XML 53 R28.htm IDEA: XBRL DOCUMENT
v3.22.4

INCOME TAXES | 12 Months Ended
--- | ---
Dec. 31, 2022
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Significant components of the Company’s deferred tax assets and liabilities from continuing operations at the end of each fiscal year were as follows:
(Millions of Dollars) | 2022 |  | 2021
Deferred tax liabilities: |  |  |
Depreciation | $ | 160.1 |  |  | $ | 132.2 |
Intangible assets | 907.5 |  |  | 917.3 |
Liability on undistributed foreign earnings | 45.4 |  |  | 48.2 |
Lease right-of-use asset | 108.2 |  |  | 106.5 |
Inventory | 59.4 |  |  | 79.6 |
Other | 46.7 |  |  | 48.4 |
Total deferred tax liabilities | $ | 1,327.3 |  |  | $ | 1,332.2 |
Deferred tax assets: |  |  |
Employee benefit plans | $ | 130.9 |  |  | $ | 204.2 |
Basis differences in liabilities | 104.0 |  |  | 100.4 |
Operating loss, capital loss and tax credit carryforwards | 817.4 |  |  | 830.7 |
Lease liability | 110.4 |  |  | 109.7 |
Intangible assets | 556.8 |  |  | 417.7 |
Basis difference in debt obligations | 268.0 |  |  | 205.1 |
Capitalized research and development costs | 134.7 |  |  | 86.0 |
Other | 204.3 |  |  | 206.6 |
Total deferred tax assets | $ | 2,326.5 |  |  | $ | 2,160.4 |
Net Deferred Tax Asset before Valuation Allowance | $ | 999.2 |  |  | $ | 828.2 |
Valuation Allowance | $ | (1,032.5) |  |  | $ | (1,067.2) |
Net Deferred Tax Liability after Valuation Allowance | $ | (33.3) |  |  | $ | (239.0) |
The increase in intangible deferred tax assets relates to the intra-entity asset transfer of certain intangible assets between two of the Company's foreign subsidiaries. The recognized deferred tax benefit represents the difference between the basis of the intellectual property for financial statement purposes and the basis of the intellectual property for tax purposes. A valuation allowance is recorded on certain deferred tax assets if it has been determined it is more likely than not that all or a portion of these assets will not be realized. The Company recorded a valuation allowance of $1,032.5 million and $1,067.2 million on deferred tax assets existing as of December 31, 2022 and January 1, 2022, respectively. The valuation allowances in 2022 and 2021 are primarily attributable to foreign and state net operating loss carryforwards, intangible assets, foreign capital loss carryforwards, and state tax credits. As of December 31, 2022, the Company has approximately $5.2 billion of unremitted foreign earnings and profits. Of the total amount, the Company has provided for deferred taxes of $45.4 million on approximately $1.5 billion, which is not indefinitely reinvested primarily due to the changes brought about by the Tax Cuts and Jobs Act. The Company otherwise continues to consider the remaining undistributed earnings of its foreign subsidiaries to be permanently reinvested based on its current plans for use outside of the U.S. and accordingly no taxes have been provided on such earnings. The cash held by the Company’s non-U.S. subsidiaries for indefinite reinvestment is generally used to finance foreign operations and investments, including acquisitions. The income taxes applicable to such earnings and other outside basis differences are not readily determinable or practicable to calculate. Net operating loss carryforwards of $3.0 billion as of December 31, 2022 are available to reduce future tax obligations of certain U.S. and foreign companies. The net operating loss carryforwards have various expiration dates beginning in 2023 with certain jurisdictions having indefinite carryforward periods. The foreign capital loss carryforwards of $56.5 million as of December 31, 2022 have indefinite carryforward periods. U.S. foreign tax credit carryforward balance as of December 31, 2022 totaled $22.5 million with various expiration dates beginning in 2029. U.S. foreign tax credit carryforward of $12.9 million is included in unrecognized tax benefits and subject to an annual limitation, which constitutes a change of ownership as defined under the Internal Revenue Code Section 382. State tax credit carryforward balance as of December 31, 2022 totaled $23.2 million. The carryforward balance is made up of various credit types spanning multiple state taxing jurisdictions and various expiration dates beginning in 2023. On August 9, 2022, the U.S. government enacted the Creating Helpful Incentives to Produce Semiconductors (“CHIPS Act”), which includes an advanced manufacturing investment tax credit and tax incentives related to semiconductor manufacturing, among other provisions. On August 16, 2022, the U.S. government enacted the Inflation Reduction Act (“IRA”), which imposes a new corporate alternative minimum tax (“CAMT”), an excise tax on stock buybacks, and significant tax incentives for energy and climate initiatives, among other provisions. The CAMT is effective for tax years beginning after December 31, 2022, while the excise tax applies to repurchases of stock after December 31, 2022. The effective dates of the energy related incentives vary. In response to a technical inquiry, the FASB provided guidance permitting a company to make an accounting policy election to either consider the effect of CAMT when evaluating the need for, and the amount of, a valuation allowance or account for the effects on deferred tax assets in the period they arise. The Company has elected to account for the effects of CAMT on deferred tax assets in the period they arise. The Company evaluated the impacts of the CHIPS Act and the IRA and concluded that they do not have a material impact on the Company’s consolidated financial statements. The components of earnings from continuing operations before income taxes and equity interest consisted of the following:
(Millions of Dollars) | 2022 |  | 2021 |  | 2020
United States | $ | (1,233.8) |  |  | $ | (77.7) |  |  | $ | 144.5 |
Foreign | 1,271.7 |  |  | 1,664.6 |  |  | 1,039.2 |
Earnings before income taxes and equity interest | $ | 37.9 |  |  | $ | 1,586.9 |  |  | $ | 1,183.7 |
Income taxes on continuing operations consisted of the following:
(Millions of Dollars) | 2022 |  | 2021 |  | 2020
Current: |  |  |  |  |
Federal | $ | (79.0) |  |  | $ | 0.3 |  |  | $ | 55.4 |
Foreign | 248.6 |  |  | 388.0 |  |  | 183.2 |
State | (16.7) |  |  | 31.8 |  |  | 19.8 |
Total current | $ | 152.9 |  |  | $ | 420.1 |  |  | $ | 258.4 |
Deferred: |  |  |  |  |
Federal | $ | (61.2) |  |  | $ | (124.7) |  |  | $ | (25.1) |
Foreign | (222.5) |  |  | (210.1) |  |  | (192.1) |
State | (1.6) |  |  | (30.2) |  |  | (3.2) |
Total deferred | (285.3) |  |  | (365.0) |  |  | (220.4) |
Income taxes | $ | (132.4) |  |  | $ | 55.1 |  |  | $ | 38.0 |
Net income taxes paid for continuing operations during 2022, 2021 and 2020 were $482.6 million, $441.8 million and $241.6 million, respectively. The 2022, 2021 and 2020 amounts include refunds of $41.8 million, $50.1 million and $43.8 million, respectively, primarily related to prior year overpayments and settlement of tax audits. The reconciliation of the U.S. federal statutory income tax provision to Income taxes on continuing operations in the Consolidated Statements of Operations is as follows:
(Millions of Dollars) | 2022 |  | 2021 |  | 2020
Tax at statutory rate | $ | 8.0 |  |  | $ | 333.2 |  |  | $ | 248.6 |
State income taxes, net of federal benefits | (19.3) |  |  | 1.4 |  |  | 12.0 |
Foreign tax rate differential | (28.8) |  |  | (63.5) |  |  | (58.6) |
Uncertain tax benefits | 26.3 |  |  | 49.6 |  |  | 17.7 |
Change in valuation allowance | (25.1) |  |  | (11.9) |  |  | (12.7) |
Change in deferred tax liabilities on undistributed foreign earnings | 12.8 |  |  | 23.1 |  |  | (118.8) |
Stock-based compensation | 7.3 |  |  | (6.3) |  |  | (9.2) |
Change in tax rates | (5.5) |  |  | (31.1) |  |  | (0.3) |
Tax credits | (8.8) |  |  | (6.7) |  |  | (6.0) |
Capital loss | — |  |  | — |  |  | (40.4) |
U.S. federal tax expense (benefit) on foreign earnings | 55.7 |  |  | (118.1) |  |  | 2.0 |
Intra-entity asset transfer of intellectual property | (153.3) |  |  | (114.2) |  |  | (27.7) |
Other | (1.7) |  |  | (0.4) |  |  | 31.4 |
Income taxes | $ | (132.4) |  |  | $ | 55.1 |  |  | $ | 38.0 |
The Company conducts business globally and, as a result, files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course, the Company is subject to examinations by taxing authorities throughout the world. The Internal Revenue Service is currently examining the Company's consolidated U.S. income tax returns for the 2017 through 2019 tax years. With few exceptions, as of December 31, 2022, the Company is no longer subject to U.S. federal, state, local, or foreign examinations by tax authorities for years before 2012. The Company’s liabilities for unrecognized tax benefits relate to U.S. and various foreign jurisdictions. The following table summarizes the activity related to the unrecognized tax benefits from continuing operations:
(Millions of Dollars) | 2022 |  | 2021 |  | 2020
Balance at beginning of year | $ | 487.7 |  |  | $ | 428.3 |  |  | $ | 392.0 |
Additions based on tax positions related to current year | 27.2 |  |  | 33.6 |  |  | 27.8 |
Additions based on tax positions related to prior years | 41.1 |  |  | 53.5 |  |  | 34.4 |
Reductions based on tax positions related to prior years | (37.8) |  |  | (17.2) |  |  | (19.0) |
Settlements | (7.0) |  |  | (1.3) |  |  | (0.5) |
Statute of limitations expirations | (8.5) |  |  | (9.2) |  |  | (6.4) |
Balance at end of year | $ | 502.7 |  |  | $ | 487.7 |  |  | $ | 428.3 |
The gross unrecognized tax benefits from continuing operations at December 31, 2022 and January 1, 2022 include $496.0 million and $478.4 million, respectively, of tax benefits that, if recognized, would impact the effective tax rate. The liability for potential penalties and interest related to unrecognized tax benefits from continuing operations decreased by $11.2 million in 2022, increased by $9.6 million in 2021 and decreased by $3.4 million in 2020. The liability for potential penalties and interest totaled $48.8 million as of December 31, 2022, $60.0 million as of January 1, 2022, and $49.2 million as of January 2, 2021. The Company classifies all tax-related interest and penalties as income tax expense. The Company considers many factors when evaluating and estimating its tax positions and the impact on income tax expense, which may require periodic adjustments, and which may not accurately anticipate actual outcomes. It is reasonably possible that the amount of the unrecognized benefit with respect to certain of the Company's unrecognized tax positions will significantly increase or decrease within the next twelve months. However, based on the uncertainties associated with finalizing audits with the relevant tax authorities including formal legal proceedings, it is not possible to reasonably estimate the impact of any such change.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration