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Income Taxes | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | Income taxes are determined using the liability method of accounting for income taxes, under which deferred tax assets (“DTAs”) and deferred tax liabilities (“DTLs”) are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities. If, based upon all available evidence, both positive and negative, it is more likely than not that such DTAs will not be realized, a valuation allowance is recorded. Management assessed the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of existing DTAs in each taxpaying jurisdiction. On the basis of this evaluation, as of December 31, 2023, a valuation allowance of $65 million has been recorded to recognize only the portion of the DTAs that are more likely than not to be realized; however, the amount of the DTAs considered realizable could be adjusted if estimates of future taxable income during the carry forward period change or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as projections for future growth. We apply a recognition threshold and measurement attribute related to uncertain tax positions taken or expected to be taken on our tax returns. We recognize a tax benefit for financial reporting of an uncertain income tax position when it has a greater than 50% likelihood of being sustained upon examination by the taxing authorities. We measure the tax benefit of an uncertain tax position based on the largest benefit that has a greater than 50% likelihood of being ultimately realized including evaluation of settlements. The components of net income (loss) from continuing operations before income taxes are as follows:
|  | Year Ended December 31,
|  | 2023 |  | 2022 |  | 2021
United States |  | $ | 92 |  |  | $ | (191) |  |  | $ | (309) |
Foreign |  | 113 |  |  | 28 |  |  | 15 |
Net income (loss) from continuing operations before income tax expense |  | $ | 205 |  |  | $ | (163) |  |  | $ | (294) |
The components of income tax expense (benefit) are as follows:
|  | Year Ended December 31,
|  | 2023 |  | 2022 |  | 2021
Current |  |  |  |  |  |
U.S. Federal |  | $ | 53 |  |  | $ | 3 |  |  | $ | (58) |
U.S. State |  | 6 |  |  | 1 |  |  | 1 |
Foreign |  | 50 |  |  | 38 |  |  | 10 |
Total |  | 109 |  |  | 42 |  |  | (47) |
Deferred |  |  |  |  |  |
U.S. Federal |  | (61) |  |  | 3 |  |  | (222) |
U.S. State |  | (15) |  |  | 1 |  |  | (46) |
Foreign |  | (8) |  |  | (33) |  |  | (3) |
Total |  | (84) |  |  | (29) |  |  | (271) |
Total income tax expense (benefit) |  | $ | 25 |  |  | $ | 13 |  |  | $ | (318) |
The reconciliation of the U.S. federal statutory tax rate to the actual tax rate is as follows:
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
Statutory U.S. federal income tax rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State tax expense | 1.8 | % |  | (0.9) | % |  | 1.5 | %
Foreign earnings at rates different than U.S. federal rate | 3.4 | % |  | 0.8 | % |  | (1.3) | %
Foreign withholding taxes | 3.1 | % |  | (1.7) | % |  | (1.6) | %
Valuation allowance adjustments | 3.4 | % |  | 6.3 | % |  | 86.3 | %
Permanent items | (1.7) | % |  | 0.7 | % |  | (1.4) | %
Earnings from consolidated subsidiaries | — | % |  | (4.3) | % |  | 0.9 | %
Tax benefits from intraperiod tax allocation to discontinued operations | — | % |  | (29.8) | % |  | — | %
Tax credits | (4.7) | % |  | 1.6 | % |  | 2.4 | %
Impact of internal planning and restructuring | (6.4) | % |  | — | % |  | — | %
Impact of Divestitures | (6.9) | % |  | — | % |  | — | %
Other | (0.9) | % |  | (1.7) | % |  | 0.6 | %
Effective income tax rate | 12.1 | % |  | (8.0) | % |  | 108.4 | %
Our 2023 and 2022 effective tax rates were impacted by the effect of worldwide tax rates on foreign earnings, offset by internal planning and restructuring as well as the impact of the Divestitures. Our 2022 effective tax rate was impacted by not benefiting from year-to-date losses in continuing operations in accordance with the intraperiod tax expense (benefit) allocation rules as generally prescribed under ASC 740-20. Our 2021 effective tax rate was impacted by changes in global valuation allowances totaling $(253) million against net DTAs in various jurisdictions. The Divestitures generated $674 million of net cash taxes, after usage of tax attributes. Of this amount, $641 million was paid in the year ended December 31, 2022 and the remainder was paid in the year ended December 31, 2023. Deferred income taxes reflect the net tax effects of temporary differences between the carrying values of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The deferred income tax balances are established using the enacted statutory tax rates and are adjusted for changes in such rates in the period of change.
