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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes In 2022, 2021 and 2020, we recorded tax provisions of $238.0 million, $225.0 million and $142.1 million, respectively. Cash tax payments, net of refunds were $192.2 million, $112.6 million and $102.0 million for 2022, 2021 and 2020, respectively. Tax Cuts and Jobs Act The Tax Cuts and Jobs Act of 2017 (“2017 Tax Act”) provides for a territorial tax system, and includes the global intangible low-taxed income (“GILTI”) provision. The Company has elected to account for GILTI tax in the period in which it is incurred. Subject to certain exceptions, the GILTI provisions require the Company to include in its U.S. income tax return the earnings of a foreign subsidiary which are in excess of an allowable return on the foreign subsidiary’s tangible assets. Beginning in 2022, taxpayers are required to capitalize research and development costs and amortize them over a 5 or 15 year life. The impact of this change on the financial statements is reflected as an increase in the capitalized expense deferred tax asset. Coronavirus Aid, Relief and Economic Security Act and Issuance of 2020 Tax Regulations In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law in March 2020. Among other things, the CARES Act raised certain deduction limitations originally imposed by the 2017 Tax Act. Taxpayers may generally deduct interest expense up to the sum of 50% of adjusted taxable income plus business interest income (30% limit under the 2017 Tax Act) for 2020 and 2019. The limit reverted to 30% of adjusted taxable income in 2021. We had no Federal disallowed interest expense in 2022, 2021 or 2020. In July 2020, the U.S. Department of Treasury issued final tax regulations with respect to the GILTI proposed tax regulations originally published in 2019. Among other changes, these regulations now permit an election to exclude from the GILTI calculation items of income which are subject to a high effective rate of foreign tax. We adopted these final regulations and recorded the net benefit in 2020. Inflation Reduction Act The Inflation Reduction Act ("IRA") was signed into law on August 16, 2022. The IRA includes climate and energy provisions and introduces a 15% corporate alternative minimum tax, among other items. The enactment of the IRA did not result in any adjustments to our income tax provision in 2022. We continue to evaluate the impact of this law on our operations and do not expect the legislation to have a material impact on our consolidated financial statements. The components of earnings before income tax provision were as follows:
|  | Year Ended December 31,
(In millions) |  | 2022 |  | 2021 |  | 2020
Domestic |  | $ | 434.0 |  |  | $ | 346.2 |  |  | $ | 328.2 |
Foreign |  | 295.3 |  |  | 370.0 |  |  | 298.0 |
Total |  | $ | 729.3 |  |  | $ | 716.2 |  |  | $ | 626.2 |
The components of our income tax provision were as follows:
|  | Year Ended December 31,
(In millions) |  | 2022 |  | 2021 |  | 2020
Current tax expense: |  |  |  |  |  |
Federal |  | $ | 154.1 |  |  | $ | 63.1 |  |  | $ | (14.2) |
State and local |  | 25.6 |  |  | 17.2 |  |  | 5.6 |
Foreign |  | 88.7 |  |  | 106.6 |  |  | 69.9 |
Total current expense |  | $ | 268.4 |  |  | $ | 186.9 |  |  | $ | 61.3 |
Deferred tax (benefit) expense: |  |  |  |  |  |
Federal |  | $ | (23.4) |  |  | $ | 9.6 |  |  | $ | 59.4 |
State and local |  | 2.3 |  |  | 6.9 |  |  | 11.8 |
Foreign |  | (9.3) |  |  | 21.6 |  |  | 9.6 |
Total deferred tax (benefit) expense |  | (30.4) |  |  | 38.1 |  |  | 80.8 |
Total income tax provision |  | $ | 238.0 |  |  | $ | 225.0 |  |  | $ | 142.1 |
Deferred tax assets (liabilities) consist of the following:
|  | December 31,
(In millions) |  | 2022 |  | 2021
Accruals not yet deductible for tax purposes |  | $ | 17.6 |  |  | $ | 17.1 |
Net operating loss carryforwards |  | 208.4 |  |  | 219.4 |
Foreign, federal and state credits |  | 9.5 |  |  | 6.4 |
Employee benefit items |  | 40.3 |  |  | 45.4 |
Capitalized expenses |  | 36.5 |  |  | 3.9 |
Intangibles |  | 12.6 |  |  | 15.4 |
Derivatives and other |  | 44.7 |  |  | 45.4 |
Sub-total deferred tax assets |  | 369.6 |  |  | 353.0 |
Valuation allowance |  | (179.5) |  |  | (189.6) |
