 145 |
| $ | 1,515 |  |  | $ | 1,552 |  |  | $ | 1,174 |
Components of income tax expense are as follows:
Years ended December 31 | 2022 |  | 2021 |  | 2020
United States Federal | $ | 240 |  |  | $ | 134 |  |  | $ | 117 |
Other nations | 159 |  |  | 98 |  |  | 98 |
States (U.S.) | 83 |  |  | 36 |  |  | 31 |
Current income tax expense | 482 |  |  | 268 |  |  | 246 |
United States Federal | (179) |  |  | (2) |  |  | (21) |
Other nations | (118) |  |  | 22 |  |  | 8 |
States (U.S.) | (37) |  |  | 14 |  |  | (12) |
Deferred income tax expense (benefit) | (334) |  |  | 34 |  |  | (25) |
Total income tax expense | $ | 148 |  |  | $ | 302 |  |  | $ | 221 |
Differences between income tax expense computed at the U.S. federal statutory tax rate of 21% and income tax expense as reflected in the Consolidated Statements of Operations are as follows:
Years ended December 31 | 2022 |  | 2021 |  | 2020
Income tax expense at statutory rate | $ | 318 |  | 21.0 | % |  | $ | 326 |  | 21.0 | % |  | $ | 246 |  | 21.0 | %
State income taxes, net of federal benefit | 76 |  | 5.0 | % |  | 55 |  | 3.5 | % |  | 39 |  | 3.3 | %
Non-U.S. tax expense on non-U.S. earnings | 1 |  | 0.1 | % |  | 8 |  | 0.5 | % |  | 5 |  | 0.5 | %
U.S. tax expense (benefit) on undistributed non-U.S. earnings | (43) |  | (2.8) | % |  | 6 |  | 0.4 | % |  | (2) |  | (0.2) | %
Intra-group IP transfer | (77) |  | (5.1) | % |  | — |  | — | % |  | — |  | — | %
Stock compensation | (68) |  | (4.5) | % |  | (32) |  | (2.1) | % |  | (48) |  | (4.1) | %
Valuation allowances | (51) |  | (3.4) | % |  | (34) |  | (2.2) | % |  | 4 |  | 0.3 | %
Research credits | (16) |  | (1.1) | % |  | (20) |  | (1.3) | % |  | (28) |  | (2.4) | %
Reserve for uncertain tax positions | (6) |  | (0.4) | % |  | (10) |  | (0.6) | % |  | — |  | — | %
Other tax expense (benefit) | 14 |  | 0.9 | % |  | 3 |  | 0.2 | % |  | 5 |  | 0.4 | %
| $ | 148 |  | 9.8 | % |  | $ | 302 |  | 19.5 | % |  | $ | 221 |  | 18.8 | %
The effective tax rate for 2022 was below the current U.S. federal statutory rate of 21% primarily due to a net deferred tax benefit as a result of an intra-group transfer of certain intellectual property ("IP") rights (described below), the recognition of excess tax benefits on share-based compensation, the foreign derived intangible income deduction, and a partial release of the valuation allowance recorded on the U.S. foreign tax credit carryforward. In January 2022, the Company completed an intra-group transfer of certain IP rights from non-U.S. wholly-owned subsidiaries of the Company to the United States in order to better align with current and future business operations. The transfer resulted in a step-up in tax basis driven by the fair value of the transferred IP rights, resulting in a one-time net deferred benefit of $77 million during 2022. The determination of the fair value involves judgment on future revenue growth, operating margins and discount rates. The Company expects to realize the net deferred tax asset recorded as a result of the IP transfer and will periodically assess such realizability. The tax-deductible amortization related to the transferred IP rights will be recognized over a 15-year period. Deferred tax balances that were recorded within Accumulated other comprehensive loss in the Company’s Consolidated Balance Sheet, rather than Income tax expense, are the result of retirement benefit adjustments and currency translation adjustments. The adjustments were charges of $2 million for the year ended December 31, 2022, charges of $21 million for the year ended December 31, 2021 and benefits of $11 million for the year ended December 31, 2020. The Company evaluates its permanent reinvestment assertions with respect to foreign earnings at each reporting period and generally, except for certain earnings that the Company intends to reinvest indefinitely due to the capital requirements of the foreign subsidiaries or due to local country restrictions, accrues for the U.S. federal and foreign income tax applicable to the earnings. As a result of the 2017 U.S. Tax Cuts and Jobs Act ("the Tax Act"), dividends from foreign subsidiaries are now exempt or the earnings have been previously subject to U.S. tax. As a result, the tax accrual for undistributed foreign earnings is limited primarily to foreign withholding taxes and tax on inherent capital gains that would result from distribution of foreign earnings which are not permanently reinvested, and such earnings may be distributed without an additional charge. Undistributed foreign earnings that the Company intends to reinvest indefinitely amounted to, in the aggregate, $1.6 billion at December 31, 2022. It is impracticable to determine the exact amount of unrecognized deferred tax liabilities on such earnings; however, due to the above-mentioned changes made under the Tax Act, the Company believes that the additional U.S. or foreign income tax charge with respect to such earnings, if distributed, would be immaterial. Gross deferred tax assets were $2.2 billion and $2.0 billion for December 31, 2022 and December 31, 2021, respectively. Deferred tax assets, net of valuation allowances, were $2.0 billion and $1.8 billion at December 31, 2022 and December 31, 2021, respectively. Gross deferred tax liabilities were $1.0 billion at each of December 31, 2022 and December 31, 2021, respectively. Significant components of deferred tax assets (liabilities) are as follows:
December 31 | 2022 |  | 2021
Inventory | $ | 38 |  |  | $ | 29 |
Accrued liabilities and allowances | 67 |  |  | 86 |
Employee benefits | 290 |  |  | 321 |
Capitalized items | 95 |  |  | (86) |
Tax basis differences on investments | 6 |  |  | (1) |
Depreciation tax basis differences on fixed assets | 1 |  |  | 23 |
Undistributed non-U.S. earnings | (38) |  |  | (36) |
Tax attribute carryforwards | 298 |  |  | 410 |
Business reorganization | 7 |  |  | 8 |
Warranty and customer liabilities | 22 |  |  | 27 |
Deferred revenue and costs | 382 |  |  | 213 |
Valuation allowances | (221) |  |  | (275) |
Operating lease assets | (116) |  |  | (95) |
Operating lease liabilities | 129 |  |  | 108 |
Other | 4 |  |  | 1 |
| $ | 964 |  |  | $ | 733 |
At December 31, 2022 and 2021, the Company had valuation allowances of $221 million and $275 million, respectively, against its deferred tax assets, including $46 million and $53 million, respectively, relating to deferred tax assets for non-U.S. subsidiaries. The Company’s U.S. valuation allowance decreased $47 million during 2022 primarily due to a change in the Company's ability to utilize U.S. foreign tax credits. The Company's Non-U.S. valuation allowance decreased $7 million during 2022 primarily due to a change in the realizability of certain Non-US deferred tax assets and the expiration of tax attributes. The Company believes that the remaining deferred tax assets are more-likely-than-not to be realizable based on estimates of future taxable income and the implementation of tax planning strategies. Tax attribute carryforwards are as follows:
December 31, 2022 | Gross Tax Loss |  | Tax Effected |  | Expiration Period
United States: |  |  |  |  |
U.S. tax losses | $ | 109 |  |  | $ | 23 |  |  | 2029-2037
Foreign tax credits | — |  |  | 181 |  |  | 2023
General business credits | — |  |  | 1 |  |  | 2030-2033
State tax losses | — |  |  | 16 |  |  | 2023-2041
State tax credits | — |  |  | 6 |  |  | 2023-2041
Non-U.S. subsidiaries: |  |  |  |  |
Japan tax losses | 9 |  |  | 3 |  |  | 2023-2029
United Kingdom tax losses | 152 |  |  | 38 |  |  | Unlimited
Canada tax losses | 17 |  |  | 4 |  |  | 2034-2042
Spain tax credits | — |  |  | 11 |  |  | 2023-2029
Other subsidiaries tax losses | 29 |  |  | 6 |  |  | Various
Other subsidiaries tax credits | — |  |  | 9 |  |  | Various
|  |  | $ | 298 |  |  |
The Company had unrecognized tax benefits of $35 million and $43 million at December 31, 2022 and December 31, 2021, respectively, of which approximately $29 million and $36 million, if recognized, would have affected the effective tax rate for 2022 and 2021, respectively. A roll-forward of unrecognized tax benefits is as follows:
(in millions) | 2022 |  | 2021
Balance at January 1 | $ | 43 |  |  | $ | 64 |
Additions based on tax positions related to current year | 1 |  |  | 1 |
Additions for tax positions of prior years | 2 |  |  | 2 |
Reductions for tax positions of prior years | (1) |  |  | — |
Settlements and agreements | (4) |  |  | (18) |
Lapse of statute of limitations | (6) |  |  | (6) |
Balance at December 31 | $ | 35 |  |  | $ | 43 |
The Company recorded $29 million and $36 million of unrecognized tax benefits in other liabilities at December 31, 2022 and December 31, 2021, respectively. The Company has several US state and non-U.S. audits pending. A summary of open tax years by major jurisdiction is presented below:
Jurisdiction | Tax Years
United States | 2018-2022
Australia | 2018-2022
Canada | 2018-2022
Germany | 2018-2022
India | 1997-2022
Israel | 2019-2022
Poland | 2016-2022
Malaysia | 2015-2022
United Kingdom | 2020-2022
Although the final resolution of the Company’s global tax disputes is uncertain, based on current information, in the opinion of the Company’s management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s consolidated financial position or liquidity. However, an unfavorable resolution of the Company’s global tax disputes could have a material adverse effect on the Company’s results of operations in the periods, and as of the dates, on which the matters are ultimately resolved. Based on the potential outcome of the Company’s global tax examinations, the expiration of the statute of limitations for specific jurisdictions, or the continued ability to satisfy tax incentive obligations, it is reasonably possible that the unrecognized tax benefits will change within the next twelve months. The associated net tax impact on the effective tax rate, exclusive of valuation allowance changes, is estimated to be up to a $6 million tax benefit. At December 31, 2022, the Company had $22 million accrued for interest and $12 million accrued for penalties on unrecognized tax benefits. At December 31, 2021, the Company had $22 million and $15 million accrued for interest and penalties, respectively, on unrecognized tax benefits. The Company's policy is to classify the interest and penalty as a component of interest expense and other expense, respectively.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI https://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration