XML 27 R15.htm IDEA: XBRL DOCUMENT v3.25.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes

5. Income Taxes

 

INCOME BEFORE INCOME TAXES (Dollars in millions)

 

2024

 

 

2023

 

 

2022

 

U.S.

 

$

(51

)

 

$

29

 

 

$

(3

)

Non-U.S.

 

 

926

 

 

 

583

 

 

 

606

 

Total

 

$

875

 

 

$

612

 

 

$

603

 

PROVISION FOR INCOME TAXES (Dollars in millions)

 

2024

 

 

2023

 

 

2022

 

Current

 

 

 

 

 

 

 

 

 

U.S. federal

 

$

(6

)

 

$

19

 

 

$

32

 

Non-U.S.

 

 

260

 

 

 

210

 

 

 

181

 

U.S. state and local

 

 

3

 

 

 

3

 

 

 

5

 

 

 

 

 

 

 

 

 

 

 

Deferred

 

 

 

 

 

 

 

 

 

U.S. federal

 

 

(11

)

 

 

(7

)

 

 

(20

)

Non-U.S.

 

 

(16

)

 

 

(101

)

 

 

(17

)

U.S. state and local

 

 

(3

)

 

 

(1

)

 

 

(3

)

Total income tax expense

 

$

227

 

 

$

123

 

 

$

178

 

 

EFFECTIVE INCOME TAX RATE (%)

 

2024

 

 

2023

 

 

2022

 

 

U.S. federal income tax rate

 

 

21.0

 

%

 

21.0

 

%

 

21.0

 

%

Non-Deductible Expenses

 

 

0.9

 

 

 

1.8

 

 

 

0.5

 

 

Foreign tax rate variances

 

 

2.2

 

 

 

4.6

 

 

 

3.6

 

 

Tax credits

 

 

(2.1

)

 

 

(3.9

)

 

 

(3.5

)

 

Change in Valuation Allowances

 

 

0.5

 

 

 

11.6

 

 

 

(1.7

)

 

Changes in tax reserves

 

 

(2.1

)

 

 

2.7

 

 

 

(0.2

)

 

Provision to Return

 

 

(1.5

)

 

 

(0.2

)

 

 

0.6

 

 

Earnings of equity investments

 

 

(0.2

)

 

 

(0.2

)

 

 

(0.1

)

 

Withholding taxes

 

 

5.6

 

 

 

5.2

 

 

 

4.0

 

 

State taxes, net of federal benefit

 

 

0.0

 

 

 

0.3

 

 

 

0.4

 

 

Tax Audits

 

 

(0.5

)

 

 

0.0

 

 

 

1.0

 

 

Other Deferred Tax Adjustments1)

 

 

0.0

 

 

 

(26.7

)

 

 

0.0

 

 

U.S. FDII Deduction

 

 

0.0

 

 

 

(0.4

)

 

 

0.0

 

 

U.S. GILTI Tax

 

 

1.9

 

 

 

3.4

 

 

 

3.4

 

 

Impact of Translation Rates

 

 

0.6

 

 

 

1.1

 

 

 

0.2

 

 

Other, net

 

 

(0.3

)

 

 

(0.2

)

 

 

0.3

 

 

Effective income tax rate

 

 

26.0

 

%

 

20.1

 

%

 

29.5

 

%

1) Deferred tax asset recognized in 2023 due to the transfer of certain assets and operations as part of the Company's restructuring activities.

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. On December 31, 2024, the Company had net operating loss carryforwards (NOL’s) of approximately $363 million, of which approximately $339 million have no expiration date. The remaining losses expire on various dates through 2033.

Valuation allowances have been established which partially offset the related deferred assets. Such allowances are primarily provided against NOL’s of companies that have perennially incurred losses, as well as the NOL’s of companies that are start-up operations and have not established a pattern of profitability. The Company assesses all available evidence, both positive and negative, to determine the amount of any required valuation allowance. During 2024, the Company recorded valuation allowances against deferred tax assets of tax losses in certain companies and a partial valuation allowance against the deferred tax asset recognized due to the transfer of certain assets and operations as part of the Company’s restructuring activities, on the basis of management’s assessment of the amount of the related deferred tax assets that are not more likely than not to be realized.

The foreign tax rate variance reflects the fact that approximately two-thirds of the Company’s non-U.S. pre-tax income is generated by business operations located in tax jurisdictions where the tax rate is between 20-30%. The tax rate from quarter to quarter and from year to year is also impacted by the mix of earnings and tax rates in various jurisdictions compared to the same periods or prior years.

The Company has reserves for income taxes that may become payable in future periods as a result of tax audits. These reserves represent the Company’s best estimate of the potential liability for tax exposures. Inherent uncertainties exist in estimates of tax exposures due to changes in tax law, both legislated and concluded through the various jurisdictions’ court systems. The Company files income tax returns in the United States federal jurisdiction, and various states and non-U.S. jurisdictions.

