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INCOME TAXES | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The following table summarizes our Earnings (loss) before taxes and Income tax expense (in millions):
| Twelve Months Ended December 31,
| 2022 |  | 2021 |  | 2020
Earnings (loss) before taxes: |  |  |  |  |
United States | $ | 1,286 |  |  | $ | 868 |  |  | $ | 8 |
Foreign | 328 |  |  | 445 |  |  | (264) |
Total | $ | 1,614 |  |  | $ | 1,313 |  |  | $ | (256) |
Income tax expense: |  |  |  |  |
Current |  |  |  |  |
United States | $ | 180 |  |  | $ | 139 |  |  | $ | 4 |
State and local | 38 |  |  | 27 |  |  | 16 |
Foreign | 125 |  |  | 90 |  |  | 30 |
Total current | 343 |  |  | 256 |  |  | 50 |
Deferred |  |  |  |  |
United States | 50 |  |  | 53 |  |  | 64 |
State and local | (6) |  |  | (3) |  |  | (1) |
Foreign | (14) |  |  | 13 |  |  | 16 |
Total deferred | 30 |  |  | 63 |  |  | 79 |
Total income tax expense | $ | 373 |  |  | $ | 319 |  |  | $ | 129 |
The reconciliation between the United States federal statutory rate and the Company’s effective income tax rate from continuing operations is:
| Twelve Months Ended December 31,
| 2022 |  | 2021 |  | 2020
United States federal statutory rate | 21 | % |  | 21 | % |  | 21 | %
State and local income taxes, net of federal tax benefit | 2 |  |  | 3 |  |  | (9) |
U.S. tax expense on foreign earnings | — |  |  | — |  |  | (5) |
Legislative tax rate changes | — |  |  | — |  |  | 7 |
Foreign tax credits | — |  |  | (1) |  |  | 2 |
Valuation allowance | — |  |  | — |  |  | (15) |
R&D Credits | (1) |  |  | — |  |  | — |
Intercompany restructuring - intellectual property transfer | — |  |  | — |  |  | 14 |
Goodwill impairment charge | — |  |  | — |  |  | (75) |
Uncertain tax positions and settlements | — |  |  | — |  |  | 2 |
Excess tax benefits related to stock compensation | — |  |  | — |  |  | 2 |
Other, net | 1 |  |  | 1 |  |  | 6 |
Effective tax rate | 23 | % |  | 24 | % |  | (50) | %
In the first quarter of 2020, the company recorded a non-cash charge related to the impairment of goodwill which was largely non-deductible resulting in a substantial negative impact to our effective tax rate. In addition, non-cash charges were recorded in 2020 related to valuation allowance adjustments against certain deferred tax assets recorded in our French, Indian and Other foreign legal entities due to volatility in the markets we serve from the COVID-19 pandemic. In December 2020, the company completed an intercompany restructuring that resulted in the transfer of certain intellectual property rights, held by wholly owned foreign subsidiaries, to the U.S. The intellectual property rights transferred to the U.S. resulted in a step-up in the tax basis for U.S. tax purposes which resulted in the company recognizing a deferred tax asset of $37 million and tax expense of $5 million. The recognized tax benefit of $37 million is amortizable for U.S. tax purposes over a fifteen-year period. On July 20, 2020 the Internal Revenue Service (IRS) issued final regulations under IRC Section 951A permitting a taxpayer to elect to exclude, from its inclusion of global intangible low-taxed income (GILTI), income subject to a high foreign effective tax rate. As a result of the final regulations, the company recorded a net non-cash income tax benefit of $13 million in the third quarter of 2020 relating to the 2018 and 2019 tax years. The Company continues to assert indefinite reinvestment in accordance with ASC 740 based on the laws as of enactment of the Tax Act. As of December 31, 2022, the Company has not provided for withholding or income taxes on approximately $1.8 billion of undistributed reserves of its foreign subsidiaries and affiliates as they are considered by management to be permanently reinvested. Quantification of the deferred tax liability associated with these undistributed reserves is not practicable. The cumulative temporary differences giving rise to the deferred tax assets and liabilities are as follows (in millions):
| December 31, 2022 |  | December 31, 2021
| Deferred Tax Assets |  | Deferred Tax Liabilities |  | Deferred Tax Assets |  | Deferred Tax Liabilities
Other employee benefits | $ | 59 |  |  | $ | — |  |  | $ | 66 |  |  | $ | — |
Pension plans | 16 |  |  | — |  |  | 16 |  |  | — |
Operating loss and tax credit carryforwards | 108 |  |  | — |  |  | 132 |  |  | — |
Depreciation | — |  |  | 334 |  |  | — |  |  | 300 |
Leases - right of use assets | — |  |  | 70 |  |  | — |  |  | 34 |
Leases - liabilities | 56 |  |  | — |  |  | 36 |  |  | — |
Amortization | — |  |  | 298 |  |  | — |  |  | 322 |
Foreign tax credit carryforwards | 52 |  |  | — |  |  | 54 |  |  | — |
Other | 168 |  |  | — |  |  | 139 |  |  | — |
Subtotal | 459 |  |  | 702 |  |  | 443 |  |  | 656 |
Valuation allowances | (129) |  |  | — |  |  | (132) |  |  | — |
Total deferred taxes | $ | 330 |  |  | $ | 702 |  |  | $ | 311 |  |  | $ | 656 |
The following table summarizes the amount and expiration dates of our deferred tax assets related to operating loss and tax credit carryforwards and foreign tax credit carryforwards at December 31, 2022 (in millions) (a):
| Expiration Dates |  | Amounts
Domestic loss and tax credit carryforwards | 2023-2036 |  | $ | 91 |
Foreign loss and tax credit carryforwards (b) | 2023 - Indefinite |  | 69 |
Total operating loss and tax credit carryforwards |  |  | $ | 160 |
(a)The use of certain of the Company's losses and credits is limited pursuant to sections 382 and 383 of the Internal Revenue Code which are triggered when a change in control occurs and are computed based upon several variable factors including the share price of the Company's common stock on the date of the change in control. A change in control is generally defined as a cumulative change of more than 50% in the ownership positions of certain stockholders during a rolling three-year period. The Company believes that these limitations will not result in a forfeiture of the carryforwards. (b)The foreign net operating losses are related to various jurisdictions that provide for both indefinite carryforward periods and others with carryforward periods that range from the tax years 2023 to 2036. Deferred income taxes are provided for temporary differences between amounts of assets and liabilities for financial reporting purposes and the basis of such assets and liabilities as measured under enacted tax laws and regulations, as well as NOLs, tax credits and other carryforwards. A valuation allowance will be recorded to reduce deferred tax assets if, based on all available evidence, it is considered more likely than not that some portion or all of the recorded deferred tax assets will not be realized in future periods. To the extent the reversal of deferred tax liabilities is relied upon in our assessment of the realizability of deferred tax assets, they will reverse in the same period and jurisdiction as the temporary differences giving rise to the deferred tax assets. As of December 31, 2022, the Company had net deferred tax liabilities before valuation allowances of $243 million. The valuation allowance of $129 million as of December 31, 2022 is related to U.S. federal foreign tax credits (FTCs) and certain state and foreign jurisdictions. The realization of deferred tax assets depends on achieving a certain minimum level of future taxable income. Management currently believes that it is at least reasonably possible that the minimum level of taxable income will be met within the next 12 months to reduce the valuation allowance of certain foreign jurisdictions by a range of zero to $3 million. The valuation allowance of $132 million as of December 31, 2021 is related to U.S. federal FTC's and certain state and foreign jurisdictions. The Company, or one of its subsidiaries, files income tax returns in the United States and other foreign jurisdictions. The Company is no longer subject to U.S. federal tax examinations for years before 2019 or state and foreign examinations for years before 2016. Due to the potential for resolution of federal, state and foreign examinations, and the expiration of various statutes of limitation, it is reasonably possible that the gross unrecognized tax benefits balance may change within the next 12 months by a range of zero to $5 million. A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows (in millions):
| Twelve Months Ended December 31,
| 2022 |  | 2021 |  | 2020
Balance at beginning of period | $ | 74 |  |  | $ | 76 |  |  | $ | 79 |
Tax positions related to the current year |  |  |  |  |
Gross additions | — |  |  | — |  |  | — |
Tax positions related to prior years |  |  |  |  |
Gross additions | 2 |  |  | 1 |  |  | 2 |
Gross reductions | — |  |  | (1) |  |  | (1) |
Settlements | (1) |  |  | (1) |  |  | (1) |
Expiration of statute of limitations | (3) |  |  | (1) |  |  | (3) |
Impact of currency changes | (1) |  |  | — |  |  | — |
Balance at end of period | $ | 71 |  |  | $ | 74 |  |  | $ | 76 |
If these unrecognized tax benefits were to be recognized as of December 31, 2022, the Company’s income tax expense would decrease by about $52 million. The Company classifies all interest and penalties as income tax expense. As of December 31, 2022, 2021 and 2020, and for the periods then ended, the Company recognized $7 million, $7 million and $7 million, respectively, in liabilities for tax related interest and penalties on its Consolidated Balance Sheets and $1 million, $2 million and less than $1 million, respectively, of interest and penalty expense on its Consolidated Statements of Earnings (Loss).

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