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Income Taxes | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | 7. INCOME TAXES The U.S. and international components of income before taxes are as follows (in millions):
|  | Year Ended December 31,
|  | 2023 |  | 2022 |  | 2021
U.S. |  | $ | (31.0) |  |  | $ | (2,403.4) |  |  | $ | 2,941.8 |
International |  | (819.1) |  |  | (2,300.9) |  |  | 2,507.3 |
Income (loss) before taxes |  | $ | (850.1) |  |  | $ | (4,704.3) |  |  | $ | 5,449.1 |
The (benefit from) provision for income taxes consists of the following (in millions):
|  | Year Ended December 31,
|  | 2023 |  | 2022 |  | 2021
Current tax expense: |  |  |  |  |  |
U.S. Federal |  | $ | 73.8 |  |  | $ | 112.8 |  |  | $ | 72.4 |
State |  | 12.0 |  |  | 20.1 |  |  | 9.2 |
International |  | 17.4 |  |  | 24.1 |  |  | 32.6 |
Current tax expense |  | 103.2 |  |  | 157.0 |  |  | 114.2 |
Deferred tax (benefit) expense: |  |  |  |  |  |
U.S. Federal |  | (291.7) |  |  | (1,121.3) |  |  | 983.5 |
State |  | (15.7) |  |  | (83.6) |  |  | 69.3 |
International |  | (15.2) |  |  | (36.7) |  |  | 32.1 |
Deferred tax expense |  | (322.6) |  |  | (1,241.6) |  |  | 1,084.9 |
Non-current tax expense (benefit) |  | 6.6 |  |  | 7.9 |  |  | (4.3) |
(Benefit from) provision for income taxes |  | $ | (212.8) |  |  | $ | (1,076.7) |  |  | $ | 1,194.8 |
The reconciliation between our effective tax rate on income before taxes and the statutory tax rate is as follows:
|  | Year Ended December 31,
|  | 2023 |  | 2022 |  | 2021
U. S. statutory tax rate |  | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Impact of foreign operations |  | (20.4) |  |  | (10.0) |  |  | (8.6) |
U.S. taxation of foreign income |  | 23.8 |  |  | 10.5 |  |  | 8.9 |
State taxes |  | 2.4 |  |  | 1.1 |  |  | 1.3 |
Other |  | (1.8) |  |  | 0.3 |  |  | (0.7) |
(Benefit from) provision for income taxes |  | 25.0 | % |  | 22.9 | % |  | 21.9 | %
On December 22, 2017, the U.S. enacted comprehensive tax legislation (the “Tax Act”). The Tax Act made broad and complex changes to the U.S. tax code, including the imposition of a one-time mandatory deemed repatriation tax (“Transition Tax”) on certain earnings accumulated offshore since 1986 and the reduction of the corporate tax rate from 35% to 21% for U.S. taxable income, resulting in a one-time remeasurement of U.S. federal deferred tax assets and liabilities. The Tax Act also amended Internal Revenue Code Section 174 requiring capitalization of research and experimentation expenditures. The capitalized expenses are amortized over a period of 5 or 15 years. On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022, which includes an Alternative Minimum Tax based on the Adjusted Financial Statement Income of Applicable Corporations. We do not believe the Inflation Reduction Act will have a material impact on our income tax provision and cash taxes. We continue to monitor the developments in tax laws and regulations to evaluate their potential impact on our business. Our effective income tax rates were 25.0%, 22.9% and 21.9% for the years ended December 31, 2023, 2022 and 2021, respectively. The effective tax rates for the years ended December 31, 2023, 2022 and 2021 were primarily driven by the unrealized gain/loss in equity securities that was taxed at 22.3%, 22.5% and 22.4%, respectively, as well as the geographic mix of earnings. Many jurisdictions in which we operate have statutory tax rates that differ from the U.S. statutory tax rate of 21%. Our effective tax rate is impacted, either favorably or unfavorably, by many factors including, but not limited to the jurisdictional mix of income before tax, changes to statutory tax rates, changes in tax laws or regulations, tax audits and settlements, and generation of tax credits. Deferred tax assets and liabilities reflect the tax effects of losses, credits, and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of deferred tax assets and liabilities are as follows (in millions):
|  | December 31,
|  | 2023 |  | 2022
Deferred tax assets: |  |  |  |
Bad debt, inventory and warranty accruals |  | $ | 29.4 |  |  | $ | 30.8 |
Other post-employment benefits, vacation and other reserves |  | 17.5 |  |  | 15.7 |
Tax credit and net operating loss carryforwards |  | 126.4 |  |  | 128.2 |
Lease obligations |  | 41.9 |  |  | 40.8 |
Other |  | 48.8 |  |  | 53.2 |
Total gross deferred tax assets |  | 264.0 |  |  | 268.7 |
Valuation allowance |  | (53.2) |  |  | (72.8) |
Total deferred tax assets |  | 210.8 |  |  | 195.9 |
Deferred tax liabilities: |  |  |  |
Property and equipment |  | 40.4 |  |  | 39.5 |
Lease assets |  | 38.4 |  |  | 38.7 |
Investments and intangible assets |  | 1,565.0 |  |  | 1,842.8 |
Total deferred tax liabilities |  | 1,643.8 |  |  | 1,921.0 |
Net deferred tax liabilities |  | $ | (1,433.0) |  |  | $ | (1,725.1) |
The realization of deferred tax assets is dependent upon the generation of sufficient taxable income of the appropriate character in future periods. We regularly assess our ability to realize our deferred tax assets and establish a valuation allowance if it is more likely than not that some portion, or all, of our deferred tax assets will not be realized. In assessing the realizability of our deferred tax assets, we weigh all available positive and negative evidence. Due to the weight of objectively verifiable negative evidence, we believe that it is more likely than not that certain of our federal, state and foreign deferred tax assets will not be realized as of December 31, 2023, and have maintained a valuation allowance on such deferred tax assets. The valuation allowance for deferred tax assets is as follows (in millions):
