XML 30 R16.htm IDEA: XBRL DOCUMENT
v3.22.0.1

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2021
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The source of pre-tax income and the components of income tax expense are as follows:
| Year Ended December 31,
(in millions) | 2021 |  | 2020 |  | 2019
Income (loss) components: |  |  |  |  |
Domestic | $ | 45 |  |  | $ | (33) |  |  | $ | 203 |
Foreign | 466 |  |  | 318 |  |  | 213 |
Total pre-tax income | $ | 511 |  |  | $ | 285 |  |  | $ | 416 |
Income tax expense components: |  |  |  |  |
Current: |  |  |  |  |
Domestic – federal | $ | 16 |  |  | $ | 24 |  |  | $ | 39 |
Domestic – state and local | 5 |  |  | 5 |  |  | 13 |
Foreign | 53 |  |  | 33 |  |  | 40 |
Total Current | 74 |  |  | 62 |  |  | 92 |
Deferred: |  |  |  |  |
Domestic – federal | $ | (2) |  |  | $ | (21) |  |  | $ | 7 |
Domestic – state and local | — |  |  | (8) |  |  | (1) |
Foreign | 12 |  |  | (2) |  |  | (83) |
Total Deferred | 10 |  |  | (31) |  |  | (77) |
Total income tax provision | $ | 84 |  |  | $ | 31 |  |  | $ | 15 |
Effective income tax rate | 16.3 | % |  | 10.9 | % |  | 3.7 | %
Reconciliations between taxes at the U.S. federal income tax rate and taxes at our effective income tax rate on earnings before income taxes are as follows:
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019
Tax provision at U.S. statutory rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Increase (decrease) in tax rate resulting from: |  |  |  |  |
State income taxes | 0.8 |  |  | 0.7 |  |  | 2.7 |
Uncertain tax positions | (0.1) |  |  | (3.9) |  |  | 0.4 |
Valuation allowance | 0.9 |  |  | 0.5 |  |  | 1.2 |
Net interest deductions | (2.4) |  |  | (4.5) |  |  | (3.0) |
Foreign income taxed at different rates | (0.2) |  |  | (0.9) |  |  | 0.7 |
US tax on foreign earnings | 2.2 |  |  | 5.3 |  |  | 1.6 |
Tax incentives | (5.5) |  |  | (7.4) |  |  | (9.6) |
Rate change | 0.9 |  |  | (1.3) |  |  | (18.1) |
Goodwill impairment | — |  |  | 2.9 |  |  | 7.8 |
Federal R&D tax credit | (0.7) |  |  | (1.3) |  |  | (1.2) |
Stock compensation | (0.6) |  |  | (2.4) |  |  | (1.5) |
Other—net | — |  |  | 2.2 |  |  | 1.7 |
Effective income tax rate | 16.3 | % |  | 10.9 | % |  | 3.7 | %
Deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and tax bases of assets and liabilities, applying enacted tax rates in effect for the year in which we expect the differences will reverse. The following is a summary of the components of the net deferred tax assets and liabilities recognized in the Consolidated Balance Sheets:
| December 31,
(in millions) | 2021 |  | 2020
Deferred tax assets: |  |  |
Employee benefits | $ | 111 |  |  | $ | 127 |
Accrued expenses | 35 |  |  | 35 |
Loss and other tax credit carryforwards | 250 |  |  | 270 |
Inventory | 6 |  |  | 6 |
Lease Liabilities | 70 |  |  | 64 |
Other | 8 |  |  | 41 |
| 480 |  |  | 543 |
Valuation allowance | (201) |  |  | (217) |
Net deferred tax asset | $ | 279 |  |  | $ | 326 |
Deferred tax liabilities: |  |  |
Intangibles | $ | 155 |  |  | $ | 138 |
Investment in foreign subsidiaries | 4 |  |  | 5 |
Property, plant and equipment | 77 |  |  | 77 |
Lease right-of-use assets | 69 |  |  | 62 |
Other | 35 |  |  | 30 |
Total deferred tax liabilities | $ | 340 |  |  | $ | 312 |
Management assesses all available positive and negative evidence, including prudent and feasible tax planning strategies, and estimates if sufficient future taxable income will be generated to realize existing deferred tax assets. On the basis of this evaluation, as of December 31, 2021, a valuation allowance of $201 million has been established to reduce the deferred income tax asset related to certain U.S. and foreign net operating losses and U.S. and foreign capital loss carryforwards. A reconciliation of the change in valuation allowance on deferred tax assets is as follows:
(in millions) | 2021 |  | 2020 |  | 2019
Valuation allowance — January 1 | $ | 217 |  |  | $ | 191 |  |  | $ | 234 |
Change in assessment (a) | — |  |  | 1 |  |  | (2) |
Current year operations | 4 |  |  | 4 |  |  | 3 |
Other comprehensive income | (4) |  |  | 3 |  |  | (1) |
Foreign currency and other (b) | (16) |  |  | 18 |  |  | (43) |
Valuation allowance — December 31 | $ | 201 |  |  | $ | 217 |  |  | $ | 191 |
(a) Increase in assessment in 2020 is primarily attributable to loss positions in various jurisdictions. Decrease in assessment in 2019 is primarily attributable to profitability of certain jurisdictions. (b) Included in foreign currency and other in 2019 is a decrease in net operating losses due primarily to the liquidation of a foreign subsidiary for which a valuation allowance was maintained. Deferred taxes are classified in the Consolidated Balance Sheets as follows:
| December 31,
(in millions) | 2021 |  | 2020
Non-current assets | $ | 226 |  |  | $ | 256 |
Non-current liabilities | (287) |  |  | (242) |
Total net deferred tax liabilities | $ | (61) |  |  | $ | 14 |
Tax attributes available to reduce future taxable income begin to expire as follows:
(in millions) | December 31, 2021 |  | First Year of Expiration
U.S. net operating loss | $ | 6 |  |  | December 31, 2025
State net operating loss | 101 |  |  | December 31, 2024
State excess interest expense | 17 |  |  | Indefinite
State tax credits | 1 |  |  | Indefinite
Foreign net operating loss | 1,068 |  |  | December 31, 2022
Foreign tax credits | 4 |  |  | December 31, 2030
As of December 31, 2021, the Company has provided a deferred tax liability of $4 million for net foreign withholding taxes and state income taxes on $591 million of foreign earnings expected to be repatriated to the U.S. parent. The Company currently does not intend to repatriate approximately $1.5 billion of foreign earnings. The amount of deferred tax that would be recorded if such amounts were repatriated is not practicable. Unrecognized Tax Benefits We recognize tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities or upon the completion of the litigation process, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such positions are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
(in millions) | 2021 |  | 2020 |  | 2019
Unrecognized tax benefits — January 1 | $ | 114 |  |  | $ | 129 |  |  | $ | 136 |
Gross Increases - Current year tax positions | — |  |  | — |  |  | 3 |
Gross Increases - Prior year tax positions | — |  |  | — |  |  | — |
Gross Decreases - Prior year tax positions | (1) |  |  | (3) |  |  | (5) |
Settlements | — |  |  | (12) |  |  | (5) |
Lapse of Statute of Limitations | (1) |  |  | — |  |  | — |
Currency Translation Adjustment | (1) |  |  | — |  |  | — |
Unrecognized tax benefits — December 31 | $ | 111 |  |  | $ | 114 |  |  | $ | 129 |
The amount of unrecognized tax benefits at December 31, 2021 which, if ultimately recognized, will reduce our effective tax rate is $111 million. We believe that it is reasonably possible that unrecognized tax benefits will be reduced by approximately $3 million within the next 12 months as a result of the expiration of certain statute of limitations. We classify interest relating to unrecognized tax benefits as a component of other non-operating (expense) income, net and tax penalties as a component of income tax expense in our Consolidated Income Statements. The amount of accrued interest relating to unrecognized tax benefits as of December 31, 2021 and 2020 was $9 million and $8 million. During 2019, Xylem’s Swedish subsidiary received a tax assessment for the 2013 tax year related to the tax treatment of an intercompany transfer of certain intellectual property that was made in connection with a reorganization of our European businesses. The assessment asserts an aggregate amount of approximately $80 million for tax, penalties and interest. Xylem filed an appeal with the Administrative Court of Stockholm. Management, in consultation with external legal advisors, believes it is more likely than not that Xylem will prevail on the proposed assessment and is vigorously defending our position through litigation; however, there can be no assurance that any final determination by the authorities will not be materially different than our position. As of December 31, 2021, we have not recorded any unrecognized tax benefits related to this uncertain tax position. The following table summarizes our earliest open tax years by major jurisdiction:
Jurisdiction |  | Earliest Open Year
Italy |  | 2015
Luxembourg |  | 2017
Sweden |  | 2013
Germany |  | 2012
United Kingdom |  | 2015
United States |  | 2017
Switzerland |  | 2019

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 http://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 http://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 http://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 http://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 http://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 http://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 http://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 http://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 http://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