The Company recognizes tax benefits only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Unrecognized tax benefits are tax benefits claimed in the Company’s tax returns that do not meet these recognition and measurement standards. At any given time, the Company is undergoing tax audits in several tax jurisdictions, covering multiple years. The Company is no longer subject to income tax examination by the U.S. Federal tax authorities for years prior to 2021. With few exceptions, the Company is no longer subject to income tax examination by U.S. state or local tax authorities or by non-U.S. tax authorities for years before 2011. The Company is undergoing tax audits in several non-U.S. jurisdictions and several U.S. state jurisdictions, covering multiple years. As of December 31, 2024, as a result of those tax examinations, the Company is not aware of any proposed income tax adjustments that would have a material impact on the Company’s financial statements, however, other audits could result in additional increases or decreases to the unrecognized tax benefits in some future period or periods. The Company believes that some of these audits will conclude within the next 12 months and that it is reasonably possible the amount of uncertain income tax positions, including interest, may decrease by $10-$15 million due to settlement of audits and expiration of statutes of limitations.

 

The Company recognizes interest and potential penalties accrued related to unrecognized tax benefits in tax expense. As of December 31, 2023, the Company had recorded $64 million for unrecognized tax benefits, including $14 million of accrued interest and penalties. During 2024, the Company recorded a net increase of $3 million to income tax reserves for unrecognized tax benefits related to tax positions taken in current year. Also, during 2024, the Company recorded a net decrease of $21 million to income tax reserves for unrecognized tax benefits due to settlement of audits and expiration of statutes of limitations.

 

The Company had $11 million accrued for the payment of interest and penalties as of December 31, 2024. Of the total unrecognized tax benefits of $43 million recorded at December 31, 2024, $13 million is classified as current income tax payable, and $30 million is classified as non-current tax payable included in Other Non-Current Liabilities on the Consolidated Balance Sheets. Substantially all of these reserves would impact the effective tax rate if released into income.

The following table summarizes the activity related to the Company’s unrecognized tax benefits.

 

UNRECOGNIZED TAX BENEFITS (Dollars in millions)

 

2024

 

 

2023

 

 

2022

 

Unrecognized tax benefits at beginning of year

 

$

83

 

 

$

67

 

 

$

65

 

Increases as a result of tax positions taken during a prior period

 

 

0

 

 

 

8

 

 

 

0

 

Increases as a result of tax positions taken during the current period

 

 

4

 

 

 

7

 

 

 

7

 

Decreases as a result of tax positions taken during a prior period

 

 

(6

)

 

 

0

 

 

 

0

 

Decreases relating to settlements with taxing authorities

 

 

(6

)

 

 

0

 

 

 

(4

)

Decreases resulting from the lapse of the applicable statute of limitations

 

 

(39

)

 

 

0

 

 

 

0

 

Translation Difference

 

 

(1

)

 

 

1

 

 

 

(1

)

Total unrecognized tax benefits at end of year

 

$

35

 

 

$

83

 

 

$

67

 

 

The tax effect of temporary differences and carryforwards that comprise significant portions of deferred tax assets and liabilities were as follows.

 

DEFERRED TAXES(Dollars in millions)

 

December 31,

 

 

 

2024

 

 

2023

 

 

2022

 

Assets

 

 

 

 

 

 

 

 

 

Provisions

 

$

112

 

 

$

126

 

 

$

99

 

Costs capitalized for tax

 

 

85

 

 

 

57

 

 

 

43

 

Other Deferred Tax Asset1)

 

 

158

 

 

 

160

 

 

 

—

 

Property, plant and equipment

 

 

30

 

 

 

11

 

 

 

12

 

Retirement Plans

 

 

39

 

 

 

40

 

 

 

42

 

Tax receivables, principally NOL’s

 

 

99

 

 

 

133

 

 

 

123

 

Deferred tax assets before allowances

 

 

523

 

 

 

527

 

 

 

319

 

Valuation allowances

 

 

(126

)

 

 

(129

)

 

 

(46

)

Total

 

 

397

 

 

 

398

 

 

 

273

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Distribution taxes

 

 

(3

)

 

 

(3

)

 

 

(3

)

Other

 

 

0

 

 

 

(1

)

 

 

(2

)

Total

 

 

(3

)

 

 

(4

)

 

 

(5

)

Net deferred tax asset

 

$

394

 

 

$

394

 

 

$

268

 

1) Deferred tax asset recognized in 2023 due to the transfer of certain assets and operations as part of the Company’s restructuring activities,

and is partially offset by the increased valuation allowances.

 

 

The following table summarizes the activity related to the Company’s valuation allowances (dollars in millions):

 

VALUATION ALLOWANCES AGAINST DEFERRED TAX ASSETS (Dollars in millions)

 

December 31,

 

 

 

2024

 

 

2023

 

 

2022

 

Allowances at beginning of year

 

$

129

 

 

$

46

 

 

$

59

 

Benefits reserved current year

 

 

11

 

 

 

81

 

 

 

14

 

Benefits recognized current year1)

 

 

(6

)

 

 

(2

)

 

 

(27

)

Translation difference

 

 

(8

)

 

 

4

 

 

 

0

 

Allowances at end of year

 

$

126

 

 

$

129

 

 

$

46

 

1) Benefits reserved in 2023 include the partial reserve against deferred tax assets recognized in 2023 due to the transfer of certain assets and operations as part of the Company's restructuring activities. In January 2025 the OECD released Administrative Guidance on Article 9.1 of the Global Anti-Base Erosion Model Rules which amends the Pillar Two Framework. Jurisdictions that have adopted the Framework may implement and administer their domestic laws consistent with the Model Rules and guidance. The Guidance eliminates the tax basis in certain deferred tax assets and tax credit carryforwards for purposes of global minimum tax established under the Framework. The Company is analyzing the latest Guidance and will recognize any impact in the first quarter of 2025.