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INCOME TAXES
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
Income tax expense was $10 million, $77 million, and $265 million in 2024, 2023 and 2022, respectively. The decrease in tax expense in 2024 compared to 2023 includes lower earnings and legal entity restructuring tax benefits related to simplifying our legal entity structure in 2024 to reduce administrative costs associated with the prior structure. The completion of the restructuring in 2024 created a tax deductible loss which was recognized in 2024 and resulted in a $721 million net tax benefit partially offset by increases in valuation allowances and the divestiture tax impact.
The change in tax expense in 2023 compared to 2022 includes legal entity restructuring tax benefits, related to simplifying the legal entity structure to reduce administrative costs associated with the prior structure. The completion of the restructuring created a tax-deductible loss which was recognized in the fourth quarter of 2023, and resulted in a $170 million net tax benefit, partially offset by increases in valuation allowances.
The following table summarizes the difference between an income tax benefit and tax expense at the United States statutory rate of 21% in 2024, 2023, and 2022, respectively, and the income tax expense at effective worldwide tax rates for the respective periods:
Millions of dollars202420232022
Earnings (loss) before income taxes
United States$(294)$9 $(158)
Foreign107 584 (1,069)
Earnings (loss) before income taxes$(188)$593 $(1,227)
Income tax (benefit) expense computed at United States statutory rate$(39)$125 $(258)
U.S. government tax incentives(19)(20)(19)
Foreign government tax incentives, including BEFIEX(31)(30)(23)
Foreign tax rate differential26 41 (3)
U.S. foreign tax credits(65)(43)11 
Valuation allowances395 78 222 
State and local taxes, net of federal tax benefit(56)(43)(21)
Foreign withholding taxes16 13 52 
U.S. tax on foreign dividends and subpart F income(57)36 22 
Settlement of global tax audits32 43 3 
Changes in enacted tax rates10 1 (2)
Nondeductible loss on sale56 5 421 
Nondeductible fines and penalties— 18 59 
Legal entity debt restructuring(3)— (159)
Divestiture tax impact239 — — 
Legal entity restructuring tax impact(721)(170)— 
Expiration/Forfeiture of net operating losses143 5 — 
Foreign currency impacts33 (23)(23)
Non-deductible expenses46 31 22 
Other items, net5 10 (39)
Income tax computed at effective worldwide tax rates$10 $77 $265 
Current and Deferred Tax Provision
The following table summarizes our income tax (benefit) provision for 2024, 2023 and 2022:
 202420232022
Millions of dollarsCurrentDeferredCurrentDeferredCurrentDeferred
United States$(6)$(437)$(27)$(212)$(40)$65 
Foreign184 393 197 155 180 85 
State and local9 (133)(3)(33)(9)(16)
$187 $(177)$167 $(90)$131 $134 
Total income tax expense$10 $77 $265 
United States Tax on Foreign Dividends
We have historically reinvested all unremitted earnings of the majority of our foreign subsidiaries and affiliates, and therefore have not recognized any U.S. deferred tax liability on those earnings. The Company had cash and cash equivalents of approximately $1.3 billion at December 31, 2024, of which approximately $1.1 billion was held by subsidiaries in foreign countries. Certain funds outside of the United States could be repatriated to fund our U.S. operations. If these funds were
repatriated, they would likely not be subject to United States federal income tax under the previously taxed income or the dividend exemption rules. However, we would likely be required to accrue and pay United States state and local taxes and withholding taxes payable to various countries. The Company has included an estimate of $15 million of income tax expense in 2024 as an estimate of this hypothetical tax obligation.
Valuation Allowances
At December 31, 2024, we had net operating loss carryforwards of $3.8 billion, $1.2 billion of which were U.S. state net operating loss carryforwards, compared to $5.4 billion and $1.2 billion at December 31, 2023, respectively. The decrease in net operating loss carryforwards was primarily driven by the legal entity restructuring actions in 2024. Of the total net operating loss carryforwards at December 31, 2024, $1.1 billion do not expire, with substantially all of the remaining carryforwards expiring in various years through 2043. At December 31, 2024, we had $363 million of United States general business credit carryforwards available to offset future payments of federal income taxes, expiring between 2031 and 2043.