| As of December 31, |
| 2023 |  | 2022 |
Deferred tax assets: |  |  |  |
Reserves and other accrued expenses | $ | 65 |  |  | $ | 87 |  |
Net operating loss carry forwards | 82 |  |  | 77 |  |
Capitalized research and development expenditures | 61 |  |  | 32 |  |
Interest limitation carry forwards | 32 |  |  | 21 |  |
Stock compensation | 33 |  |  | 21 |  |
Property and equipment | 14 |  |  | 17 |  |
Differences in financial reporting and tax basis for: |  |  |  |
Other | 32 |  |  | 18 |  |
Less: Valuation allowance | (65) |  |  | (68) |  |
Realizable deferred tax assets | 254 |  |  | 205 |  |
Deferred tax liabilities: |  |  |  |
Differences in financial reporting and tax basis for: |  |  |  |
Identifiable intangible assets | (87) |  |  | (131) |  |
Property and equipment | (25) |  |  | (26) |  |
Other | (20) |  |  | (21) |  |
Total deferred tax liabilities | (132) |  |  | (178) |  |
Net deferred tax asset on balance sheet | $ | 122 |  |  | $ | 27 |  |
At December 31, 2023, we had the following NOL, interest limitation, R&D credit and state tax credit carry forwards:
| December 31, 2023
| Federal |  | State |  | Foreign
NOL carry forwards | $ | — |  |  | $ | 555 |  |  | $ | 264 |
Interest limitation carry forwards | 40 |  |  | 65 |  |  | 72 |
R&D and state credit carry forwards | 1 |  |  | 2 |  |  | — |
The state and foreign NOL carry forwards can be carried forward for periods that vary from three years to indefinitely. State tax credits expire through 2031. The interest limitation carry forwards can be carried forward indefinitely in all applicable jurisdictions. At December 31, 2023 and 2022, we had the following valuation allowances:
|  | December 31,
|  | 2023 |  | 2022
Federal |  | $ | 5 |  |  | $ | 10 |
State |  | 14 |  |  | 26 |
Foreign |  | 46 |  |  | 32 |
Undistributed earnings of subsidiaries are accounted for as a temporary difference, except that DTLs are not recorded for undistributed earnings of foreign subsidiaries that are deemed to be indefinitely reinvested in foreign jurisdictions. The Tax Cuts and Jobs Act of 2017 (“Tax Act”) required the Company to compute a tax on previously undistributed earnings and profits of its foreign subsidiaries upon transition from a worldwide tax system to a territorial tax system during the year ended December 31, 2017. The repatriation of such amounts in the future should generally be exempt from income taxes in the U.S. (as a result of the Tax Act) and in those jurisdictions that have a similar territorial system of taxation. Substantially all of our current year foreign cash flows are not intended to be indefinitely reinvested offshore, and therefore the tax effects of repatriation (including applicable withholding taxes) of such cash flows are provided for in our financial reporting. Unrecognized Tax Benefits The total amount of unrecognized tax benefits (“UTBs”) as of December 31, 2023 was $72 million. Of this amount, $72 million, if recognized, would be included in our Consolidated Statements of Operations and have an impact on our effective tax rate. We expect to recognize approximately $10 million of tax benefits before December 31, 2024 due to expiration of statute of limitations on tax positions. We recognize interest and penalties for unrecognized tax benefits in income tax expense. The amounts recognized for interest and penalties during the years ended December 31, 2023, 2022 and 2021 were not material. We file income tax returns in the U.S. Federal jurisdiction and various state and foreign jurisdictions. We are generally not subject to examination for periods prior to December 31, 2019; however, as we utilize our NOLs, prior periods can be subject to examination. There are no ongoing material U.S. federal, state, local or non-U.S. examinations by tax authorities. The Company had the following activity for unrecognized tax benefits:
|  | Year Ended December 31,
|  | 2023 |  | 2022 |  | 2021
Balance at beginning of period |  | $ | 73 |  |  | $ | 29 |  |  | $ | 30 |
Tax positions related to current year additions |  | 2 |  |  | 43 |  |  | — |
Additions for tax positions of prior years |  | 1 |  |  | 1 |  |  | — |
Tax positions related to prior year reductions |  | (4) |  |  | — |  |  | (1) |
Balance at end of period |  | $ | 72 |  |  | $ | 73 |  |  | $ | 29 |

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