Total deferred tax assets |  | $ | 190.1 |  |  | $ | 163.4 |
Depreciation and amortization |  | $ | (89.1) |  |  | $ | (78.6) |
Other |  | — |  |  | (0.2) |
Total deferred tax liabilities |  | (89.1) |  |  | (78.8) |
Net deferred tax assets |  | $ | 101.0 |  |  | $ | 84.6 |
Valuation allowances have been provided based on the uncertainty of realizing the tax benefits of certain deferred tax assets, primarily: •$169.5 million of foreign items, primarily net operating losses; and •$8.5 million of tax credits. For the year ended December 31, 2022, the valuation allowances decreased by $10.1 million. The change is primarily driven by foreign exchange revaluation on foreign net operating losses. As of December 31, 2022, we have foreign net operating loss carryforwards of $810.1 million expiring in years beginning in 2023, with the large majority of losses having an unlimited carryover. The state net operating loss carryforwards totaling $245.6 million expire in various amounts over 1 to 19 years. As of December 31, 2022, we have $2.0 million of federal tax credit carryforwards and $9.4 million of state credit carryovers expiring in 2023 – 2032. Most of the credit carryovers have a valuation allowance. The Company has indefinitely reinvested most of its foreign earnings, which are the principal component of U.S. and foreign outside basis differences. The total amount of unremitted foreign earnings is approximately $4.9 billion upon which the U.S. federal income tax effect has largely been recorded as a result of the one-time mandatory tax on previously deferred foreign earnings of foreign subsidiaries provision (“Transition Tax”) associated with the 2017 Tax Act. Remitting these foreign earnings would result in additional foreign and U.S. income tax consequences, the net tax costs of which are not practicable to determine. As SEE has evaluated its worldwide business under the Reinvent SEE business transformation, the Company has reorganized and simplified its structure in order to align its business operations and optimize cash balances in certain jurisdictions. While the Company continues to evaluate potential future cash repatriations and optimization strategies, no deferred tax liability for future distributions has been recorded as of December 31, 2022. We have no outstanding liability with respect to Transition Tax. A reconciliation of the provision for income taxes, with the amount computed by applying the statutory federal income tax rate, 21%, to income before provision for income taxes, is as follows:
|  | Year Ended December 31,
(In millions) |  | 2022 |  | 2021 |  | 2020
Computed expected tax |  | $ | 153.2 |  |  | 21.0 | % |  | $ | 150.4 |  |  | 21.0 | % |  | $ | 131.5 |  |  | 21.0 | %
State income taxes, net of federal tax benefit |  | 18.3 |  |  | 2.5 | % |  | 15.6 |  |  | 2.2 | % |  | 13.4 |  |  | 2.1 | %
Foreign earnings taxed at different rates |  | 10.3 |  |  | 1.4 | % |  | 16.2 |  |  | 2.2 | % |  | 10.5 |  |  | 1.7 | %
U.S. tax on foreign earnings |  | 16.8 |  |  | 2.3 | % |  | 14.3 |  |  | 2.0 | % |  | 24.0 |  |  | 3.8 | %
Tax credits |  | (30.6) |  |  | (4.2) | % |  | (30.2) |  |  | (4.2) | % |  | (27.8) |  |  | (4.4) | %
Unremitted foreign earnings |  | — |  |  | — | % |  | — |  |  | — | % |  | 2.5 |  |  | 0.4 | %
Reorganization and divestitures |  | — |  |  | — | % |  | — |  |  | — | % |  | 0.4 |  |  | 0.1 | %
Withholding tax |  | 7.0 |  |  | 1.0 | % |  | 4.7 |  |  | 0.7 | % |  | 4.2 |  |  | 0.7 | %
Net change in valuation allowance |  | 1.0 |  |  | 0.1 | % |  | 3.6 |  |  | 0.5 | % |  | (5.2) |  |  | (0.8) | %
Net change in unrecognized tax benefits |  | 65.3 |  |  | 9.0 | % |  | 19.6 |  |  | 2.7 | % |  | (1.1) |  |  | (0.2) | %
Legislative Changes |  | — |  |  | — | % |  | 5.1 |  |  | 0.7 | % |  | (22.4) |  |  | (3.6) | %
Deferred tax adjustments |  | — |  |  | — | % |  | 11.4 |  |  | 1.6 | % |  | 3.0 |  |  | 0.5 | %
Other |  | (3.3) |  |  | (0.5) | % |  | 14.3 |  |  | 2.0 | % |  | 9.1 |  |  | 1.4 | %
Income tax provision and rate |  | $ | 238.0 |  |  | 32.6 | % |  | $ | 225.0 |  |  | 31.4 | % |  | $ | 142.1 |  |  | 22.7 | %
Unrecognized Tax Benefits We are providing the following disclosures related to our unrecognized tax benefits and the effect on our effective income tax rate if recognized:
|  | Year Ended December 31,
(In millions) |  | 2022 |  | 2021 |  | 2020
Beginning balance of unrecognized tax benefits |  | $ | 389.0 |  |  | $ | 379.6 |  |  | $ | 390.3 |
Additions for tax positions of current year |  | 1.3 |  |  | 1.8 |  |  | 2.7 |
Additions for tax positions of prior years |  | 41.6 |  |  | 9.7 |  |  | 8.3 |
Reductions for tax positions of prior years |  | (4.1) |  |  | (1.9) |  |  | (18.2) |
Reductions for lapses of statutes of limitation and settlements |  | (7.7) |  |  | (0.2) |  |  | (3.5) |
Ending balance of unrecognized tax benefits |  | $ | 420.1 |  |  | $ | 389.0 |  |  | $ | 379.6 |
In 2022, our unrecognized tax benefit increased by $31.1 million, and in 2021, our unrecognized tax benefit increased by $9.4 million, primarily related to interest or other adjustments to existing unrecognized tax benefit positions. If the unrecognized tax benefits at December 31, 2022 were recognized, our income tax provision would decrease by $372.4 million, resulting in a substantially lower effective tax rate. Based on the potential outcome of the Company’s global tax examinations and the expiration of the statute of limitations for specific jurisdictions, it is possible that the unrecognized tax benefits could change significantly within the next 12 months and the associated impact on the ending balance is estimated to be a decrease of approximately $208.0 million during 2023. We recognize interest and penalties associated with unrecognized tax benefits in our income tax provision in the Consolidated Statements of Operations. Interest and penalties recorded were $29.0 million, $10.5 million, and $5.6 million, respectively in 2022, 2021 and 2020. We had gross liabilities, for interest and penalties, of $120.8 million at December 31, 2022, $80.0 million at December 31, 2021 and $65.3 million at December 31, 2020. Most of the unrecognized tax benefit amount of $420.1 million relates to the Americas. Income Tax Returns The IRS completed its field examination of our U.S. federal income tax returns for the years 2011 through 2014 in the third quarter of 2020. As previously disclosed, the IRS has proposed to disallow for the 2014 taxable year the entirety of the deduction of the approximately $1.49 billion settlement payments made pursuant to the Settlement agreement and the resulting reduction of our U.S. federal tax liability by approximately $525 million. The proposed disallowance is being reviewed by the IRS Independent Office of Appeals (“Appeals”). Although we believe we have meritorious defenses to the proposed disallowance, we have reached a tentative agreement to settle this matter with the IRS, which is subject to further review, approval and execution of a definitive agreement by both parties. There can be no assurance that a definitive agreement will be executed and we cannot predict the outcome of this matter or when it will be concluded. We have revised our uncertain tax position to reflect the tentative agreement. Future developments in this matter could have a material impact on the Company's uncertain tax position balances and results of operations, including cash flows, within the next twelve months. State income tax returns are generally subject to examination for a period of 3 to 5 years after their filing date. We have various state income tax returns in the process of examination and are generally open to examination for periods after 2017. Our foreign income tax returns are under examination in various jurisdictions in which we conduct business. Income tax returns in foreign jurisdictions have statutes of limitations generally ranging from 3 to 5 years after their filing date. We have various foreign returns in the process of examination but have largely concluded all other income tax matters for the years prior to 2017. Management believes that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any of the issues addressed in the Company’s tax audits are resolved in a manner that is inconsistent with management’s expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs and could be required to make significant payments as a result.

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