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Income Taxes | 3 Months Ended
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Mar. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Our quarterly provision for income taxes is measured using an estimated annual effective tax rate, adjusted for discrete items within periods presented. The comparison of our effective tax rate between periods is significantly impacted by the level and mix of earnings and losses by tax jurisdiction and discrete items. The income tax provision for the three months ended March 31, 2023 was $27 million resulting in an effective tax rate of 21.7%, compared to a $16 million expense resulting in an effective tax rate of 16.4% for the same period in 2022. The effective tax rate for the three month period ended March 31, 2023 was higher than the U.S. federal statutory rate primarily due to the impact of earnings mix and nondeductible transaction costs. Unrecognized Tax Benefits 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. Xylem filed an appeal with the Administrative Court of Växjö, which rendered a decision adverse to Xylem in June 2022 for SEK800 million (approximately $77 million), consisting of the full tax assessment amount plus penalties and interest. Xylem has appealed this decision with the intermediate appellate court, the Administrative Court of Appeal (the “Court”). At this time, management, in consultation with external legal advisors, continues to believe it is more likely than not that Xylem will prevail on the proposed assessment and will continue to vigorously defend our position through the appellate process. The appeal to the Court is expected to take approximately one year; however, there can be no assurance as to the timing of the Court’s decision. Both parties will have the ability to seek appeal of the Court’s decision to the Supreme Administrative Court of Sweden. There can be no assurance that the final determination by the authorities will not be materially different than our position. As of March 31, 2023, we do not have any unrecognized tax benefits related to this uncertain tax position.

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