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INCOME TAXES (Tables) | 12 Months Ended
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Dec. 31, 2021
Income Tax Disclosure [Abstract] |
Summary of components of income tax expense (benefit) | Earnings before income taxes and the provision for income taxes are presented in the following table.
| Year Ended December 31,
(in millions) | 2021 |  | 2020 |  | 2019
Earnings (loss) before income taxes: |  |  |  |  |
U.S.1 | $ | (423) |  |  | $ | 437 |  |  | $ | 310 |
Non-U.S.1 | 1,212 |  |  | 527 |  |  | 955 |
Total | $ | 789 |  |  | $ | 964 |  |  | $ | 1,265 |
Provision for income taxes: |  |  |  |  |
Current: |  |  |  |  |
Federal | $ | 43 |  |  | $ | 19 |  |  | $ | 32 |
State | 7 |  |  | 2 |  |  | 4 |
Foreign | 276 |  |  | 252 |  |  | 245 |
Total current expense | 326 |  |  | 273 |  |  | 281 |
Deferred: |  |  |  |  |
Federal | (98) |  |  | 70 |  |  | 150 |
State | (13) |  |  | 11 |  |  | 23 |
Foreign | (65) |  |  | 43 |  |  | 14 |
Total deferred (benefit) expense | (176) |  |  | 124 |  |  | 187 |
Total provision for income taxes | $ | 150 |  |  | $ | 397 |  |  | $ | 468 |
__________________________ 1 In 2021, the U.S. loss before income taxes was primarily related to the $362 million unrealized loss related to the Company’s investment in Romeo Power, Inc. In 2020, the Company recognized a $382 million unrealized gain related to its investment in Romeo Power, Inc.
Schedule of effective income tax rate reconciliation | The following table provides a reconciliation of tax expense based on the U.S. statutory tax rate to final tax expense.
| Year Ended December 31,
(in millions) | 2021 |  | 2020 |  | 2019
Income taxes at U.S. statutory rate of 21% | $ | 166 |  |  | $ | 203 |  |  | $ | 266 |
Increases (decreases) resulting from: |  |  |  |  |
Valuation allowance adjustments, net | 39 |  |  | 53 |  |  | (2) |
Net tax on remittance of foreign earnings | 43 |  |  | 93 |  |  | 22 |
Foreign rate differentials | 36 |  |  | 21 |  |  | 35 |
U.S. tax on non-U.S. earnings | 12 |  |  | 11 |  |  | 15 |
State taxes, net of federal benefit | 5 |  |  | 12 |  |  | 3 |
Derecognition of Morse TEC | — |  |  | — |  |  | 137 |
Tax credits | (5) |  |  | (12) |  |  | (17) |
Affiliates' earnings | (10) |  |  | (4) |  |  | (7) |
Changes in accounting methods and filing positions | (18) |  |  | (18) |  |  | (7) |
Reserve adjustments, settlements and claims | (17) |  |  | 45 |  |  | 46 |
Impact of tax law and rate change | (20) |  |  | — |  |  | — |
Tax holidays | (76) |  |  | (36) |  |  | (26) |
Research and development super deduction | (27) |  |  | (9) |  |  | (5) |
Other, net | 22 |  |  | 38 |  |  | 8 |
Provision for income taxes, as reported | $ | 150 |  |  | $ | 397 |  |  | $ | 468 |
Reconciliation of the total gross unrecognized tax benefits | A roll forward of the Company’s total gross unrecognized tax benefits is presented below:
(in millions) | 2021 |  | 2020 |  | 2019
Balance, January 1 | $ | 231 |  |  | $ | 146 |  |  | $ | 120 |
Additions based on tax positions related to current year | 23 |  |  | 14 |  |  | 7 |
Acquisitions | 8 |  |  | 54 |  |  | — |
Additions for tax positions of prior years | — |  |  | 9 |  |  | 26 |
Reductions for lapse in statute of limitations | (36) |  |  | (5) |  |  | (6) |
Translation adjustment | (5) |  |  | 13 |  |  | (1) |
Balance, December 31 | $ | 221 |  |  | $ | 231 |  |  | $ | 146 |
Summary of tax jurisdiction | The Company is no longer subject to income tax examinations by tax authorities in its major tax jurisdictions as follows:
Tax jurisdiction |  | Years no longer subject to audit |  | Tax jurisdiction |  | Years no longer subject to audit
U.S. Federal |  | 2013 and prior |  | Japan |  | 2018 and prior
Barbados |  | 2016 and prior |  | Luxembourg |  | 2016 and prior
China |  | 2015 and prior |  | Mexico |  | 2015 and prior
France |  | 2015 and prior |  | Poland |  | 2016 and prior
Germany |  | 2011 and prior |  | South Korea |  | 2016 and prior
Hungary |  | 2015 and prior |  | United Kingdom |  | 2015 and prior
Schedule of deferred tax assets (liabilities) | The components of deferred tax assets and liabilities consist of the following:
| December 31,
(in millions) | 2021 |  | 2020
Deferred tax assets: |  |  |
Net operating loss and capital loss carryforwards | $ | 634 |  |  | $ | 656 |
Interest limitation carryforwards | 123 |  |  | 111 |
Research and development capitalization | 91 |  |  | 57 |
Employee compensation | 44 |  |  | 39 |
Pension and other postretirement benefits | 41 |  |  | 93 |
Other comprehensive loss | 39 |  |  | 106 |
Unrecognized tax benefits | 32 |  |  | 47 |
Warranty | 31 |  |  | 27 |
State tax credits | 28 |  |  | 28 |
Foreign tax credits | 8 |  |  | 16 |
Other | 167 |  |  | 161 |
Total deferred tax assets | $ | 1,238 |  |  | $ | 1,341 |
Valuation allowance | (554) |  |  | (529) |
Net deferred tax asset | $ | 684 |  |  | $ | 812 |
Deferred tax liabilities: |  |  |
Goodwill and intangible assets | (274) |  |  | (279) |
Unremitted foreign earnings | (146) |  |  | (156) |
Fixed assets | (123) |  |  | (176) |
Unrealized gain on equity securities | (5) |  |  | (91) |
Other | (88) |  |  | (95) |
Total deferred tax liabilities | $ | (636) |  |  | $ | (797) |
Net deferred taxes | $ | 48 |  |  | $ | 15 |

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- Definition Tabular disclosure for tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities and other income tax contingencies. Includes, but is not limited to, interest and penalties, reconciliation of unrecognized tax benefits, unrecognized tax benefits that would affect the effective tax rate, tax years that remain subject to examination by tax jurisdictions, and information about positions for which it is reasonably possible that amounts unrecognized will significantly change within 12 months. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15A -URI http://asc.fasb.org/extlink&oid=121826272&loc=SL6600010-109319 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -Subparagraph (d) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32718-109319 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 19 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32840-109319 + Details
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