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Income Taxes | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES The provision (benefit) for income taxes consists of the following:
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
| (Amounts in thousands)
Current: |  |  |  |  |
U.S. federal | $ | 24,766 |  |  | $ | 45,130 |  |  | $ | 66,486 |
Foreign | 51,431 |  |  | 40,876 |  |  | 29,987 |
State and local | 5,018 |  |  | 6,177 |  |  | 1,478 |
Total current provision (benefit) | 81,215 |  |  | 92,183 |  |  | 97,951 |
Deferred: |  |  |  |  |
U.S. federal | 3,665 |  |  | (88,498) |  |  | (92,021) |
Foreign | (62,944) |  |  | (42,756) |  |  | (4,339) |
State and local | (3,374) |  |  | (4,568) |  |  | (4,185) |
Total deferred provision (benefit) | (62,653) |  |  | (135,822) |  |  | (100,545) |
Total provision (benefit) | $ | 18,562 |  |  | $ | (43,639) |  |  | $ | (2,594) |
The provision for income taxes differs from the statutory corporate rate due to the following:
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
| (Amounts in millions)
Statutory federal income tax at 21% | $ | 47.0 |  |  | $ | 32.4 |  |  | $ | 28.1 |
Base Erosion and Anti-abuse Tax | — |  |  | (7.6) |  |  | 7.6 |
Foreign impact, net | 10.4 |  |  | (22.3) |  |  | (158.0) |
Change in valuation allowances | (34.5) |  |  | (50.5) |  |  | 146.6 |
State and local income taxes, net | 1.6 |  |  | 1.6 |  |  | (2.7) |
Reversal of deferred tax liabilities following legal entity reorganizations | — |  |  | — |  |  | (22.6) |
Research and development credit | (2.9) |  |  | (1.0) |  |  | (3.6) |
Non-deductible items | 2.6 |  |  | 2.3 |  |  | 4.4 |
U.S. federal tax return to accrual adjustments, not separately disclosed in other categories | (4.8) |  |  | 1.8 |  |  | (0.8) |
Recognition of compensation costs related to restricted shares | 0.7 |  |  | 2.4 |  |  | (1.3) |
Intercompany profit in inventory | 0.2 |  |  | (2.0) |  |  | (0.3) |
Other, net | (1.7) |  |  | (0.7) |  |  | — |
Total | 18.6 |  |  | (43.6) |  |  | (2.6) |
Effective tax rate | 8.3 | % |  | (28.3) | % |  | (1.9) | %
On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act of 2017 (the “Tax Reform Act”), which provided the base-erosion and anti-abuse tax (“BEAT”) provision which effectively creates a new minimum tax on certain deductible payments to foreign affiliates. For the year ended December 31, 2023, we are not subject to BEAT tax, and the previously recorded 2021 BEAT tax was reversed in 2022 following finalization of the 2021 U.S. federal income tax return. For the year ended December 31, 2023, the change in valuation allowances is driven mainly by the release of the valuation allowance against our deferred tax assets by $18.9 million in Brazil and $14.6 million in France. The Company determined that the net deferred tax assets in Brazil and France are realizable based on recent history of profitability and future income projections. For the year ended December 31, 2022, the change in valuation allowances is driven mainly by the release of the valuation allowance against our deferred tax assets by $13.2 million in Germany, $22.4 million in Mexico and $44.4 million release of the valuation allowance on our U.S. foreign tax credit carryforwards on general category income partially offset by a valuation allowance establishment of $13.6 million in Argentina. The Company determined that the net deferred tax assets in Germany and Mexico are realizable based on recent history of profitability and future income projections. In addition, we determined that the U.S. foreign tax credit carryforwards on general category income were realizable based on the development of a tax planning strategy. For the years ended December 31, 2023, 2022 and 2021 we have asserted indefinite reinvestment on certain earnings of our foreign subsidiaries. As of December 31, 2023, we have not recorded approximately $28.7 million of deferred tax liabilities associated with remaining unremitted earnings considered indefinitely reinvested, specifically related to foreign withholding taxes that would be due upon repatriation of the designated earnings to the U.S. While the company has estimated the foreign withholding tax impact related to distributing earnings currently deemed permanently reinvested, the calculation of the potential US tax consequences associated with the distribution of earnings currently deemed permanently reinvested is impracticable. Deferred income taxes reflect the net tax effects of 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 the consolidated deferred tax assets and liabilities were:
| December 31,
| 2023 |  | 2022
| (Amounts in thousands)
Deferred tax assets related to: |  |  |
Retirement benefits | $ | 34,526 |  |  | $ | 20,553 |
Net operating loss carryforwards | 186,337 |  |  | 183,541 |
Compensation accruals | 41,688 |  |  | 22,046 |
Credit and capital loss carryforwards | 185,162 |  |  | 197,774 |
Warranty and accrued liabilities | 47,614 |  |  | 49,302 |
Capitalized research and experimental expenditures | 60,542 |  |  | 54,486 |
Other | 122,678 |  |  | 126,334 |
Total deferred tax assets | 678,547 |  |  | 654,036 |
Valuation allowances | (347,673) |  |  | (356,557) |
Net deferred tax assets | $ | 330,874 |  |  | $ | 297,479 |
Deferred tax liabilities related to: |  |  |
Goodwill and intangibles | $ | (81,245) |  |  | $ | (123,088) |
Foreign undistributed earnings | (10,477) |  |  | (11,154) |
Operating lease right-of-use-assets | (20,198) |  |  | (20,453) |
Other | (1,930) |  |  | (1,395) |
Total deferred tax liabilities | (113,850) |  |  | (156,090) |
Deferred tax asset (liabilities), net | $ | 217,024 |  |  | $ | 141,389 |
We had $1,555.3 million of U.S. and foreign net operating loss carryforwards at December 31, 2023. Of this total, $14.8 million are state net operating losses. State net operating losses generated in the U.S., if unused, will expire in 2027. $226.3 million of our foreign net operating losses carry forward without expiration. The majority of our Hungarian net operating loss of $1,177.6 million that has a full valuation allowance (see discussion below), if unused, will expire in 2024, 2025 and 2028. The remaining foreign net operating losses of $136.6 million that do not carry forward without expiration, if unused, will expire between 2024-2043. Additionally, we had $63.5 million of foreign tax credit carryforwards at December 31, 2023, that have a valuation allowance on the foreign branch category income (see discussion below), if unused, will expire between 2028-2033. The following schedule presents the changes in deferred tax asset valuation allowance as follows:
(Amounts in thousands) |  | Balance at beginning of year |  | Additions charged to cost and expenses |  | Additions charged to other accounts - currency effects and other, net |  | Deductions from reserve |  | Balance at end of year
Year Ended December 31, 2023 |  |  |  |  |  |  |  |  |  |
Deferred tax asset valuation allowance(1): |  | $ | 356,557 |  |  | $ | 19,684 |  |  | $ | 25,367 |  |  | $ | (53,936) |  |  | $ | 347,672 |
Year Ended December 31, 2022 |  |  |  |  |  |  |  |  |  |
Deferred tax asset valuation allowance(1): |  | 415,962 |  |  | 36,822 |  |  | (11,775) |  |  | (84,452) |  |  | 356,557 |
Year Ended December 31, 2021 |  |  |  |  |  |  |  |  |  |
Deferred tax asset valuation allowance(1): |  | 287,410 |  |  | 178,203 |  |  | (15,572) |  |  | (34,079) |  |  | 415,962 |
______________________________ (1)Deductions from reserve result from the release of valuation allowances on deferred tax assets, expiration or utilization of net operating losses and foreign tax credits previously reserved. Additions to reserve result from the establishment of valuation allowances on deferred tax assets, generation of net operating losses and foreign tax credits. The Company maintains a full valuation allowance against the net deferred tax assets in certain foreign jurisdictions as of December 31, 2023. As of each reporting date, management considers new evidence, both positive and negative that could affect its view of the future realization of net deferred tax assets. We asses our forecast of future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets in determining the sufficiency of our valuation allowances. Failure to achieve forecasted taxable income in the applicable tax jurisdictions could affect the ultimate realization of deferred tax assets and could result in an increase in our effective tax rate on future earnings. It is possible there may be sufficient positive evidence to release a portion of the remaining valuation allowance in those foreign jurisdictions. Release of the valuation allowance would result in a benefit to income tax expense for the period the release is recorded, which could have a material impact on net earnings. The timing and amount of the potential valuation allowance release are subject to significant management judgment and the level of profitability achieved. Our valuation allowances primarily relate to the deferred tax assets established for U.S. foreign tax credit carryforwards on foreign branch category income of $49.1 million, Hungarian net operating loss carryforward of $106.0 million, a foreign capital loss carryforward of $114.7 million, and other foreign deferred tax assets of $77.9 million. The Hungarian net operating loss carryforward was a result of a local statutory impairment of investments in subsidiaries in 2021. It is more likely than not that the loss will not be utilized within its five year carryforward period and, therefore, has a full valuation allowance. The foreign capital loss carryforward was the result of a reorganization of certain foreign subsidiaries in 2019. Due to its capital nature, it is more likely than not that the loss will not be utilized within its ten year carryforward period and, therefore, has a full valuation allowance. Earnings before income taxes comprised:
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
| (Amounts in thousands)
U.S. | $ | 212,631 |  |  | $ | 63,508 |  |  | $ | (52,915) |
Foreign | 11,119 |  |  | 90,868 |  |  | 186,504 |
Total | $ | 223,750 |  |  | $ | 154,376 |  |  | $ | 133,589 |
A tabular reconciliation of the total gross amount of unrecognized tax benefits, excluding interest and penalties, is as follows (in millions):
| 2023 |  | 2022 |  | 2021
Balance — January 1 | $ | 50.2 |  |  | $ | 49.9 |  |  | $ | 54.8 |
Gross amount of increase (decrease) in unrecognized tax benefits resulting from tax positions taken: |  |  |  |  |
During a prior year | (9.1) |  |  | 5.4 |  |  | 8.0 |
During the current period | 7.4 |  |  | 5.8 |  |  | 4.5 |
Decreases in unrecognized tax benefits relating to: |  |  |  |  |
Settlements with taxing authorities | (2.8) |  |  | (5.5) |  |  | (10.2) |
Lapse of the applicable statute of limitations | (1.4) |  |  | (4.1) |  |  | (5.1) |
Increase (decrease) in unrecognized tax benefits relating to foreign currency translation adjustments | 1.9 |  |  | (1.3) |  |  | (2.1) |
Balance — December 31 | $ | 46.2 |  |  | $ | 50.2 |  |  | $ | 49.9 |
The amount of gross unrecognized tax benefits at December 31, 2023, was $71.2 million, which includes $25.0 million of accrued interest and penalties. Of this amount $53.2 million, if recognized, would favorably impact our effective tax rate. With limited exception, we are no longer subject to U.S. federal income tax audits for years through 2017, state and local income tax audits for years through 2017 or foreign income tax audits for years through 2016. We are currently under examination for various years in Austria, Canada, China, Germany, India, Indonesia, Italy, Kenya, Madagascar, Malaysia, Mexico, Morocco, the Philippines, Saudi Arabia, Singapore, Switzerland, the U.S. and Venezuela. It is reasonably possible that within the next 12 months the effective tax rate will be impacted by the resolution of some or all of the matters audited by various taxing authorities. It is also reasonably possible that we will have the statute of limitations close in various taxing jurisdictions within the next 12 months. As such, we estimate we could record a reduction in our tax expense up to approximately $4.0 million within the n ext 12 months.

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