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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Taxes [Abstract]  
Income Tax Disclosure [Text Block] Income Taxes
Income before income taxes is categorized geographically as follows:
Year Ended December 31,
202320222021
(In millions)
United States$607.1 $558.5 $489.4 
Foreign369.4 321.7 292.8 
Total income before income taxes$976.5 $880.2 $782.2 
The provision for income taxes consisted of the following:
Year Ended December 31,
202320222021
(In millions)
Current expense:
Federal$159.1 $145.1 $97.5 
State 28.0 41.7 32.2 
Foreign, including withholding tax24.4 26.3 29.8 
211.5 213.1 159.5 
Deferred expense (benefit):
Federal (25.6)(18.0)3.9 
State11.2 (4.8)(0.2)
Foreign(38.2)16.1 (165.8)
(52.6)(6.7)(162.1)
Total income tax expense (benefit) $158.9 $206.4 $(2.6)
The Company's state current expense was lower in 2023 due to a beneficial change in certain state income apportionment rules, which became effective starting in 2023. The new apportionment rules required the Company to write down certain of its deferred tax assets resulting in a net state deferred expense in 2023.
The difference between income tax expense (benefit) and the amount resulting from applying the federal statutory rate of 21% to Income before income taxes is attributable to the following:
Year Ended December 31,
202320222021
(In millions)
Income tax expense at federal statutory rate$205.1 $184.8 $164.3 
Non-U.S. intellectual property(118.0)— (165.5)
Change in valuation allowance66.1 0.1 0.1 
State taxes, net of federal benefit28.5 29.2 25.5 
Effect of non-U.S. operations(15.5)(9.5)(23.3)
Remeasurement of unrecognized tax benefits(8.3)(1.5)(5.1)
Other1.0 3.3 1.4 
Total income tax expense (benefit)
$158.9 $206.4 $(2.6)
During the fourth quarter of 2023, due to a change in local tax systems, the Company recognized amortizable tax basis related to a portion of its non-U.S. intellectual property based on a fair value of approximately $1.80 billion. This intellectual property had no book value, resulting in the recognition of a $118.0 million deferred tax asset and a corresponding income tax benefit in 2023.
During the fourth quarter of 2021, as part of a legal entity reorganization, the Company completed an internal transfer of certain of its non-U.S. intellectual property which had no book value. This transfer created amortizable tax basis for the receiving entity based on the $1.20 billion fair value of the intellectual property, which resulted in the recognition of a $165.5 million deferred tax asset and a corresponding income tax benefit. During the fourth quarter of 2023, due to the change in the tax systems mentioned above, the Company determined that it is more likely than not that a portion of the aforementioned deferred tax asset will not be realized, and as a result, recognized a valuation allowance of $64.7 million.
The tax effects of temporary differences that give rise to significant portions of the Company’s deferred tax assets and liabilities are as follows:
As of December 31,
20232022
(In millions)
Deferred tax assets:
Intellectual property$266.2 $147.0 
Deferred revenue, accruals and reserves72.9 73.7 
Research and development costs23.6 12.0 
Tax credit carryforwards4.6 3.8 
Net operating loss carryforwards2.2 3.4 
Other6.0 1.8 
Total deferred tax assets375.5 241.7 
Valuation allowance(73.6)(5.5)
Net deferred tax assets301.9 236.2 
Deferred tax liabilities
(0.9)(1.6)
Total net deferred tax assets$301.0 $234.6 
With the exception of a portion of deferred tax assets related to intellectual property and certain state and foreign net operating loss and foreign tax credit carryforwards, management believes it is more likely than not that the tax effects of the deferred tax liabilities together with future taxable income, will be sufficient to fully recover the remaining deferred tax assets.
As part of the Tax Cuts and Jobs Act of 2017, domestic and foreign research and development expenses, including costs related to internally developed software, are required to be amortized for income tax purposes, over five and fifteen years, respectively, beginning with our 2022 tax year.
As of December 31, 2023, the Company’s deferred tax assets included $38.4 million of state net operating loss carryforwards, before applying tax rates for the respective jurisdictions. The tax credit carryforwards as of December 31, 2023 consisted primarily of foreign tax credit carryforwards. The state net operating loss carryforwards expire in various years from 2024 through 2034. The foreign tax credits will expire between 2028 and 2033.
A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows:
As of December 31,
20232022
(In millions)
Beginning balance$15.1 $16.0 
Increases in tax positions for prior years0.1 0.1 
Increases in tax positions for current year5.0 1.4 
Lapse in statute of limitations(10.6)(2.4)
Ending balance$9.6 $15.1 
As of December 31, 2023, approximately $7.1 million of unrecognized tax benefits, including penalties and interest, could affect the Company’s tax provision and effective tax rate. The Company does not expect the balance of unrecognized tax benefits to change materially during the next twelve months.
In accordance with its accounting policy, the Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of tax expense. These accruals were not material in any period presented.
The Company’s major taxing jurisdictions are the U.S., the Commonwealth of Virginia, and Switzerland. The Company’s U.S. federal income tax returns are not currently under examination by the IRS and only the Company’s tax returns for 2020 and years thereafter are subject to examination. The Company’s other material tax returns are not currently under examination by their respective taxing jurisdictions. Because the Company has previously used net operating loss carryforwards and other tax attributes to offset its taxable income in income tax returns for the U.S. and Virginia, such attributes can be adjusted by these taxing authorities until the statute of limitations closes on the year in which such attributes were utilized. The open years for examination in Switzerland are the 2019 tax year and forward.