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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes

15. Income Taxes

The domestic and foreign components of income (loss) before income taxes were as follows (in millions):

 

 

Year Ended December 31,

 

 

 

2023

 

 

2022

 

 

2021

 

Domestic

 

$

249

 

 

$

113

 

 

$

(257

)

Foreign

 

 

363

 

 

 

125

 

 

 

27

 

 

$

612

 

 

$

238

 

 

$

(230

)

 

The components of the provision (benefit) for income taxes consisted of (in millions):

 

 

Year Ended December 31,

 

 

2023

 

 

2022

 

 

2021

 

Current:

 

 

 

 

 

 

 

 

 

Federal

 

$

(4

)

 

$

(1

)

 

$

4

 

State

 

 

2

 

 

 

—

 

 

 

(1

)

Foreign

 

 

118

 

 

 

86

 

 

 

23

 

Total current income tax provision

 

 

116

 

 

 

85

 

 

 

26

 

Deferred:

 

 

 

 

 

 

 

 

 

Federal

 

 

(252

)

 

 

3

 

 

 

(1

)

State

 

 

(47

)

 

 

—

 

 

 

—

 

Foreign

 

 

(190

)

 

 

(5

)

 

 

(10

)

Total deferred income tax provision

 

 

(489

)

 

 

(2

)

 

 

(11

)

Total income tax provision (benefit)

 

$

(373

)

 

$

83

 

 

$

15

 

 

The difference between the effective tax rate reflected in the provision (benefit) for income taxes and the U.S. federal statutory rate was as follows (in millions):

 

 

Year Ended December 31,

 

 

2023

 

 

2022

 

 

2021

 

Federal income tax at U.S. statutory rate

 

$

129

 

 

$

50

 

 

$

(48

)

Foreign income tax rate differential

 

 

3

 

 

 

1

 

 

 

(9

)

Change in deferred tax valuation allowance

 

 

(564

)

 

 

24

 

 

 

31

 

Nondeductible expenses

 

 

18

 

 

 

18

 

 

 

17

 

Foreign inclusions, net of foreign tax credits

 

 

5

 

 

 

(4

)

 

 

38

 

Change in uncertain tax positions

 

 

12

 

 

 

4

 

 

 

13

 

Withholding taxes

 

 

30

 

 

 

31

 

 

 

16

 

Income tax credits

 

 

(8

)

 

 

(5

)

 

 

(11

)

Other

 

 

2

 

 

 

(36

)

 

 

(32

)

Total income tax provision (benefit)

 

$

(373

)

 

$

83

 

 

$

15

 

 

 

The effective tax rate for the year ended December 31, 2023 was (60.9%), compared to 34.9% for 2022. For the year-ended 2023, the effective tax rate was favorably impacted by the release of $485 million in valuation allowances in numerous jurisdictions. During the fourth quarter of 2023, the Company determined it was more likely than not the Company would be able to realize the benefit of a substantial portion of the deferred tax assets in the United States and the majority of its other international jurisdictions. In reaching this determination, the Company considered the growing trend of profitability over the last three years, particularly in the United States, as well as expectations regarding the generation of future taxable income and the sources of future taxable income. As a result of this analysis, the Company recognized a discrete tax benefit related to the release of valuation allowances of $299 million in the United States and $186 million outside the United States. As of December 31, 2023, the Company continues to maintain a valuation allowance of $346 million primarily related to foreign tax credit carryforwards in the United States and deferred tax assets in certain other jurisdictions due to several factors, including specific jurisdictions in which the Company does not project to generate sufficient future taxable income to realize all or a portion of its deferred tax assets specific to that jurisdiction; the specific nature and timing of future taxable income required to realize certain tax credit carryforwards, most notably U.S. foreign tax credits; and the timing of expiration of certain tax credit carryforwards. The effective tax rate was also favorably impacted by adjustments related to utilization of losses and tax credits for current and prior year tax returns, partially offset by current year losses in certain jurisdictions with no tax benefit.

 

For the year ended December 31, 2022 the effective tax rate was negatively impacted by losses in certain jurisdictions with no tax benefit, partially offset by favorable adjustments related to the foreign currency translation gains and the utilization of losses and tax credits for prior year tax returns.

