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Income Taxes
 12 Months Ended
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:
202420232022
Income before income taxes:
U.S.$396 $244 $111 
Foreign535 595 557 
Total income before income taxes931 839 668 
Provision for income taxes:
Current tax expense:
U.S. federal31 6 8 
State and local6 5 2 
Foreign255 183 159 
Total current tax expense292 194 169 
Deferred tax expense (benefit):
U.S. federal11 — 5 
State and local2 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:
20242023
Deferred tax assets attributable to:
Employee benefit accruals$31 $32 
Pensions and postretirement plans9 16 
Lease liabilities51 54 
Bad debt3 5 
Inventory reserve16 16 
Net operating loss carryforwards51 58 
Tax credit carryforwards7 5 
Derivative contracts— 16 
Uniform capitalization8 12 
Equity method investments9 4 
Other46 31 
Total deferred tax assets231 249 
Valuation allowances(60)(46)
Net deferred tax assets171 203 
Deferred tax liabilities attributable to:
Property, plant and equipment161 184 
Identified intangibles25 33 
Right-of-use lease assets48 51 
Foreign withholding and state taxes on unremitted earnings1 1 
Goodwill38 35 
Derivative contracts3 — 
Total deferred tax liabilities276 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:
202420232022
Provision for tax at U.S. statutory rate21.0 %21.0 %21.0 %
Tax rate difference on foreign income5.4 6.1 7.2 
Foreign currency foreign exchange1.9 (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 implications1.4 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 matters1.6 — — 
Valuation allowance on investments1.2 — — 
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, net1.5 (0.1)1.1 
Provision at effective tax rate29.8 %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:
20242023
Balance at January 1$31 $30 
Additions for tax positions related to prior years7 1 
Reductions for tax positions related to prior years(1)(1)
Additions based on tax positions related to the current year3 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.