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Income Taxes | 12 Months Ended
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Dec. 31, 2021
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES Earnings before income taxes consisted of the following:
| December 31,
(DOLLARS IN MILLIONS) | 2021 |  | 2020 |  | 2019
U.S. loss before taxes | $ | (493) |  |  | $ | (142) |  |  | $ | (110) |
Foreign income before taxes | 847 |  |  | 583 |  |  | 667 |
Total income before taxes | $ | 354 |  |  | $ | 441 |  |  | $ | 557 |
The income tax provision consisted of the following:
| December 31,
(DOLLARS IN MILLIONS) | 2021 |  | 2020 |  | 2019
Current tax provision |  |  |  |  |
Federal | $ | (5) |  |  | $ | (9) |  |  | $ | 10 |
State and local | 13 |  |  | 1 |  |  | — |
Foreign | 303 |  |  | 150 |  |  | 146 |
Total current tax provision | 311 |  |  | 142 |  |  | 156 |
Deferred tax provision |  |  |  |  |
Federal | (121) |  |  | (8) |  |  | (41) |
State and local | (34) |  |  | (2) |  |  | 8 |
Foreign | (81) |  |  | (58) |  |  | (26) |
Total deferred tax benefit | (236) |  |  | (68) |  |  | (59) |
Total provision for income taxes | $ | 75 |  |  | $ | 74 |  |  | $ | 97 |
Effective Tax Rate Reconciliation Reconciliation between the U.S. federal statutory income tax rate to the actual effective tax rate was as follows:
| December 31,
| 2021 |  | 2020 |  | 2019
Statutory tax rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Difference in effective tax rate on foreign earnings and remittances(1) | 8.0 |  |  | (6.9) |  |  | (6.8) |
Tax benefit from supply chain optimization | (5.8) |  |  | (5.0) |  |  | (1.0) |
Unrecognized tax benefit, net of reversals | 0.7 |  |  | 5.7 |  |  | 3.4 |
Tax impact on gains on business disposal | 4.0 |  |  | — |  |  | — |
Deferred taxes on deemed repatriation | 2.7 |  |  | (0.2) |  |  | 0.8 |
Global intangible low-taxed income | 4.1 |  |  | 5.3 |  |  | — |
Foreign-derived intangible income | (1.6) |  |  | (0.3) |  |  | (0.3) |
U.S. foreign tax credit - general limitation | (3.1) |  |  | (1.9) |  |  | (1.2) |
Research and development credit | (1.4) |  |  | (1.0) |  |  | (0.9) |
Acquisition costs | 2.4 |  |  | 1.0 |  |  | 0.5 |
Establishment (release) of valuation allowance on state deferred | (3.0) |  |  | (0.4) |  |  | 1.7 |
State and local taxes | (4.8) |  |  | (0.6) |  |  | (0.8) |
Other, net | (2.0) |  |  | 0.1 |  |  | 1.0 |
Effective tax rate | 21.2 | % |  | 16.8 | % |  | 17.4 | %
_______________________ (1)For 2021, the rate includes rate change impacts related to the Netherlands and United Kingdom. The effective tax rate reflects the impact of an unfavorable mix of earnings, higher repatriation costs and the cost of global intangible low-taxed income ("GILTI"), partially offset by tax benefits related to supply chain optimization and credits. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”) that significantly revised the U.S. tax code effective January 1, 2018. The Tax Act created significant international tax provisions, including GILTI. The Company has elected to treat GILTI as a current period cost if and when incurred. This tax position resulted in a net $15 million income tax expense for the year ended December 31, 2021, which includes a provision to return adjustment. The U.S. consolidated group has historically generated taxable income after the inclusion of foreign dividends which has allowed the Company to realize its federal deferred tax assets. Foreign dividends are subject to a 100% dividends received deduction under the Tax Act and do not serve as a source of federal taxable income. However, as of December 31, 2021 the U.S. consolidated group is in a cumulative income position, and is expected to continue to be in a cumulative income position primarily due to the inclusion of GILTI and expects to realize tax benefits for the reversal of temporary differences, including the significant deferred tax liabilities associated with the Merger with N&B. Further, as of December 31, 2021 the Company has maintained a valuation allowance of approximately $2 million on certain state tax attributes based on a state taxable income forecast. The main inputs into the forecast are the 2021 taxable income projections. Changes in the performance of the North American business, the Company’s transfer pricing policies and adjustments to the Company’s U.S. tax profile could impact the estimate. Deferred Taxes The deferred tax assets and liabilities consisted of the following amounts:
| December 31,
(DOLLARS IN MILLIONS) | 2021 |  | 2020
Employee and retiree benefits | $ | 148 |  |  | $ | 108 |
Credit and net operating loss carryforwards | 312 |  |  | 271 |
Intangible assets | — |  |  | 10 |
Amortizable research and development expenses | 42 |  |  | 30 |
Gain on foreign currency translation | — |  |  | 46 |
Interest limitation | 43 |  |  | 51 |
Inventory | 32 |  |  | 14 |
Lease obligations | 189 |  |  | 53 |
Other, net | 79 |  |  | 23 |
Gross deferred tax assets | 845 |  |  | 606 |
Property, plant and equipment, net | (265) |  |  | (60) |
Intangible assets | (2,486) |  |  | (586) |
Right-of-use assets | (187) |  |  | (53) |
Loss on foreign currency translation | (30) |  |  | — |
Deferred taxes on deemed repatriation | (81) |  |  | (46) |
Gross deferred tax liabilities | (3,049) |  |  | (745) |
Valuation allowance | (232) |  |  | (257) |
