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INCOME TAXES | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Earnings before income taxes and the provision for income taxes are presented in the following table.
| Year Ended December 31,
(in millions) | 2024 |  | 2023 |  | 2022
Earnings (loss) before income taxes: |  |  |  |  |
U.S.1 | $ | (303) |  |  | $ | (316) |  |  | $ | (40) |
Non-U.S.1 | 842 |  |  | 1,307 |  |  | 953 |
Total | $ | 539 |  |  | $ | 991 |  |  | $ | 913 |
Provision for income taxes: |  |  |  |  |
Current: |  |  |  |  |
Federal | $ | 27 |  |  | $ | 42 |  |  | $ | 49 |
State | 1 |  |  | 8 |  |  | 7 |
Foreign | 239 |  |  | 299 |  |  | 233 |
Total current expense | 267 |  |  | 349 |  |  | 289 |
Deferred: |  |  |  |  |
Federal | (198) |  |  | (85) |  |  | (54) |
State | (5) |  |  | — |  |  | (8) |
Foreign | 47 |  |  | 25 |  |  | (32) |
Total deferred benefit | (156) |  |  | (60) |  |  | (94) |
Total provision for income taxes | $ | 111 |  |  | $ | 289 |  |  | $ | 195 |
__________________________ 1 In 2023, the U.S. loss before income taxes included the realized and unrealized loss on debt and equity securities of $174 million that was primarily related to the Company’s investment in Wolfspeed convertible debt securities that was sold during the year. The provision for income taxes resulted in an effective tax rate of approximately 21%, 29% and 21% for the years ended December 31, 2024, 2023 and 2022, respectively. 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) | 2024 |  | 2023 |  | 2022
Income taxes at U.S. statutory rate of 21% | $ | 114 |  |  | $ | 209 |  |  | $ | 192 |
Increases (decreases) resulting from: |  |  |  |  |
Impairment of goodwill | 151 |  |  | — |  |  | — |
Net tax on remittance of foreign earnings | 38 |  |  | 45 |  |  | 36 |
Foreign rate differentials | 14 |  |  | 20 |  |  | 57 |
Valuation allowance adjustments, net | 23 |  |  | 186 |  |  | 21 |
Other permanent differences | 17 |  |  | 18 |  |  | 14 |
Changes in accounting methods and filing positions | (10) |  |  | (18) |  |  | (15) |
State taxes, net of federal benefit | (6) |  |  | 6 |  |  | (3) |
Affiliates' earnings | (6) |  |  | (7) |  |  | (6) |
Foreign derived intangible income deduction | (11) |  |  | (23) |  |  | (23) |
Impact of tax law and rate change | (9) |  |  | (1) |  |  | 1 |
U.S. tax on foreign earnings | 24 |  |  | 18 |  |  | 10 |
Enhanced research and development deductions | (29) |  |  | (35) |  |  | (33) |
Tax credits | (34) |  |  | (21) |  |  | (15) |
Deferred tax impact of intra-group transactions | (36) |  |  | (70) |  |  | — |
Tax holidays | (46) |  |  | (35) |  |  | (38) |
Reserve adjustments, settlements and claims | (99) |  |  | (15) |  |  | 13 |
Other, net | 16 |  |  | 12 |  |  | (16) |
Provision for income taxes, as reported | $ | 111 |  |  | $ | 289 |  |  | $ | 195 |
The Company’s tax rate is affected by the tax laws and rates of the U.S. and other jurisdictions in which the Company operates, the relative amount of income earned by jurisdiction and the relative amount of losses or income for which no tax benefit or expense was recognized due to a valuation allowance. The Company’s effective tax rate was impacted beneficially by tax incentives obtained in various non-U.S. countries, primarily those arising in China related to the High and New Technology Enterprise (“HNTE”) status of various subsidiaries ($46 million, $35 million and $38 million for the years ended December 31, 2024, 2023 and 2022, respectively). HNTE status is granted for three-year periods, and the Company seeks to renew such status on a regular basis. In addition, beneficial impacts were recognized related to tax deductions for qualifying research and development expenditures ($29 million, $35 million and $33 million for the years ended December 31, 2024, 2023 and 2022, respectively) and tax credits primarily related to research and development ($34 million, $21 million and $15 million for the years ended December 31, 2024, 2023 and 2022, respectively). The Company’s effective tax rate is also impacted by net