XML 72 R27.htm IDEA: XBRL DOCUMENT v3.24.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2023
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, 2023, 2022 and 2021 (in millions):
202320222021
United States$(63.5)$(60.2)$46.8 
Foreign1,397.0 1,167.4 897.5 
Income before income taxes and equity in net earnings of affiliates$1,333.5 $1,107.2 $944.3 

    The provision for income taxes by location of the taxing jurisdiction for the years ended December 31, 2023, 2022 and 2021 consisted of the following (in millions):
202320222021
Current:
United States$61.2 $26.0 $3.4 
Foreign433.6 328.6 222.9 
494.8 354.6 226.3 
Deferred:
United States(82.8)(55.3)(70.0)
Foreign(181.6)(2.7)(47.9)
(264.4)(58.0)(117.9)
$230.4 $296.6 $108.4 

    The Company's income tax provision as of December 31, 2023 includes a benefit of $112.3 million related to the recognition of a deferred tax asset of $197.7 million, net of a valuation allowance of $85.4 million, related to the finalization of negotiations surrounding the application of Swiss Tax reform legislation enacted in 2020. The provision also includes a charge of approximately $26.4 million associated with our enrollment in a Brazilian tax amnesty program, "Litigation Zero", discussed further below.

    A reconciliation of income taxes computed at the United States federal statutory income tax rate (21% for 2023, 2022 and 2021) to the provision for income taxes reflected in the Company’s Consolidated Statements of Operations for the years ended December 31, 2023, 2022 and 2021 is as follows (in millions):
202320222021
Provision for income taxes at United States federal statutory rate
$280.0 $232.5 $198.3 
State and local income taxes, net of federal income tax effects
(3.0)(2.9)2.2 
Taxes on foreign income which differ from the United States statutory rate(1)
(193.9)43.6 16.2 
Tax effect of permanent differences(20.5)(0.2)(6.4)
Change in valuation allowance(1)
116.5 0.7 (130.8)
Change in tax contingency reserves33.2 25.5 36.6 
Research and development tax credits(9.6)(6.9)(7.4)
Brazil Amnesty Program, net of United States foreign tax credit
26.4 — — 
Other1.3 4.3 (0.3)
$230.4 $296.6 $108.4 
____________________________________
(1) In 2023, a gross deferred tax asset of $197.7 million less a valuation allowance of $85.4 million was recognized to reflect future Swiss tax incentives the Company anticipates it will be able to utilize by 2034 when the incentive expires.
    The significant components of the deferred tax assets and liabilities at December 31, 2023 and 2022 were as follows (in millions):
20232022
Deferred Tax Assets:
Net operating loss carryforwards$42.1 $45.9 
Sales incentive discounts102.5 46.3 
Inventory valuation reserves50.0 34.4 
Pensions and postretirement health care benefits17.9 19.7 
Warranty and other reserves162.8 127.7 
Research and development tax credits5.1 6.9 
Foreign tax credits33.4 4.7 
Swiss tax basis adjustment
197.7 — 
Other22.7 15.6 
Total gross deferred tax assets634.2 301.2 
Valuation allowance(149.8)(47.3)
Total deferred tax assets484.4 253.9 
Deferred Tax Liabilities:
Tax over book depreciation and amortization102.5 123.6 
Investment in affiliates3.9 11.3 
Other19.0 2.5 
Total deferred tax liabilities125.4 137.4 
Net deferred tax assets$359.0 $116.5 
Amounts recognized in Consolidated Balance Sheets:
Deferred tax assets - noncurrent$481.6 $228.5 
Deferred tax liabilities - noncurrent(122.6)(112.0)
$359.0 $116.5 

    As reflected in the preceding table, the Company recorded a net deferred tax asset of $359.0 million and $116.5 million as of December 31, 2023 and 2022, respectively, and had a valuation allowance against its gross deferred tax assets of approximately $149.8 million and $47.3 million as of December 31, 2023 and 2022, 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.
    Changes in the valuation allowance during the years ended December 31, 2023, 2022 and 2021 are summarized as follows (in millions):
Additions
DescriptionBalance at
Beginning
of Period		Acquired
Businesses
Charged (Credited) to
Costs and
Expenses(1)
Deductions(2)
Foreign
Currency
Translation		Balance at
End of Period
Year ended December 31, 2023      
Deferred tax valuation allowance$47.3 $— $116.5 $(16.7)$2.7 $149.8 
Year ended December 31, 2022      
Deferred tax valuation allowance$47.4 $— $0.7 $— $(0.8)$47.3 
Year ended December 31, 2021      
Deferred tax valuation allowance$181.0 $0.4 $(130.8)$— $(3.2)$47.4 
(1) The amounts recorded to expense in 2023 are primarily related to Switzerland and the U.S. There were no amounts credited or charged through other comprehensive income during 2023, 2022 and 2021.
(2) The deductions are primarily related to reversal of valuation allowance from the effective utilization of certain tax losses in the Brazil amnesty program during 2023.

