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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes As a global organization, we and our subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. As of December 31, 2022, the statute of limitations for the U.S. federal tax years 2017 through 2022 remain open to examination. For U.S. state and local jurisdictions, tax years 2013 through 2022 are open to examination. We are also subject to examination in various foreign jurisdictions for tax years 2015 through 2022. A reconciliation of the beginning and ending amount of the liability for unrecognized tax benefits is as follows:
($ in millions) | 2022 |  | 2021 |  | 2020
Balance at January 1 | $ | 24.9 |  |  | $ | 10.4 |  |  | $ | 5.0 |
Increase due to current year position | 11.4 |  |  | 16.3 |  |  | 4.9 |
Increase (decrease) due to prior year position | 0.6 |  |  | (1.0) |  |  | 0.6 |
Reduction for expiration of statute of limitations/audits | (0.4) |  |  | (0.8) |  |  | (0.1) |
Balance at December 31 | $ | 36.5 |  |  | $ | 24.9 |  |  | $ | 10.4 |
In addition, we had balances in accrued liabilities for interest and penalties of $1.6 million and $0.5 million at December 31, 2022 and 2021, respectively. As of December 31, 2022, we had $36.5 million of total gross unrecognized tax benefits, which, if recognized, $36.5 million would favorably impact the effective income tax rate. It is reasonably possible that, due to the expiration of statutes and the closing of tax audits, the amount of gross unrecognized tax benefits may be reduced by approximately $1.7 million during the next twelve months, which would favorably impact our effective tax rate. The components of income before income taxes and equity in net income of affiliated companies are:
($ in millions) | 2022 |  | 2021 |  | 2020
U.S. operations | $ | 394.4 |  |  | $ | 420.0 |  |  | $ | 227.0 |
International operations | 285.5 |  |  | 328.9 |  |  | 174.3 |
Total income before income taxes and equity in net income of affiliated companies | $ | 679.9 |  |  | $ | 748.9 |  |  | $ | 401.3 |
The related provision for income taxes consists of:
($ in millions) | 2022 |  | 2021 |  | 2020
Current: |  |  |  |  |
Federal | $ | 75.7 |  |  | $ | 64.8 |  |  | $ | 28.9 |
State | 8.4 |  |  | 10.9 |  |  | 3.4 |
International | 61.4 |  |  | 74.4 |  |  | 46.0 |
Current income tax provision | 145.5 |  |  | 150.1 |  |  | 78.3 |
Deferred: |  |  |  |  |
Federal and state | (20.3) |  |  | 7.3 |  |  | 0.2 |
International | (10.5) |  |  | (50.2) |  |  | (6.0) |
Deferred income tax provision | (30.8) |  |  | (42.9) |  |  | (5.8) |
Income tax expense | $ | 114.7 |  |  | $ | 107.2 |  |  | $ | 72.5 |
Deferred income taxes result from temporary differences between the amount of assets and liabilities recognized for financial reporting and tax purposes. The significant components of our deferred tax assets and liabilities at December 31 are:
($ in millions) | 2022 |  | 2021
Deferred tax assets |  |  |
Net operating loss carryforwards | $ | 10.3 |  |  | $ | 14.0 |
Tax credit carryforwards | 1.9 |  |  | 1.5 |
Pension and deferred compensation | 31.4 |  |  | 31.6 |
Royalty acceleration | 46.2 |  |  | 45.1 |
Other | 25.5 |  |  | 12.2 |
Capitalized R&D expenses | 8.1 |  |  | — |
Leases | 20.6 |  |  | — |
Valuation allowance | (13.3) |  |  | (12.2) |
Total deferred tax assets | 130.7 |  |  | 92.2 |
Deferred tax liabilities: |  |  |
Property, plant, and equipment | 53.7 |  |  | 47.2 |
Tax on undistributed earnings of subsidiaries | 1.5 |  |  | 1.8 |
Leases | 19.7 |  |  | — |
Other | 4.5 |  |  | (0.4) |
Total deferred tax liabilities | 79.4 |  |  | 48.6 |
Net deferred tax asset (liability) | $ | 51.3 |  |  | $ | 43.6 |
A reconciliation of the U.S. federal corporate tax rate to our effective consolidated tax rate on income before income taxes and equity in net income of affiliated companies is as follows:
| 2022 |  | 2021 |  | 2020
U.S. federal corporate tax rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Tax on international operations other than U.S. tax rate | (1.5) |  |  | 1.9 |  |  | 1.2 |
Adjustments to reserves for unrecognized tax benefits | 2.9 |  |  | 0.1 |  |  | 1.4 |
U.S. tax on international earnings, net of foreign tax credits | (0.3) |  |  | 0.3 |  |  | 0.4 |