Significant components of our deferred tax assets and liabilities were as follows (in millions):

 

December 31,

 

 

2023

 

 

2022

 

Deferred tax assets:

 

 

 

 

 

 

Allowances and operating liabilities

 

$

264

 

 

$

276

 

Net operating loss carryforwards

 

 

249

 

 

 

324

 

Stock Compensation

 

 

48

 

 

 

51

 

Tax credit carryforwards

 

 

301

 

 

 

292

 

Other

 

 

121

 

 

 

119

 

Valuation allowance

 

 

(346

)

 

 

(920

)

Total deferred tax assets

 

 

637

 

 

 

142

 

Deferred tax liabilities:

 

 

 

 

 

 

Tax over book depreciation

 

 

43

 

 

 

49

 

Capital leases

 

 

67

 

 

 

73

 

Intangible assets

 

 

39

 

 

 

34

 

Deferred income

 

 

24

 

 

 

16

 

Accrued tax on unremitted earnings

 

 

38

 

 

 

32

 

Other

 

 

8

 

 

 

6

 

Total deferred tax liabilities

 

 

219

 

 

 

210

 

Net deferred tax asset (liability)

 

$

418

 

 

$

(68

)

 

The valuation allowance decreased by $574 million during 2023. This decrease is comprised of $485 million due to the Company’s evaluation of the realizability of deferred tax assets based on future projections of taxable income, $68 million related to utilized NOLs and other timing differences in the United States, $8 million related to utilized NOLs in foreign jurisdictions, $7 million related to foreign currency exchange rate changes, and $6 million related to current year changes in the carrying value of deferred tax assets.

 

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in millions):

 

 

 

2023

 

 

2022

 

 

2021

 

Unrecognized tax benefit at beginning of year

 

$

62

 

 

$

60

 

 

$

57

 

Gross increase for tax position in current year

 

 

18

 

 

 

—

 

 

 

—

 

Gross increase for tax positions in prior years

 

 

1

 

 

 

9

 

 

 

8

 

Gross decrease for tax positions in prior years

 

 

(3

)

 

 

(1

)

 

 

(1

)

Cash Settlements

 

 

(4

)

 

 

(1

)

 

 

(1

)

Lapse of statute of limitations

 

 

(7

)

 

 

(5

)

 

 

(3

)

Unrecognized tax benefit at end of year

 

$

67

 

 

$

62

 

 

$

60

 

 

The balance of unrecognized tax benefits at December 31, 2023, 2022 and 2021 was $67 million, $62 million and $60 million, respectively. Accruals related to prior year domestic and foreign jurisdiction issues resulted in uncertain tax position increases of $19 million in 2023. Resolutions of domestic and foreign jurisdiction audits resulted in a $4 million and $1 million decrease in uncertain tax provisions for the years ended December 31, 2023 and 2022, respectively.

Substantially all of the unrecognized tax benefits, if ultimately realized, would be recorded as a reduction to income tax expense in the period realized. The Company does not anticipate any material change within the next twelve months due to settlements and conclusions of tax examinations. To the extent penalties and interest would be assessed on any underpayment of income tax, such accrued amounts have been classified as a component of income tax expense in the financial statements consistent with the Company’s policy. For the years ended December 31, 2023, 2022 and 2021, we recorded income tax expense of $5 million, $8 million and $8 million, respectively, for interest and penalty related to unrecognized tax benefits. As of December 31, 2023 and 2022, the Company had accrued $20 million and $23 million, respectively, of interest and penalty relating to unrecognized tax benefits.

The Company is subject to taxation in the United States as well as various states and foreign jurisdictions. The Company has significant operations in the United States, Norway, Saudi Arabia, Brazil, China, the United Kingdom, the Netherlands, Denmark, and Mexico. Tax years that remain subject to examination by major tax jurisdictions vary by legal entity, but are generally open in the U.S. for tax years ending after 2013 and outside the U.S. for tax years ending after 2018.

Net operating loss carryforwards by jurisdiction and expiration as of December 31, 2023 were as follows (in millions):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

 

State

 

 

Foreign

 

 

Total

 

2024 - 2028 Expiration

 

$

—

 

 

$

9

 

 

$

51

 

 

$

60

 

2029 - 2043 Expiration

 

 

13

 

 

 

344

 

 

 

212

 

 

 

569

 

Unlimited Expiration

 

 

41

 

 

 

—

 

 

 

546

 

 

 

587

 

Total Net Operating Loss (NOL)

 

$

54

 

 

$

353

 

 

$

809

 

 

$

1,216

 

Tax Effected NOL

 

$

11

 

 

$

24

 

 

$

214

 

 

$

249

 

 

The Company has $277 million of excess foreign tax credits in the United States as of December 31, 2023, of which $145 million, $92 million, $12 million, $11 million, and $10 million and $7 million will expire in 2027, 2028, 2030, 2031, 2032 and 2033 respectively. As of December 31, 2023, the Company has remaining tax-deductible goodwill of $70 million, resulting from acquisitions. The amortization of this goodwill is deductible over various periods ranging up to 8 years.