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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of income before income taxes and the provision for income taxes for the years indicated are shown below:
(in millions)202220212020
Income before income taxes:
U.S.$111 $39 $(15)
Foreign557 209 521 
Total income before income taxes668 248 506 
Provision for income taxes:
Current tax expense:
U.S. federal8 2 1 
State and local2 2 2 
Foreign159 180 156 
Total current tax expense169 184 159 
Deferred tax expense (benefit):
U.S. federal5 (57)(18)
State and local(1)(2)(1)
Foreign(7)(2)12 
Total deferred tax (benefit)(3)(61)(7)
Total provision for income taxes$166 $123 $152 
Deferred income taxes are provided for the tax effects of temporary differences between the financial reporting basis and tax basis of assets and liabilities. Significant temporary differences as of December 31, 2022 and 2021, are summarized as follows:
(in millions)20222021
Deferred tax assets attributable to:
Employee benefit accruals$30 $28 
Pensions and postretirement plans14 14 
Lease liabilities49 49 
Bad debt6 14 
Inventory reserve22 13 
Net operating loss carryforwards59 64 
Tax credit carryforwards5 18 
Other42 36 
Total deferred tax assets227 236 
Valuation allowances(51)(67)
Net deferred tax assets176 169 
Deferred tax liabilities attributable to:
Property, plant and equipment175 175 
Identified intangibles48 47 
Right-of-use lease assets46 46 
Foreign withholding and state taxes on unremitted earnings1 1 
Goodwill31 27 
Brazilian indirect tax credits4 5 
Derivative contracts3 19 
Total deferred tax liabilities308 320 
Net deferred tax liabilities$132 $151 
Of the $59 million of tax-effected net operating loss carryforwards as of December 31, 2022, $4 million and $15 million are for U.S. federal and state loss carryforwards, respectively, and $40 million are for foreign loss carryforwards. U.S. federal and state loss carryforwards have various expiration periods starting in 2025. Of the $40 million of foreign loss carryforwards, $19 million are related to Canada, $7 million to Argentina and $7 million to Australia with carryforward periods of 20 years, 5 years and indefinitely, respectively.
A valuation allowance is established when it is more likely than not that all or a portion of a deferred tax asset will not be realized. Prior to establishing a valuation allowance, we consider historical taxable income, scheduled reversal of deferred tax liabilities, tax planning strategies, tax carryovers and projected future taxable income. As of December 31, 2022, we maintained valuation allowances of $51 million, consisting of $26 million primarily related to foreign loss carryforwards, $15 million for state loss carryforwards, $5 million for state credits and carryforwards, $4 million for U.S. federal loss carryforwards and $1 million for certain foreign tax credits, all of which we have determined will more likely than not expire prior to realization.
Net operating loss carryforwards disclosed in the financial statements differ from the as-filed tax returns due to an unrecognized tax benefit. Foreign net operating loss carryforwards and valuation allowances would increase $10 million, absent the unrecognized tax benefit.
A reconciliation of the U.S. federal statutory tax rate to our effective tax rate follows:
202220212020
Provision for tax at U.S. statutory rate21.0 %21.0 %21.0 %
Tax rate difference on foreign income7.2 13.3 9.1 
Foreign currency FX(0.3)3.2 1.2 
Inflation adjustments(0.6)(4.0)(0.8)
Tax benefit of intercompany financing(0.4)(1.6)(0.8)
U.S. international tax implications2.2 0.8 0.6 
Valuation allowance in Argentina— (0.4)(0.6)
Favorable judgment on the treatment of credits and interest on indirect taxes(0.3)(4.8)(0.6)
Unremitted earnings— (12.1)— 
Impairment charge related to Argentina joint venture— 35.5 — 
Foreign-derived intangible income (FDII)(1.0)— — 
Brazil exclusion of certain tax incentives(4.0)— — 
Other items, net1.1 (1.3)0.9 
Provision at effective tax rate24.9 %49.6 %30.0 %
We have significant operations in Mexico, Pakistan and Colombia, where the 2022 statutory tax rates are 30 percent, 33 percent (excluding a 4 percent surcharge) and 35 percent, respectively. In addition, our subsidiary in Brazil has a statutory tax rate of 34 percent before the application of local incentives that vary each year.
During 2022, the U.S. Treasury published final foreign tax credit regulations that limit our ability to claim foreign tax credits from certain countries, primarily in South America, and we recorded the resulting tax liability to our Consolidated Balance Sheets.
During 2022, Ingredion Brazil recorded a tax benefit related to the exclusion of certain tax incentives provided by the local government from taxable income for fiscal years 2018 through 2022. This resulted in a tax benefit of $27 million, or 4.0 percentage points on the effective tax rate. This transaction is more fully discussed in Note 14 Commitments and Contingencies.
As of December 31, 2022, we have a $1 million accrual for foreign withholding on certain unremitted earnings from foreign subsidiaries. No foreign withholding taxes, federal and state taxes or foreign currency gains/losses have been provided on distributions of approximately $2.4 billion of unremitted earnings of our foreign subsidiaries, as such amounts are considered permanently reinvested. It is not practicable to estimate the additional income taxes, including applicable foreign withholding taxes that would be due upon the repatriation of these earnings.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits, excluding interest and penalties, for 2022 and 2021 is as follows:
(in millions)20222021
Balance at January 1$29 $46 
Additions for tax positions related to prior years5 2 
Reductions for tax positions related to prior years(1)(9)
Additions based on tax positions related to the current year1 2 
Reductions related to a lapse in the statute of limitations(4)(12)
Balance at December 31$30 $29 
Of the $30 million of unrecognized tax benefits as of December 31, 2022, $19 million represents the amount that, if recognized, could affect the effective tax rate in future periods. The remaining $11 million includes $10 million of net operating loss carryforwards that would have otherwise had a valuation allowance and $1 million of U.S. federal benefits.
We account for interest and penalties related to income tax matters within the provision for income taxes. We have accrued $5 million of interest expense and penalties related to the unrecognized tax benefits as of December 31, 2022.
We are subject to U.S. federal income tax as well as income tax in multiple states and non-U.S. jurisdictions. The U.S. federal tax returns are subject to audit for the years 2019 through 2022. In general, our foreign subsidiaries remain subject to audit for years 2010 and later.
It is reasonably possible that the total amount of unrecognized tax benefits including interest and penalties will increase or decrease within twelve months of December 31, 2022. We believe it is reasonably possible that none of the unrecognized tax benefits may be recognized within twelve months of December 31, 2022, as a result of a lapse of the statute of limitations. We have classified none of the unrecognized tax benefits as current because they are not expected to be resolved within the next twelve months.