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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 sources of income before income taxes and equity in net earnings of affiliates were as follows for the years ended December 31, 2022, 2021 and 2020 (in millions):
| 2022 |  | 2021 |  | 2020
United States | $ | (60.2) |  |  | $ | 46.8 |  |  | $ | (73.4) |
Foreign | 1,167.4 |  |  | 897.5 |  |  | 635.4 |
Income before income taxes and equity in net earnings of affiliates | $ | 1,107.2 |  |  | $ | 944.3 |  |  | $ | 562.0 |
The provision for income taxes by location of the taxing jurisdiction for the years ended December 31, 2022, 2021 and 2020 consisted of the following (in millions):
| 2022 |  | 2021 |  | 2020
Current: |  |  |  |  |
United States | $ | 26.0 |  |  | $ | 3.4 |  |  | $ | 4.1 |
Foreign | 328.6 |  |  | 222.9 |  |  | 180.2 |
| 354.6 |  |  | 226.3 |  |  | 184.3 |
Deferred: |  |  |  |  |
United States | (55.3) |  |  | (70.0) |  |  | 1.3 |
Foreign | (2.7) |  |  | (47.9) |  |  | 2.1 |
| (58.0) |  |  | (117.9) |  |  | 3.4 |
| $ | 296.6 |  |  | $ | 108.4 |  |  | $ | 187.7 |
The Company’s income tax provision as of December 31, 2021 includes the benefit of the reversals of approximately $67.8 million and $55.6 million related to valuation allowances previously established against the Company’s net deferred tax assets in the United States and Brazil, respectively. The Company recorded the reversal of a portion of the United States valuation allowance during the three months ended June 30, 2021, and the reversal of a portion of its Brazilian valuation allowance during the three months ended December 31, 2021. Improvements in income in the United States and Brazil during 2020 and 2021, along with updated future projected income levels, supported the reversal of both valuation allowances during those respective periods in 2021. A reconciliation of income taxes computed at the United States federal statutory income tax rate (21% for 2022, 2021 and 2020) to the provision for income taxes reflected in the Company’s Consolidated Statements of Operations for the years ended December 31, 2022, 2021 and 2020 is as follows (in millions):
| 2022 |  | 2021 |  | 2020
Provision for income taxes at United States federal statutory rate(1) | $ | 232.5 |  |  | $ | 198.3 |  |  | $ | 118.0 |
State and local income taxes, net of federal income tax effects(1) | (2.9) |  |  | 2.2 |  |  | (3.5) |
Taxes on foreign income which differ from the United States statutory rate | 43.6 |  |  | 16.2 |  |  | 13.9 |
Tax effect of permanent differences | (0.2) |  |  | (6.4) |  |  | 13.4 |
Change in valuation allowance | 0.7 |  |  | (130.8) |  |  | 16.3 |
Change in tax contingency reserves | 25.5 |  |  | 36.6 |  |  | 37.2 |
Research and development tax credits | (6.9) |  |  | (7.4) |  |  | (9.0) |
Other | 4.3 |  |  | (0.3) |  |  | 1.4 |
| $ | 296.6 |  |  | $ | 108.4 |  |  | $ | 187.7 |
____________________________________ (1)There were no impacts related to changes in tax laws that impacted the Company in 2022, 2021 and 2020. The significant components of the deferred tax assets and liabilities at December 31, 2022 and 2021 were as follows (in millions):
| 2022 |  | 2021
Deferred Tax Assets: |  |  |
Net operating loss carryforwards | $ | 45.9 |  |  | $ | 69.5 |
Sales incentive discounts | 46.3 |  |  | 40.1 |
Inventory valuation reserves | 34.4 |  |  | 33.6 |
Pensions and postretirement health care benefits | 19.7 |  |  | 18.5 |
Warranty and other reserves | 127.7 |  |  | 102.9 |
Research and development tax credits | 6.9 |  |  | 3.8 |
Foreign tax credits | 4.7 |  |  | 9.4 |
Other | 15.6 |  |  | 14.0 |
Total gross deferred tax assets | 301.2 |  |  | 291.8 |
Valuation allowance | (47.3) |  |  | (47.4) |
Total deferred tax assets | 253.9 |  |  | 244.4 |
Deferred Tax Liabilities: |  |  |
Tax over book depreciation and amortization | 123.6 |  |  | 159.3 |
Investment in affiliates | 11.3 |  |  | 24.4 |
Other | 2.5 |  |  | 8.3 |
Total deferred tax liabilities | 137.4 |  |  | 192.0 |
Net deferred tax assets | $ | 116.5 |  |  | $ | 52.4 |
Amounts recognized in Consolidated Balance Sheets: |  |  |
Deferred tax assets - noncurrent | $ | 228.5 |  |  | $ | 169.3 |
Deferred tax liabilities - noncurrent | (112.0) |  |  | (116.9) |
| $ | 116.5 |  |  | $ | 52.4 |
As reflected in the preceding table, the Company recorded a net deferred tax asset of $116.5 million and $52.4 million as of December 31, 2022 and 2021, respectively, and had a valuation allowance against its gross deferred tax assets of approximately $47.3 million and $47.4 million as of December 31, 2022 and 2021, respectively. The Company maintains a valuation allowance to reserve a portion of its net deferred tax assets in the United States and certain foreign jurisdictions. A valuation allowance is established when it is more likely than not that some portion or all of the deferred tax assets may not be realized. The Company assessed the likelihood that its deferred tax assets would be recovered from estimated future taxable income and the current economic climate, as well as available tax planning strategies, and determined that all adjustments to the valuation allowance were appropriate. The Company believes it is more likely than not that it will realize its remaining net deferred tax assets, net of the valuation allowance, in future years. The Company had net operating loss carryforwards of $136.3 million as of December 31, 2022, with expiration dates as follows: 2023 - $27.2 million; 2024 - $6.7 million; 2025 and thereafter - $21.2 million and unlimited - $81.2 million. The net operating loss carryforwards of $136.3 million are entirely in tax jurisdictions outside of the