We routinely review the future realization of deferred tax assets based on projected future reversal of taxable temporary differences, available tax planning strategies and projected future taxable income. We have recorded a valuation allowance to reflect the net estimated amount of certain deferred tax assets associated with net operating loss and other deferred tax assets we believe will be realized. Our recorded valuation allowance of $885 million at December 31, 2024 consists of $601 million of net operating loss carryforward deferred tax assets and $284 million of other deferred tax assets. Our recorded valuation allowance was $490 million at December 31, 2023 and consisted of $393 million of net operating loss carryforward deferred tax assets and $97 million of other deferred tax assets. The increase in our valuation allowance was primarily driven by the European major domestic appliance business transaction.
Net operating loss carryforwards in 2023 of $2.1 billion related to the European major domestic appliance business as of December 31, 2023. Net deferred tax assets of $512 million, including $106 million of valuation allowances, associated with the disposal group were transferred to assets held for sale in the fourth quarter of 2023. For additional information, see Notes 10 and 16 to the 2023 Consolidated Financial Statements.
Deferred Tax Liabilities and Assets
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities used for financial reporting purposes and the amounts used for income tax purposes. The following table summarizes the significant components of our deferred tax liabilities and assets at December 31, 2024 and 2023:
Millions of dollars20242023
Deferred tax liabilities
Intangibles$249 $429 
Property, net126 224 
Right of use assets171 190 
Inventory Reserves— (3)
Other59 238 
Total deferred tax liabilities$605 $1,078 
Deferred tax assets
U.S. general business credit carryforwards, including Energy Tax Credits$363 $365 
Corporate Alternative Minimum Tax credits
— 28 
Lease liabilities179 200 
Pensions33 64 
Loss carryforwards911 1,388 
Postretirement obligations28 29 
Foreign tax credit carryforwards151 94 
Research and development capitalization367 315 
Employee payroll and benefits53 48 
Accrued expenses82 52 
Product warranty accrual41 49 
Receivable and inventory allowances41 67 
Other656 676 
Total deferred tax assets2,905 3,375 
Valuation allowances for deferred tax assets(885)(490)
Deferred tax assets, net of valuation allowances2,020 2,885 
Reclassification of net deferred tax assets to held for sale— (515)
Net deferred tax assets$1,415 $1,292 
On August 16, 2022, the Inflation Reduction Act of 2022 (the “IRA”) was enacted into law. Among other changes to the Internal Revenue Code of 1986, as amended (the “Code”), the IRA imposes a 15% corporate alternative minimum tax on certain corporations (the “CAMT”). To the extent a corporation is subject to the CAMT in a prior taxable year and in a later taxable year is subject to the regular corporate tax, such corporation may apply the prior amounts paid under the CAMT against its regular tax liability to the extent such credits do not reduce the regular tax liability below the CAMT applicable in such taxable year. We have no CAMT liability nor related deferred tax asset carryforward as of December 31, 2024.
Unrecognized Tax Benefits
The following table represents a reconciliation of the beginning and ending amount of unrecognized tax benefits that if recognized would impact the effective tax rate, excluding federal benefits of state and local tax positions, and interest and penalties:
Millions of dollars202420232022
Balance, January 1$380 $589 $580 
Additions for tax positions of the current year10 13 24 
Additions for tax positions of prior years14 22 32 
Reductions for tax positions of prior years(52)(56)(45)
Settlements during the period (1)
(3)(188)(1)
Lapses of applicable statute of limitation— — (1)
Balance, December 31$349 $380 $589 
(1) During the fourth quarter of 2023, the Company resolved a number of disputed tax positions with the U.S. and other tax authorities. The Company had previously recorded reserves for the risk associated with these tax positions, and the settlement of these matters resulted in a reduction in the Company's unrecognized tax benefits, which is shown in the table above.
Interest and penalties associated with unrecognized tax benefits resulted in a net expense of $14 million, net benefit of $12 million and net expense of $24 million in December 31, 2024, 2023 and 2022, respectively. We have accrued a total of $53 million, $78 million and $90 million at December 31, 2024, 2023 and 2022, respectively.
It is reasonably possible that certain unrecognized tax benefits of $134 million could be settled with various related jurisdictions during the next 12 months.
We are in various stages of tax disputes (including audits, appeals and litigation) with certain governmental tax authorities. We establish liabilities for the difference between tax return provisions and the benefits recognized in our financial statements. Such amounts represent a reasonable provision for taxes ultimately expected to be paid, and may need to be adjusted over time as more information becomes known. We are no longer subject to any significant tax disputes (including audits, appeals and litigation) for the years before 2012 relating to US Federal income taxes and for the years before 2003 relating to any state, local or foreign income taxes.