| December 31,
| 2023 |  | 2022 |  | 2021
Beginning balance | $ | 72.8 |  |  |  | $ | 46.4 |  |  |  | $ | 44.6 |  |
Additions charged to expenses |  | — |  |  |  |  | 26.4 |  |  |  |  | 1.8 |  |
Deductions from reserves |  | (19.6) |  |  |  |  | — |  |  |  |  | — |  |
Ending balance | $ | 53.2 |  |  |  | $ | 72.8 |  |  |  | $ | 46.4 |  |
As of December 31, 2023, our federal, state and foreign net operating loss carryforwards were approximately $18.2 million, $30.0 million and $301.4 million, respectively. Of our foreign net operating losses, $144.5 million may be carried forward indefinitely. The majority of the remaining foreign net operating losses, if not utilized, will begin to expire in 2024. Our federal and state net operating loss carryforwards, if not utilized, will begin to expire in 2028. As of December 31, 2023, our federal and state tax credit carryforwards were approximately $7.7 million and $74.6 million, respectively. Our federal tax credits, if not utilized, will begin to expire in 2029, and our state tax credits, generally, may be carried forward indefinitely. Federal and state tax laws impose restrictions on the utilization of net operating loss and certain tax credit carryforwards in the event of a change in our ownership as defined by the Internal Revenue Code Sections 382 and 383. Under Section 382 and 383 of the Internal Revenue Code, substantial changes in our ownership and the ownership of acquired companies may limit the amount of net operating loss and research and development credit carryforwards that are available to offset taxable income. The annual limitation would not automatically result in the loss of net operating loss or research and development credit carryforwards but may limit the amount available in any given future period. Our income tax returns are audited by U.S. federal, state and foreign tax authorities. We are currently under examination by many of these tax authorities. The tax years open to examination include the years 2012 and forward for the U.S. and certain foreign jurisdictions including France, Germany, India and Switzerland. There are differing interpretations of tax laws and regulations, and as a result, significant disputes may arise with these tax authorities involving issues of the timing and amount of deductions and allocations of income among various tax jurisdictions. We evaluate our exposures associated with our tax filing positions on a quarterly basis. We record liabilities for unrecognized tax benefits related to uncertain tax positions. We do not believe any currently pending uncertain tax positions will have a material adverse effect on our consolidated financial statements, although an adverse resolution of one or more of these uncertain tax positions in any period may have a material impact on the results of operations for that period. The following is a tabular reconciliation of the total amounts of unrecognized tax benefits (in millions):
|  | 2023 |  | 2022 |  | 2021
Unrecognized tax benefits – January 1 |  | $ | 85.5 |  |  | $ | 61.9 |  |  | $ | 55.8 |
Additions to tax positions related to prior years |  | 0.2 |  |  | 18.1 |  |  | 3.2 |
Reductions to tax positions related to prior years |  | (12.8) |  |  | (0.2) |  |  | (2.1) |
Additions to tax positions related to the current year |  | 11.6 |  |  | 9.8 |  |  | 18.1 |
Settlements |  | (0.2) |  |  | (2.2) |  |  | (2.4) |
Lapse of statute of limitations |  | (0.9) |  |  | (0.8) |  |  | (10.8) |
Foreign currency adjustments |  | 1.3 |  |  | (1.1) |  |  | 0.1 |
Unrecognized tax benefits – December 31 |  | $ | 84.7 |  |  | $ | 85.5 |  |  | $ | 61.9 |
We recognize accrued interest and penalties related to unrecognized tax benefits as income tax expense. Related to the unrecognized tax benefits noted above, the cumulative amount of accrued interest and penalties as of December 31, 2023, 2022 and 2021 was $9.6 million, $6.7 million and $11.8 million, respectively. We accrued interest and penalties of $2.8 million, $(1.1) million, and $(2.5) million for the years ended December 31, 2023, 2022, and 2021, respectively. The total unrecognized tax benefits and interest and penalties of $94.3 million as of December 31, 2023 was partially offset by deferred tax assets of $17.8 million and prepaid taxes of $2.7 million, for a net amount of $73.8 million. As of December 31, 2023, based on the expected outcome of certain examinations or as a result of the expiration of statutes of limitation for certain jurisdictions, we believe that within the next twelve months it is reasonably possible that our previously unrecognized tax benefits could decrease by approximately $17.2 million. Substantially all such amounts will impact our effective income tax rate if recognized. It is generally our intention to repatriate certain foreign earnings to the extent that such repatriations are not restricted by local laws or accounting rules, and there are no substantial incremental costs. The determination of the amount of the unrecognized deferred tax liability for foreign earnings that are indefinitely reinvested is not practicable to estimate.

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