Foreign-Derived Intangible Income Deductions (FDII) | (2.1) |  |  | (1.5) |  |  | (1.1) |
State income taxes, net of federal tax effect | 1.0 |  |  | (0.1) |  |  | 1.2 |
U.S. research and development credits | (0.6) |  |  | (0.4) |  |  | (0.7) |
Excess tax benefits on share-based payments | (2.4) |  |  | (4.2) |  |  | (5.2) |
Royalty acceleration | — |  |  | (2.5) |  |  | — |
Pension settlement | (1.2) |  |  | — |  |  | — |
Tax on undistributed earnings of subsidiaries | — |  |  | (0.6) |  |  | 0.1 |
Other | 0.1 |  |  | 0.3 |  |  | (0.2) |
Effective tax rate | 16.9 | % |  | 14.3 | % |  | 18.1 | %
During 2022, we recorded tax expense of $5.7 million due to the impact of tax law changes enacted during the year, $19.8 million of tax expense due to the Company's recognition of reserves for unrecognized tax benefits, and a tax benefit of $16.5 million associated with stock-based compensation. A tax benefit of $20.6 million was recognized for the 2022 termination of our U.S. pension plan. The company did not elect to reclassify to retained earnings the stranded tax effects on items within AOCI related to the Tax Cuts and Jobs Act of 2017, and therefore included within the $20.6 million pension termination benefit is a deferred tax benefit of $8.0 million. During 2021, we recorded a tax benefit of $1.4 million due to the impact of tax law changes enacted during 2021, a tax benefit of $18.5 million due to the Company's prepayment of future royalties from one of its subsidiaries, and a tax benefit of $31.5 million associated with stock-based compensation. During 2020, we recorded a tax benefit of $0.5 million due to the impact of tax law changes enacted during 2020 and a tax benefit of $20.8 million associated with stock-based compensation. State operating loss carryforwards of $123.2 million created a deferred tax asset of $7.3 million, while foreign operating loss carryforwards of $18.4 million created a deferred tax asset of $2.9 million. Management estimates that certain state and foreign operating loss carryforwards are unlikely to be utilized and the associated deferred tax assets have been appropriately reserved. In 2022, it was determined that $3.8 million of previously reserved state loss carryforwards were more likely than not to be utilized prior to expiration. State loss carryforwards expire as follows: $4.7 million in 2023 and $118.5 million thereafter. Foreign loss carryforwards total $18.4 million, none of which will expire. During 2019, we utilized all of our remaining U.S. federal research and development credit carryforwards. State research and development credit carryforwards of $1.8 million created a deferred tax asset of $1.4 million. As of December 31, 2022, $0.4 million of state research and development credits expire in 2025. In response to the 2017 Tax Act, we reevaluated our position regarding permanent reinvestment of foreign subsidiary earnings and profits through 2017 (with the exception of China and Mexico) and decided that those profits were no longer permanently reinvested. As of January 1, 2018, we reasserted indefinite reinvestment related to all post-2017 unremitted earnings in all of our foreign subsidiaries. In general, it is our practice and intention to permanently reinvest the earnings of our foreign subsidiaries and repatriate earnings only when the tax impact is de minimis, and that position has not changed subsequent to the one-time transition tax under the 2017 Tax Act, except as noted above. Accordingly, no deferred taxes have been provided for withholding taxes or other taxes that would result upon repatriation of approximately $893.1 million of undistributed earnings from foreign subsidiaries to the U.S., as those earnings continue to be permanently reinvested. Further, it is impracticable for us to estimate any future tax costs for any unrecognized deferred tax liabilities associated with our indefinite reinvestment assertion, because the actual tax liability, if any, would be dependent on complex analysis and calculations considering various tax laws, exchange rates, circumstances existing when there is a repatriation, sale or liquidation, or other factors.

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- 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
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