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Income Taxes | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The components of Income before income taxes are as follows for the years ended December 31:
|  | 2024 |  | 2023 |  | 2022
United States |  | $ | 1,084 |  |  | $ | 692 |  |  | $ | 1,169 |
International |  | 2,872 |  |  | 2,700 |  |  | 1,491 |
Total Income before income taxes |  | $ | 3,956 |  |  | $ | 3,392 |  |  | $ | 2,660 |
The Provision for income taxes consists of the following for the years ended December 31:
|  | 2024 |  | 2023 |  | 2022
United States |  | $ | 188 |  |  | $ | 72 |  |  | $ | 199 |
International |  | 719 |  |  | 865 |  |  | 494 |
Total Provision for income taxes |  | $ | 907 |  |  | $ | 937 |  |  | $ | 693 |
Temporary differences between accounting for financial statement purposes and accounting for tax purposes result in the current provision for taxes being higher (lower) than the total provision for income taxes as follows:
|  | 2024 |  | 2023 |  | 2022
Goodwill and intangible assets |  | $ | 3 |  |  | $ | 1 |  |  | $ | 106 |
Property, plant and equipment |  | 12 |  |  | (13) |  |  | 2 |
Pension and other retiree benefits |  | (6) |  |  | 68 |  |  | (1) |
Stock-based compensation |  | (14) |  |  | 2 |  |  | (3) |
Right-of-use assets/lease liabilities |  | 2 |  |  | 1 |  |  | (5) |
Tax credits and tax loss carryforwards, net of valuation allowance |  | 37 |  |  | 29 |  |  | 8 |
Deferred withholding tax |  | (14) |  |  | 7 |  |  | 8 |
Research and Experimentation Capitalization |  | 21 |  |  | 29 |  |  | 58 |
Other, net |  | (8) |  |  | 11 |  |  | (10) |
Total deferred tax benefit (provision) |  | $ | 33 |  |  | $ | 135 |  |  | $ | 163 |
The difference between the statutory U.S. federal income tax rate and the Company’s global effective tax rate as reflected in the Consolidated Statements of Income is as follows:
|  | 2024 |  | 2023 |  | 2022
Percentage of Income before income taxes |  |  |  |  |  |
Tax at United States statutory rate |  | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State income taxes, net of federal benefit |  | 0.5 |  |  | (0.1) |  |  | 0.8 |
Earnings taxed at other than United States statutory rate |  | 4.1 |  |  | 5.4 |  |  | 5.4 |
Non-deductible goodwill impairment charges |  | — |  |  | — |  |  | 1.9 |
Foreign-derived intangible income benefit |  | (2.6) |  |  | (2.4) |  |  | (2.6) |
Foreign tax matter |  | — |  |  | 3.7 |  |  | — |
Other, net |  | (0.1) |  |  | — |  |  | (0.4) |
Effective tax rate |  | 22.9 | % |  | 27.6 | % |  | 26.1 | %
The components of deferred tax assets (liabilities) are as follows at December 31:
|  | 2024 |  | 2023
Deferred tax liabilities: |  |  |  |
Goodwill and intangible assets |  | $ | (389) |  |  | $ | (412) |
Property, plant and equipment |  | (397) |  |  | (420) |
Right-of-use assets |  | (126) |  |  | (126) |
Deferred withholding tax |  | (110) |  |  | (96) |
Other |  | (130) |  |  | (34) |
Total deferred tax liabilities |  | (1,152) |  |  | (1,088) |
Deferred tax assets: |  |  |  |
Pension and other retiree benefits |  | 272 |  |  | 295 |
Tax credits and tax loss carryforwards |  | 430 |  |  | 356 |
Lease liabilities |  | 137 |  |  | 134 |
Accrued liabilities |  | 223 |  |  | 221 |
Stock-based compensation |  | 61 |  |  | 75 |
Research and Experimentation Capitalization |  | 108 |  |  | 87 |
Other |  | 101 |  |  | 60 |
Total deferred tax assets |  | 1,332 |  |  | 1,228 |
Valuation Allowance |  | $ | (328) |  |  | $ | (287) |
Net deferred tax assets |  | $ | 1,004 |  |  | $ | 941 |
Net deferred income taxes |  | $ | (148) |  |  | $ | (147) |
The changes in valuation allowance for deferred tax assets are as follows:
| 2024 |  | 2023 |  | 2022
Balance, January 1 | $ | 287 |  |  | $ | 129 |  |  | $ | 120 |
Additions |  |  |  |  |
Charged to costs and expenses | 56 |  | 158 |  | 14
Deductions | 15 |  | — |  |  | 5
Balance, December 31 | $ | 328 |  |  | $ | 287 |  |  | $ | 129 |
As of December 31, 2024, the Company had net operating losses (“NOLs”) and capital loss carryforwards of $37. Of this amount, capital loss and NOL carryforwards of $6 will begin to expire in 2025 and NOLs of $13 can be carried forward indefinitely. The Company believes that it will be able to utilize these capital loss and NOL carryforwards. There is an additional NOL of $18 which has a full valuation allowance. As of December 31, 2024, the Company has $393 of tax credits, of which $66 will begin to expire in 2030 and $17 can be carried forward indefinitely. The Company believes that it will be able to utilize these tax credits. The remaining credits of $310 have a full valuation allowance. Applicable U.S. income and foreign withholding taxes have been provided on substantially all of the Company’s accumulated earnings of foreign subsidiaries. Net tax expense of $55, net tax benefit of $19 and net tax expense of $164 were recorded directly through equity in 2024, 2023 and 2022 respectively. The net tax expense or benefit in each year predominantly includes current and future tax impacts related to benefit plans and the impact of currency translation adjustments. The Company uses a comprehensive model to recognize, measure, present and disclose in its financial statements uncertain tax positions that the Company has taken or expects to take on an income tax return. Unrecognized tax benefits activity for the years ended December 31, 2024, 2023 and 2022 is summarized below:
|  | 2024 |  | 2023 |  | 2022
Unrecognized tax benefits: |  |  |  |  |  |
Balance, January 1 |  | $ | 314 |  |  | $ | 298 |  |  | $ | 245 |
Increases as a result of tax positions taken during the current year |  | 37 |  |  | 73 |  |  | 32 |
Decreases of tax positions taken during prior years |  | (53) |  |  | (61) |  |  | (21) |
Increases of tax positions taken during prior years |  | 10 |  |  | 6 |  |  | 46 |
Decreases as a result of settlements with taxing authorities and the expiration of statutes of limitations |  | (3) |  |  | (2) |  |  | (2) |