changes to valuation allowances, where the Company has determined that it is more-likely-than-not that certain deferred tax assets would not be realized. For the years ended December 31, 2024, 2023, and 2022, the Company recorded net expense related to changes to valuation allowances of $23 million, $186 million, and $21 million, respectively In 2024, the Company reflected a $151 million tax impact of non-deductible impairment of goodwill. In addition, the Company recorded a discrete tax benefit of $107 million related to reductions in certain unrecognized tax benefits and accrued interest for matters where the statute of limitations lapsed, and a discrete tax benefit of $36 million related to post Spin-Off restructuring. In 2023, the Company recognized a discrete tax benefit of $19 million related to the resolution of tax audits and reductions in certain unrecognized tax benefits and accrued interest related to matters for which the statute of limitation had lapsed. In addition, the Company recognized a discrete tax benefit of $50 million in relation to the Spin-Off, a discrete tax benefit of $30 million in relation to various changes in filling positions for prior years, and a discrete tax expense of $79 million in relation to changes in judgment related to the recovery of deferred tax assets, primarily due to the impact of the Spin-Off on the allocation of the Company’s profits across jurisdictions for tax purposes as well as various tax structuring actions and strategies. In 2022, the Company recognized discrete tax benefits of $23 million, primarily related to a reduction in certain unrecognized tax benefits and accrued interest related to matters for which the statute of limitations had lapsed and favorable provision-to-return adjustments. A roll forward of the Company’s total gross unrecognized tax benefits is presented below:
(in millions) | 2024 |  | 2023 |  | 2022
Balance, January 1 | $ | 161 |  |  | $ | 172 |  |  | $ | 181 |
Additions based on tax positions related to current year | 9 |  |  | 15 |  |  | 19 |
Reductions for closure of tax audits and settlements | — |  |  | (5) |  |  | (9) |
Reductions for tax positions of prior years | (1) |  |  | (11) |  |  | (7) |
Reductions for lapse in statute of limitations | (67) |  |  | (10) |  |  | — |
Translation adjustment | (7) |  |  | — |  |  | (12) |
Balance, December 31 | $ | 95 |  |  | $ | 161 |  |  | $ | 172 |
The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense and accrued approximately $22 million and $65 million for the payment of interest and penalties at December 31, 2024 and 2023, respectively. For the years ended December 31, 2024, 2023 and 2022, the Company recognized expense related to interest and penalties of $5 million, $10 million and $6 million, respectively. During the year ended December 31, 2024, the Company also recorded a reduction in tax expense of $46 million for previously recorded interest related to matters for which the statute of limitations lapsed. As of December 31, 2024, approximately $92 million represents the amount that, if recognized, would affect the Company's effective income tax rate in future periods. This amount includes a decrease in U.S. federal income taxes that would occur upon recognition of the state tax benefits and U.S. foreign tax credits included therein. The Company and/or one of its subsidiaries files income tax returns in the U.S. federal, various state jurisdictions and various foreign jurisdictions. In certain tax jurisdictions, the Company may have more than one taxpayer. 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 |  | 2016 and prior |  | Luxembourg |  | 2017 and prior
China |  | 2018 and prior |  | Mexico |  | 2017 and prior
France |  | 2020 and prior |  | Poland |  | 2016 and prior
Germany |  | 2015 and prior |  | South Korea |  | 2017 and prior
Hungary |  | 2018 and prior |  | United Kingdom |  | 2019 and prior
Japan |  | 2023 and prior |  |  |  |