Total net deferred tax liabilities | $ | (2,436) |  |  | $ | (396) |
Net operating loss carryforwards were approximately $272 million and $246 million at December 31, 2021 and 2020, respectively. If unused, approximately $105 million will expire between 2022 and 2041. The remainder, totaling approximately $167 million, may be carried forward indefinitely. Tax credit carryforwards were approximately $40 million and $28 million at December 31, 2021 and 2020, respectively. If unused, the $40 million will expire between 2022 and 2041. Of the $312 million deferred tax asset for net operating loss carryforwards and credits at December 31, 2021, the Company considers it unlikely that a portion of the tax benefit will be realized. Accordingly, a valuation allowance of approximately $230 million on net operating loss carryforwards and $2 million of tax credits has been established against these deferred tax assets. Uncertain Tax Positions A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| December 31,
(DOLLARS IN MILLIONS) | 2021 |  | 2020 |  | 2019
Balance of unrecognized tax benefits at beginning of year | $ | 99 |  |  | $ | 75 |  |  | $ | 51 |
Gross amount of increases in unrecognized tax benefits as a result of positions taken during a prior year(1) | 42 |  |  | 11 |  |  | 20 |
Gross amount of decreases in unrecognized tax benefits as a result of positions taken during a prior year | (3) |  |  | — |  |  | (2) |
Gross amount of increases in unrecognized tax benefits as a result of positions taken during the current year | 5 |  |  | 24 |  |  | 13 |
The amounts of decreases in unrecognized benefits relating to settlements with taxing authorities | (1) |  |  | (2) |  |  | (3) |
Reduction in unrecognized tax benefits due to the lapse of applicable statute of limitation | (12) |  |  | (9) |  |  | (4) |
Balance of unrecognized tax benefits at end of year | $ | 130 |  |  | $ | 99 |  |  | $ | 75 |
_______________________ (1)For 2021, the amount includes positions related to N&B opening balance sheet amounts. At December 31, 2021, 2020 and 2019, there were approximately $130 million, $98 million and $74 million, respectively, of unrecognized tax benefits recorded to Other liabilities and less than $1 million recorded to Other current liabilities for 2021 and approximately $1 million recorded to Other current liabilities for both 2020 and 2019. If these unrecognized tax benefits were recognized, all the benefits and related interest and penalties would be recorded as a benefit to income tax expense. For the year ended December 31, 2021, the Company increased its liabilities for interest and penalties by approximately $19 million, net, increased its liabilities for interest and penalties by approximately $3 million, net for the year ended 2020, and increased its liabilities for interest and penalties by approximately $11 million, net for the year ended 2019. At December 31, 2021, 2020 and 2019, the Company had accrued approximately $36 million, $17 million and $14 million, respectively, of interest and penalties classified as Other liabilities, and less than $1 million to Other current liabilities for December 31, 2021 and 2020. No such liabilities were accrued for the year ended December 31, 2019. As of December 31, 2021, the Company’s aggregate provision for unrecognized tax benefits, including interest and penalties, was approximately $166 million, associated with various tax positions principally asserted in foreign jurisdictions, none of which were individually material. Other Tax benefits credited to Shareholders’ equity were de minimis for the years ended December 31, 2021, 2020 and 2019 associated with stock option exercises and PRSU dividends. The Company regularly repatriates earnings from non-U.S. subsidiaries. As the Company repatriates these funds to the U.S. they will be required to pay income taxes in certain U.S. states and applicable foreign withholding taxes during the period when such repatriation occurs. Accordingly, as of December 31, 2021, the Company had a deferred tax liability of approximately $81 million for the effect of repatriating the funds to the U.S., attributable to various non-U.S. subsidiaries. There is no deferred tax liability associated with non-U.S. subsidiaries where we intend to indefinitely reinvest the earnings to fund local operations and/or capital projects. The Company has ongoing income tax audits and legal proceedings which are at various stages of administrative or judicial review, of which the material items are discussed below. In addition, the Company has other ongoing tax audits and legal proceedings that relate to indirect taxes, such as value-added taxes, capital tax, sales and use and property taxes, which are discussed in Note 19. The Company also has several other tax audits in process and has open tax years with various taxing jurisdictions that range primarily from 2011 to 2020. Based on currently available information, the Company does not believe the ultimate outcome of any of these tax audits and other tax positions related to open tax years, when finalized, will have a material impact on its financial position.

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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 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
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