Effect of foreign currency rate movements |  | (9) |  |  | — |  |  | (2) |
Balance, December 31 |  | $ | 296 |  |  | $ | 314 |  |  | $ | 298 |
If all of the unrecognized tax benefits for 2024 above were recognized, approximately $286 would impact the effective tax rate. It is reasonably possible that the amount of unrecognized benefits with respect to our uncertain tax positions could change in the next twelve months and such change may or may not be material. The Company recognized expenses of approximately $22, $10 and $8 for interest and penalties related to the above unrecognized tax benefits within income tax expense in 2024, 2023 and 2022, respectively. The Company had accrued interest and penalties of approximately $68, $45 and $40 as of December 31, 2024, 2023 and 2022, respectively. In the third quarter of 2023, the Internal Revenue Service (the “IRS”) issued a notice giving taxpayers temporary relief from the effects of certain U.S. tax regulations that were issued in December 2021, which place greater restrictions on foreign taxes that are creditable against U.S. taxes on foreign-source income. This notice allowed taxpayers to defer the application of these new regulations through the end of 2023. In December 2023, the IRS issued further guidance modifying this temporary relief period to the date that a notice or other guidance withdrawing or modifying the temporary relief is issued. The Company will recognize the impact, if any, in the period in which the temporary relief is withdrawn or modified. During the quarter ended June 30, 2023, the Company reassessed with its legal and tax advisers certain tax deductions taken in prior years by one of our subsidiaries and concluded that it was more likely than not that the deductions would not be sustained by the courts in that jurisdiction. The value of the tax deductions was not material to the Company in any year in which they were taken. The cumulative effect of the change in tax position of $148 was reflected as a discrete item in the quarter ended June 30, 2023 income tax expense, partially offset by the reversal of certain prior years’ withholding tax reserves of $22 that were no longer required. The tax liability was paid in the quarter ended September 30, 2023. On August 16, 2022, the Inflation Reduction Act of 2022 (the “IRA”) was enacted, which among other things, implements a 15% minimum tax on book income of certain large corporations effective for years beginning after December 31, 2022. Based on the Company’s analysis, as well as guidance published by the IRS, the IRA, and in particular the 15% minimum tax, did not have an impact on the Company’s Consolidated Financial Statements. Subsequent to the aforementioned guidance published by the IRS, on September 12, 2024, the U.S. Treasury Department and IRS released proposed regulations relating to this 15% minimum tax. Based on the Company’s analysis, these proposed regulations, if finalized in their current form, are not expected to have an impact on the Company’s Consolidated Financial Statements. However, the Company will continue to evaluate any additional guidance and clarification that becomes available. Additionally, on December 15, 2022, the 27 member states of the European Union (“EU”) reached an agreement on a minimum level of taxation for certain large corporations to pay a minimum corporate tax rate of 15% in every jurisdiction in which they operate. This agreement, which is known as the Minimum Tax Directive (part of the “Pillar II Model Rules”), was supposed to be transposed into the laws of all EU member states by December 31, 2023. Most member states complied, while some were granted extensions of time. In addition, many other jurisdictions outside the EU have implemented a similar minimum tax regime consistent with the policy of the Pillar II Model Rules. Detailed regulations of these minimum tax regimes are still being considered in certain countries and, in some cases, enactment and timing is still uncertain. Based on current legislation and available guidance, apart from a significant additional compliance burden, Pillar II did not have a material impact as of December 31, 2024 and the Company does not believe it will have a material impact on its Consolidated Financial Statements. However, as these rules and related regulations are revised and implemented, the Company will evaluate the impact, if any, on its Consolidated Financial Statements. The Company has ongoing federal, state and international income tax audits in various jurisdictions and evaluates uncertain tax positions that may be challenged by local tax authorities and not fully sustained. All U.S. federal income tax returns through December 31, 2013 have been audited by the IRS and there are limited matters which the Company plans to appeal for years 2010 through 2013. One such matter relates to the IRS assessment of taxes on the Company by imputing income on certain activities within one of our international operations, which is also under audit for the years 2014 through 2018. There were U.S. Tax Court rulings during 2023 in favor of the IRS against unrelated third parties on similar matters. Despite the U.S. Tax Court rulings, the Company continues to believe that the tax assessment against the Company is without merit. While there can be no assurances, the Company believes this matter will ultimately be decided in favor of the Company. The amount of tax plus interest for the years 2010 through 2018 is estimated to be approximately $153, which is not included in the Company’s uncertain tax positions. In May 2024, the IRS initiated an audit for the years 2019 through 2021. The Company has made an accounting policy election to treat Global Intangible Low-Taxed Income taxes as a current period expense rather than including these amounts in the measurement of deferred taxes.

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