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INCOME TAXES | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
PROVISION FOR INCOME TAXES | INCOME TAXES Components of earnings before income taxes and the provision for U.S. and other income taxes from operations follow:
| For years ended December 31,
(Dollars in millions) | 2024 |  | 2023 |  | 2022
Earnings before income taxes |  |  |  |  |
United States | $ | 147 |  |  | $ | 357 |  |  | $ | 205 |
Outside the United States | 931 |  |  | 730 |  |  | 772 |
Total | $ | 1,078 |  |  | $ | 1,087 |  |  | $ | 977 |
Provision for income taxes |  |  |  |  |
United States Federal |  |  |  |  |
Current | $ | 36 |  |  | $ | 133 |  |  | $ | 179 |
Deferred | (80) |  |  | (39) |  |  | (76) |
Outside the United States |  |  |  |  |
Current | 176 |  |  | 153 |  |  | 105 |
Deferred | 41 |  |  | (35) |  |  | (10) |
State and other |  |  |  |  |
Current | 10 |  |  | 7 |  |  | 33 |
Deferred | (13) |  |  | (28) |  |  | (50) |
Total | $ | 170 |  |  | $ | 191 |  |  | $ | 181 |
The following represents the deferred tax (benefit) charge recorded as a component of "Accumulated other comprehensive income (loss)" ("AOCI") in the Consolidated Statements of Financial Position:
| For years ended December 31,
(Dollars in millions) | 2024 |  | 2023 |  | 2022
Cumulative translation adjustment | $ | 19 |  |  | $ | 11 |  |  | $ | — |
Defined benefit pension and other postretirement benefit plans | (3) |  |  | (6) |  |  | (7) |
Derivatives and hedging | 11 |  |  | (9) |  |  | (1) |
Total | $ | 27 |  |  | $ | (4) |  |  | $ | (8) |
Total income tax expense (benefit) included in the consolidated financial statements was composed of the following:
| For years ended December 31,
(Dollars in millions) | 2024 |  | 2023 |  | 2022
Earnings before income taxes | $ | 170 |  |  | $ | 191 |  |  | $ | 181 |
Other comprehensive income | 27 |  |  | (4) |  |  | (8) |
Total | $ | 197 |  |  | $ | 187 |  |  | $ | 173 |
Differences between the provision for income taxes and income taxes computed using the U.S. Federal statutory income tax rate follow:
| For years ended December 31,
(Dollars in millions) | 2024 |  | 2023 |  | 2022
Amount computed using the statutory rate | $ | 226 |  | $ | 228 |  | $ | 205
State income taxes, net | (21) |  | (26) |  | (27)
Foreign rate variance | (31) |  | (78) |  | (16)
Change in reserves for tax contingencies | 40 |  | 105 |  | 27
General business credits | (64) |  | (81) |  | (44)
U.S. tax on foreign earnings, net of credits | (5) |  | 22 |  | (17)
Divestitures | 7 |  | 14 |  | 37
Other | 18 |  | 7 |  | 16
Provision for income taxes | $ | 170 |  | $ | 191 |  | $ | 181
Effective income tax rate | 16 | % |  | 18 | % |  | 19 | %
The 2024 provision for income taxes includes decreases related to general business credits and foreign rate variance due to the Company's mix of earnings, offset by increases related to changes in reserves for tax contingencies. The 2023 provision for income taxes includes an increase related to changes in reserves for tax contingencies, a decrease related to general business credits, and a decrease related to the foreign rate variance due to the Company's mix of earnings. The 2022 provision for income taxes includes decreases related to general business credits and the release of a state valuation allowance, offset by the impacts of the business divestitures. The significant components of deferred tax assets and liabilities follow:
| December 31,
(Dollars in millions) | 2024 |  | 2023
Deferred tax assets |  |  |
Post-employment obligations | $ | 132 |  |  | $ | 158 |
Net operating loss carryforwards | 657 |  |  | 690 |
Tax credit carryforwards | 313 |  |  | 268 |
Environmental contingencies | 68 |  |  | 68 |
Capitalized research and development expenses | 421 |  |  | 322 |
Other | 198 |  |  | 264 |
Total deferred tax assets | 1,789 |  |  | 1,770 |
Less: Valuation allowance | 686 |  |  | 183 |
Deferred tax assets less valuation allowance | $ | 1,103 |  |  | $ | 1,587 |
Deferred tax liabilities |  |  |
Property, plant, and equipment | $ | (961) |  |  | $ | (952) |
Intangible assets | (251) |  |  | (270) |
Investments | — |  |  | (516) |
Deferred gain | (166) |  |  | (160) |
Other | (149) |  |  | (134) |
Total deferred tax liabilities | $ | (1,527) |  |  | $ | (2,032) |
Net deferred tax liabilities | $ | (424) |  |  | $ | (445) |
As recorded in the Consolidated Statements of Financial Position: |  |  |
Other noncurrent assets | $ | 109 |  |  | $ | 156 |