United States. The amount of the Company’s U.S. state net operating loss carryforwards is not material. The Company paid income taxes of $304.0 million, $247.3 million and $181.4 million for the years ended December 31, 2022, 2021 and 2020, respectively. The Company recognizes income tax benefits from uncertain tax positions only when there is a more than 50% likelihood that the tax positions will be sustained upon examination by the taxing authorities based on the technical merits of the positions. At December 31, 2022 and 2021, the Company had approximately $10.4 million and $40.1 million, respectively, of accrued or deferred taxes related to uncertain income tax positions connected with ongoing income tax audits in various jurisdictions that it expects to settle or pay in the next 12 months. At December 31, 2022 and 2021, the Company had approximately $274.1 million and $196.7 million, respectively, of accrued taxes reflected in “Other noncurrent liabilities”, and approximately $2.8 million of deferred tax assets and $9.6 million of deferred tax liabilities, respectively, related to uncertain tax positions that it expects to settle or pay beyond 12 months, reflected in “Deferred tax assets” and “Deferred tax liabilities,” respectively, in the Company’s Consolidated Balance Sheets. The Company accrued approximately $6.0 million and $4.8 million of interest and penalties related to unrecognized tax benefits in its provision for income taxes during 2022 and 2021, respectively. At December 31, 2022 and 2021, the Company had accrued interest and penalties related to unrecognized tax benefits of $25.8 million and $32.7 million, respectively. A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits as of and during the years ended December 31, 2022 and 2021 is as follows (in millions):
| 2022 |  | 2021
Gross unrecognized income tax benefits at the beginning of the year | $ | 246.4 |  |  | $ | 227.9 |
Additions for tax positions of the current year | 51.7 |  |  | 43.0 |
Additions for tax positions of prior years | 3.9 |  |  | 8.4 |
Reductions for tax positions of prior years for: |  |  |
Changes in judgments | (6.5) |  |  | 3.2 |
Settlements during the year | (0.6) |  |  | (19.1) |
Lapses of applicable statute of limitations | (1.2) |  |  | (0.6) |
Foreign currency translation and other | (12.0) |  |  | (16.4) |
Gross unrecognized income tax benefits at the end of the year | $ | 281.7 |  |  | $ | 246.4 |
At December 31, 2022 and 2021, the Company had $281.7 million and $246.4 million, respectively, of unrecognized income tax benefits, which would affect the Company’s effective tax rate if recognized. The reconciliation of gross unrecognized income tax benefits above for 2022 and 2021 excludes certain indirect favorable effects that relate to other tax jurisdictions of approximately $74.0 million and $70.2 million, respectively. The change in certain indirect favorable effects between 2022 and 2021 includes approximately $22.4 million and $3.8 million, respectively, related to additions and reductions for tax positions of current and prior years, changes in judgments and lapses of statutes of limitations. During 2022, the Company made the determination that it will be able to utilize approximately $15.7 million of indirect favorable benefits in the United States related to the settlement of a foreign audit examination. In addition, the gross unrecognized income tax benefits as of December 31, 2022 and 2021 exclude certain deposits made in a foreign jurisdiction of approximately $45.1 million and $6.7 million, respectively, associated with an ongoing audit. The Company and its subsidiaries file income tax returns in the United States and in various state, local and foreign jurisdictions. The Company and its subsidiaries are routinely examined by tax authorities in these jurisdictions. As of December 31, 2022, a number of income tax examinations in foreign jurisdictions, as well as the United States, were ongoing. It is possible that certain of these ongoing examinations may be resolved within 12 months. 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 Company’s gross unrecognized income tax benefits balance may materially change within the next 12 months. In certain foreign jurisdictions, there are either statutory expirations or the Company’s settlement expectations such that approximately $10.4 million could be concluded within the next 12 months. Although there are ongoing examinations in various federal and state jurisdictions, the 2017 through 2022 tax years generally remain subject to examination in the United States by applicable authorities. In the Company’s significant foreign jurisdictions, primarily the United Kingdom, France, Germany, Switzerland, Finland and Brazil, the 2017 through 2022 tax years generally remain subject to examination by their respective tax authorities. In Brazil, the Company is contesting disallowed deductions related to amortization of certain goodwill amounts (see Note 12). In 2022, the U.S. Inflation Reduction Act and the CHIPS and Science Act of 2022 (the “Acts”) were signed into law. These acts include, among other provisions, a corporate alternative minimum tax of 15%, an excise tax on the repurchase of corporate stock, various climate and energy provisions, and incentives for investment in semiconductor manufacturing. The primary provisions of the Acts are effective during 2023 and forward. The Company is evaluating the impact these acts could have on the Company’s future tax provision and the effective tax rate, as well as any other impacts on the Company’s financial position and results of operations.

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