    The Company had net operating loss carryforwards of $133.9 million as of December 31, 2023, with expiration dates as follows: 2024 - $7.2 million; 2025 - $2.0 million; 2026 and thereafter - $73.9 million and unlimited - $50.8 million. The net operating loss carryforwards of $133.9 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 $463.6 million, $304.0 million and $247.3 million for the years ended December 31, 2023, 2022 and 2021, 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, 2023 and 2022, the Company had approximately $9.9 million and $10.4 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, 2023 and 2022, the Company had approximately $344.2 million and $274.1 million, respectively, of accrued taxes reflected in “Other noncurrent liabilities”, and approximately $2.9 million and $2.8 million of deferred tax assets, respectively, related to uncertain tax positions that it expects to settle or pay beyond 12 months, reflected in “Deferred tax assets” in the Company’s Consolidated Balance Sheets. The Company accrued approximately $0.3 million and $6.0 million of interest and penalties related to unrecognized tax benefits in its provision for income taxes during 2023 and 2022, respectively. At December 31, 2023 and 2022, the Company had accrued interest and penalties related to unrecognized tax benefits of $27.9 million and $25.8 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, 2023 and 2022 is as follows (in millions):
20232022
Gross unrecognized income tax benefits at the beginning of the year$281.7 $246.4 
Additions for tax positions of the current year67.9 51.7 
Additions for tax positions of prior years5.5 3.9 
Reductions for tax positions of prior years for:
Changes in judgments2.8 (6.5)
Settlements during the year(15.4)(0.6)
Lapses of applicable statute of limitations(2.0)(1.2)
Foreign currency translation and other10.7 (12.0)
Gross unrecognized income tax benefits at the end of the year$351.2 $281.7 
    At December 31, 2023 and 2022, the Company had $351.2 million and $281.7 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 2023 and 2022 excludes certain indirect favorable effects that relate to other tax jurisdictions of approximately $103.9 million and $74.0 million, respectively. The change in certain indirect favorable effects between 2023 and 2022 includes approximately $26.7 million and $22.4 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, 2023 and 2022 exclude certain deposits made in a foreign jurisdiction of approximately $26.9 million, net of $19.7 million refunds received, and $45.1 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, 2023, 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 $9.9 million could be concluded within the next 12 months. Although there are ongoing examinations in various federal and state jurisdictions, the 2019 through 2023 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 2019 through 2023 tax years generally remain subject to examination by their respective tax authorities.

    In 2008 and 2012, as part of routine audits, the Brazilian taxing authorities disallowed deductions relating to the amortization of certain goodwill recognized in connection with a reorganization of the Company’s Brazilian operations and the related transfer of certain assets to the Company’s Brazilian subsidiaries. The amount of the tax disallowance through December 31, 2023, not including interest and penalties, would have been approximately 131.5 million Brazilian reais (or approximately $27.1 million). The amount ultimately in dispute would have been significantly greater because of interest and penalties. The Company historically had been advised by its legal and tax advisors that its position with respect to the deductions was allowable under the tax laws of Brazil. The Company contested the disallowance and maintained that it was not likely that the assessment, interest or penalties would require payment. The ultimate outcome of the case would not have been determined until the Brazilian tax appeal process was completed.
    On January 12, 2023, the Brazilian government issued a “Litigation Zero” tax amnesty program, whereby cases being disputed at the administrative court level of review for a period of more than ten years could be considered for amnesty. Enrollment in the amnesty program would not be considered an admission of guilt with respect to outstanding cases. The amnesty program allowed companies to settle outstanding contested cases at a significant monetary discount. After weighing various impacts involved with enrollment, including the avoidance of potential interest, penalties and legal costs, the Company enrolled in the program in the quarter ended March 31, 2023. The Company recorded approximately 182.6 million Brazilian reais (or approximately $34.8 million) within “Income tax provision” for the year ended December 31, 2023, net of associated U.S. income tax credits of approximately $8.4 million related to its enrollment in the program. The Company paid installment payments related to the program of 188.5 million Brazilian reais (or approximately $37.8 million) during the year ended December 31, 2023, inclusive of $1.2 million of interest on payments and approximately $1.8 million of foreign currency translation impacts. The final installment payment was made in October 2023.