Deferred income tax liabilities | (533) |  |  | (601) |
Net deferred tax liabilities | $ | (424) |  |  | $ | (445) |
At December 31, 2024, foreign net operating loss carryforwards totaled $2.4 billion. Of this amount, $800 million will expire in 1 to 20 years and $1.6 billion of the carryforwards have no expiration date. In 2024, the Company reassessed the likelihood of certain foreign net operating losses being recaptured, that were previously maintained as a deferred tax liability. These net operating losses are not realizable; therefore, a valuation allowance was recorded to offset the elimination of the deferred tax liability. A valuation allowance of approximately $551 million has been provided against foreign net operating loss carryforwards and other foreign deferred income tax balances. At December 31, 2024, there were no federal net operating loss carryforwards available to offset future taxable income. At December 31, 2024, foreign tax credit carryforwards of approximately $112 million were available to reduce possible future U.S. income taxes, which expire from 2028 to 2034. A partial valuation allowance of $103 million has been established for foreign tax credit carryforwards as of December 31, 2024. A partial valuation allowance of $29 million has been established for the Solutia, Inc. ("Solutia") state net operating loss carryforwards. The valuation allowance will be retained until there is sufficient positive evidence to conclude that it is more likely than not that the deferred tax assets will be realized, or the related statute expires. All foreign earnings, with the exception of short-term liquid assets on certain foreign subsidiaries, including basis differences, continue to be considered indefinitely reinvested. As of December 31, 2024, unremitted earnings of subsidiaries outside the U.S. totaled $4.0 billion of which a substantial portion has already been subject to U.S. tax. The Company has not determined the deferred tax liability associated with these unremitted earnings and basis differences, as such determination is not practicable. Amounts due to and from tax authorities as recorded in the Consolidated Statements of Financial Position:
| December 31,
(Dollars in millions) | 2024 |  | 2023
Miscellaneous receivables | $ | 73 |  |  | $ | 62 |
Payables and other current liabilities | $ | 229 |  |  | $ | 133 |
Other long-term liabilities | 302 |  |  | 287 |
Total income taxes payable | $ | 531 |  |  | $ | 420 |
A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:
(Dollars in millions) | 2024 |  | 2023 |  | 2022
Balance at January 1 | $ | 320 |  |  | $ | 235 |  |  | $ | 200 |
Adjustments based on tax positions related to current year | 27 |  |  | 33 |  |  | 11 |
Adjustments based on tax positions related to prior years | 3 |  |  | 68 |  |  | 24 |
Lapse of statute of limitations | (6) |  |  | (9) |  |  | — |
Settlements | (23) |  |  | (7) |  |  | — |
Balance at December 31 (1) | $ | 321 |  |  | $ | 320 |  |  | $ | 235 |
(1)All of the unrecognized tax benefits as of December 31, 2024, would, if recognized, impact the Company's effective tax rate. A reconciliation of the beginning and ending amounts of accrued interest related to unrecognized tax positions is as follows:
(Dollars in millions) | 2024 |  | 2023 |  | 2022
Balance at January 1 | $ | 39 |  |  | $ | 22 |  |  | $ | 13 |
Expense for interest, net of tax | 18 |  |  | 17 |  |  | 9 |
Income for interest, net of tax | (2) |  |  | — |  |  | — |
Balance at December 31 | $ | 55 |  |  | $ | 39 |  |  | $ | 22 |
Accrued penalties related to unrecognized tax positions were immaterial as of December 31, 2024, 2023, and 2022. Eastman files federal income tax returns in the U.S. and income tax returns in various state and foreign jurisdictions. The Company is no longer subject to U.S. federal income tax examinations by tax authorities for years before 2017. With few exceptions, Eastman is no longer subject to foreign, state, and local income tax examinations by tax authorities for years before 2015. Solutia and related subsidiaries are no longer subject to state and local income tax examinations for years before 2002. It is reasonably possible that, as a result of the resolution of federal, state, and foreign examinations and appeals, and the expiration of various statutes of limitation, unrecognized tax benefits could decrease within the next twelve months by up to $150 million.

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