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Income Taxes | 12 Months Ended
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Dec. 31, 2024
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 presented below:
|  | 2024 |  | 2023 |  | 2022
Income before income taxes: |  |  |  |  |  |
U.S. |  | $ | 396 |  |  | $ | 244 |  |  | $ | 111 |
Foreign |  | 535 |  |  | 595 |  |  | 557 |
Total income before income taxes |  | 931 |  |  | 839 |  |  | 668 |
Provision for income taxes: |  |  |  |  |  |
Current tax expense: |  |  |  |  |  |
U.S. federal |  | 31 |  |  | 6 |  |  | 8 |
State and local |  | 6 |  |  | 5 |  |  | 2 |
Foreign |  | 255 |  |  | 183 |  |  | 159 |
Total current tax expense |  | 292 |  |  | 194 |  |  | 169 |
Deferred tax expense (benefit): |  |  |  |  |  |
U.S. federal |  | 11 |  |  | — |  |  | 5 |
State and local |  | 2 |  |  | 1 |  |  | (1) |
Foreign |  | (28) |  |  | (7) |  |  | (7) |
Total deferred tax (benefit) |  | (15) |  |  | (6) |  |  | (3) |
Total provision for income taxes |  | $ | 277 |  |  | $ | 188 |  |  | $ | 166 |
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, 2024 and 2023 are summarized as follows:
|  | 2024 |  | 2023
Deferred tax assets attributable to: |  |  |  |
Employee benefit accruals |  | $ | 31 |  |  | $ | 32 |
Pensions and postretirement plans |  | 9 |  |  | 16 |
Lease liabilities |  | 51 |  |  | 54 |
Bad debt |  | 3 |  |  | 5 |
Inventory reserve |  | 16 |  |  | 16 |
Net operating loss carryforwards |  | 51 |  |  | 58 |
Tax credit carryforwards |  | 7 |  |  | 5 |
Derivative contracts |  | — |  |  | 16 |
Uniform capitalization |  | 8 |  |  | 12 |
Equity method investments |  | 9 |  |  | 4 |
Other |  | 46 |  |  | 31 |
Total deferred tax assets |  | 231 |  |  | 249 |
Valuation allowances |  | (60) |  |  | (46) |
Net deferred tax assets |  | 171 |  |  | 203 |
Deferred tax liabilities attributable to: |  |  |  |
Property, plant and equipment |  | 161 |  |  | 184 |
Identified intangibles |  | 25 |  |  | 33 |
Right-of-use lease assets |  | 48 |  |  | 51 |
Foreign withholding and state taxes on unremitted earnings |  | 1 |  |  | 1 |
Goodwill |  | 38 |  |  | 35 |
Derivative contracts |  | 3 |  |  | — |
Total deferred tax liabilities |  | 276 |  |  | 304 |
Net deferred tax liabilities |  | $ | 105 |  |  | $ | 101 |
Of the $51 million of tax-effected net operating loss carryforwards as of December 31, 2024, $34 million are for foreign loss carryforwards, $14 million for state loss carryforwards, and $3 million for U.S. federal loss carryforwards. Of the $34 million of foreign loss carryforwards, $24 million are related to Canada, $4 million to Malaysia, $3 million to Argentina, and $1 million to the United Kingdom, with carryforward periods of 20 years, 10 years, 5 years, and indefinite. U.S. federal and state loss carryforwards have various expiration periods beginning in 2025. 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, 2024, we maintained valuation allowances of $60 million, consisting of $22 million primarily related to foreign loss carryforwards, $14 million for state loss carryforwards, $11 million primarily related to equity method investments, $7 million for state credits and carryforwards, $4 million for U.S. federal loss carryforwards and net deferred tax assets and $2 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:
| 2024 |  | 2023 |  | 2022
Provision for tax at U.S. statutory rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Tax rate difference on foreign income | 5.4 |  |  | 6.1 |  |  | 7.2 |
Foreign currency foreign exchange | 1.9 |  |  | (1.8) |  |  | (0.3) |
Inflation adjustments | (0.4) |  |  | (0.5) |  |  | (0.6) |
Tax benefit of intercompany financing | (0.3) |  |  | (0.4) |  |  | (0.4) |
U.S. international tax implications | 1.4 |  |  | 1.0 |  |  | 2.2 |
Valuation allowance in Argentina | — |  |  | — |  |  | — |
Favorable judgment on the treatment of credits and interest on indirect taxes | — |  |  | (0.2) |  |  | (0.3) |
Sale of our South Korea business | (1.6) |  |  | — |  |  | — |
Unfavorable judgement and related reserve on transfer pricing matters | 1.6 |  |  | — |  |  | — |
Valuation allowance on investments | 1.2 |  |  | — |  |  | — |
Foreign-derived intangible income (“FDII”) | (1.6) |  |  | (1.5) |  |  | (1.0) |
Brazil exclusion of certain tax incentives | (0.3) |  |  | (1.2) |  |  | (4.0) |
Other items, net | 1.5 |  |  | (0.1) |  |  | 1.1 |
Provision at effective tax rate | 29.8 | % |  | 22.4 | % |  | 24.9 | %
The 2024 statutory tax rates (including surcharges and local jurisdictional taxes when applicable) were 30 percent in Mexico, 32 percent in Germany, 35 percent in Colombia, 39 percent in Pakistan, and 26 percent in Canada, where we have significant operations. In addition, our subsidiary in Brazil has a statutory tax rate of 34 percent before the application of local incentives that vary each year. As of December 31, 2024, we had 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 or losses have been provided on distributions of approximately $2.5 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, which 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 2024 and 2023 were as follows:
|  | 2024 |  | 2023
Balance at January 1 |  | $ | 31 |  |  | $ | 30 |
Additions for tax positions related to prior years |  | 7 |  |  | 1 |
Reductions for tax positions related to prior years |  | (1) |  |  | (1) |
Additions based on tax positions related to the current year |  | 3 |  |  | 1 |
Balance at December 31 |  | $ | 40 |  |  | $ | 31 |
Of the $40 million of unrecognized tax benefits as of December 31, 2024, $29 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 $8 million of interest expense and penalties related to unrecognized tax benefits as of December 31, 2024. 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 2020 through 2023. In general, our foreign subsidiaries remain subject to audit for years 2013 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, 2024. We believe it is reasonably possible that $7 million of the unrecognized tax benefits may be recognized within twelve months of December 31, 2024, as a result of the expiration of a statute of limitations period and potential settlement.

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