In the U.S., certain tax attributes created in years prior to 2017 were subsequently utilized. Even though the U.S. federal statute of limitations may have expired for years prior to 2017, the years in which these tax attributes were created could still be subject to examination, limited to only the examination of the creation of the tax attribute. The components of deferred tax assets and liabilities consist of the following:
| December 31,
(in millions) | 2024 |  | 2023
Deferred tax assets: |  |  |
Net operating loss and capital loss carryforwards | $ | 305 |  |  | $ | 359 |
Research and development capitalization | 291 |  |  | 211 |
Employee compensation | 45 |  |  | 43 |
State tax credits | 38 |  |  | 23 |
Warranty | 30 |  |  | 20 |
Unrecognized tax benefits | 25 |  |  | 27 |
Foreign tax credits | 9 |  |  | — |
Pension and other postemployment benefits | — |  |  | 4 |
Other comprehensive loss | — |  |  | 3 |
Other | 126 |  |  | 97 |
Total deferred tax assets | $ | 869 |  |  | $ | 787 |
Valuation allowance | (325) |  |  | (310) |
Net deferred tax asset | $ | 544 |  |  | $ | 477 |
Deferred tax liabilities: |  |  |
Fixed assets | (107) |  |  | (121) |
Goodwill and intangible assets | (100) |  |  | (135) |
Unremitted foreign earnings | (95) |  |  | (115) |
Other comprehensive income | (35) |  |  | — |
Pension and other postemployment benefits | (4) |  |  | — |
Unrealized gain on equity securities | (2) |  |  | (2) |
Other | (9) |  |  | (7) |
Total deferred tax liabilities | $ | (352) |  |  | $ | (380) |
Net deferred taxes | $ | 192 |  |  | $ | 97 |
As of December 31, 2024, the Company had gross deferred tax assets for certain non-U.S. net operating loss (“NOL”) carryforwards of $218 million, $40 million of which expire at various dates from 2025 through 2043 and $178 million of which have an indefinite life. The Company has a valuation allowance recorded of $174 million with regards to these deferred tax assets. As of December 31, 2024, certain U.S. subsidiaries had gross deferred tax assets of approximately $42 million for federal and state NOL carryforwards, $22 million of which expire at various dates from 2025 through 2043 and $20 million of which have an indefinite life. The Company has recorded a valuation allowance of $37 million with regards to these deferred tax assets. In addition, certain U.S. subsidiaries also have state tax credit carryforwards of $38 million, which are offset by a valuation allowance of $38 million. On a quarterly basis, the Company reviews the likelihood that the benefit of its deferred tax assets will be realized and, therefore, the need for valuation allowances. The Company assesses existing deferred tax assets, net operating loss carryforwards and tax credit carryforwards by jurisdiction and expectations of its ability to utilize these tax attributes through a review of past, current, and estimated future taxable income and tax planning strategies. If, based upon the weight of available evidence, it is more-likely-than-not the deferred tax assets will not be realized, a valuation allowance is recorded. Due to recent restructurings, the Company concluded that the weight of the negative evidence outweighs the positive evidence in certain foreign jurisdictions. As a result, the Company believes it is more-likely-than-not that the net deferred tax assets in certain foreign jurisdictions that include entities in France, Spain, Italy, U.S., and the U.K. will not be realized in the future. As of December 31, 2024, the Company recorded deferred tax liabilities of $95 million with respect to foreign unremitted earnings. The Company did not provide deferred tax liabilities with respect to certain book versus tax basis differences not represented by undistributed earnings of approximately $195 million as of December 31, 2024, because the Company continues to assert indefinite reinvestment of these basis differences. These basis differences would become taxable upon the sale or liquidation of the foreign subsidiaries. The Company’s best estimate of the unrecognized deferred tax liability on these basis differences is approximately $2 million as of December 31, 2024.

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