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Income Taxes | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Provision for Income Taxes Our income before taxes is as follows:
(in millions) For year ended December 31, |  | 2023 |  | 2022 |  | 2021
U.S. operations |  | $ | 97.4 |  |  | $ | 163.9 |  |  | $ | 173.9 |
Non-U.S. operations |  | 142.4 |  |  | 84.4 |  |  | 52.2 |
Total |  | $ | 239.8 |  |  | $ | 248.3 |  |  | $ | 226.1 |
Our provision (benefit) for income taxes consists of:
(in millions) For the year ended December 31, |  | 2023 |  | 2022 |  | 2021
Current: |  |  |  |  |  |
U.S. federal tax |  | $ | 31.3 |  |  | $ | 52.2 |  |  | $ | 27.7 |
U.S. state and local tax |  | 1.7 |  |  | 6.0 |  |  | 4.2 |
Non-U.S. tax |  | 20.6 |  |  | 13.6 |  |  | 8.0 |
Total current |  | 53.6 |  |  | 71.8 |  |  | 39.9 |
Deferred: |  |  |  |  |  |
U.S. federal tax |  | (2.8) |  |  | (13.8) |  |  | (1.0) |
U.S. state and local tax |  | (0.4) |  |  | (2.3) |  |  | 8.7 |
Non-U.S. tax |  | 1.1 |  |  | (12.3) |  |  | 0.5 |
Total deferred |  | (2.1) |  |  | (28.4) |  |  | 8.2 |
Total provision for income taxes (a) |  | $ | 51.5 |  |  | $ | 43.4 |  |  | $ | 48.1 |
(a) Included in the above amounts are excess tax benefits from share-based compensation of $0.9 million, $0.8 million and $1.9 million in 2023, 2022 and 2021, respectively, which were reflected as reductions in our provision for income taxes in 2023, 2022 and 2021. A reconciliation of the statutory U.S. federal tax rate to our effective tax rate is as follows:
For the year ended December 31, |  | 2023 |  | 2022 |  | 2021
Statutory U.S. federal tax rate |  | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Increase (reduction) from: |  |  |  |  |  |
Income taxed at non-U.S. rates |  | (2.0) | % |  | (6.6) | % |  | (1.4) | %
Non-U.S. income inclusion, net of tax credits |  | 2.0 | % |  | 4.3 | % |  | (0.9) | %
State and local taxes, net of federal benefit |  | 1.0 | % |  | 1.2 | % |  | 4.7 | %
U.S. research and development tax credit |  | (0.7) | % |  | (0.4) | % |  | (0.9) | %
U.S. deduction for foreign - derived intangible income |  | (0.8) | % |  | (1.0) | % |  | (0.2) | %
Other |  | 1.0 | % |  | (1.0) | % |  | (1.1) | %
Effective tax rate |  | 21.5 | % |  | 17.5 | % |  | 21.2 | %
The Organization for Economic Co-operation and Development (“OECD”) has proposed a global minimum tax of 15% of reported profits (“Pillar 2”) that has been agreed upon by over 140 member jurisdictions including the United States. Pillar 2 addresses the risks associated with profit shifting to entities in low tax jurisdictions. We are currently assessing the impact of this minimum tax on our business. As of December 31, 2023, we have made the following determinations with regard to our non-U.S. earnings:
(in millions) |  | Permanently reinvested |  | Not permanently reinvested
Amount of earnings |  | $ | 179.0 |  |  | $ | 148.5 |
Associated tax |  | N/A (a) |  | $ | 0.5 |
(a) Determination of U.S. income taxes and non-U.S. withholding taxes due upon repatriation of this $179.0 million of earnings is not practicable because the amount of such taxes depends upon circumstances existing in numerous taxing jurisdictions at the time the remittance occurs. Tax Related to Comprehensive Income During 2023, 2022 and 2021, tax provision of $0.5 million, $2.8 million and $0.7 million, respectively, related to changes in pension and post-retirement plan assets and benefit obligations, were recorded to accumulated other comprehensive loss. Deferred Taxes and Valuation Allowances The components of deferred tax assets and liabilities included in our Consolidated and Combined Balance Sheets are as follows:
(in millions) December 31, |  | 2023 |  | 2022
Deferred tax assets: |  |  |  |
Tax loss and credit carryforwards |  | $ | 48.4 |  |  | $ | 23.7 |
Inventories |  | 8.5 |  |  | 9.1 |
Capitalized Research and Development |  | 9.0 |  |  | 6.8 |
Accrued Bonuses and Stock Based Compensation |  | 1.1 |  |  | 1.8 |
Pension and Post Retirement Benefits |  | 2.4 |  |  | 1.6 |
Other |  | 12.5 |  |  | 11.5 |
Total |  | $ | 81.9 |  |  | $ | 54.5 |
Less: valuation allowance |  | 46.4 |  |  | 19.3 |
Total deferred tax assets, net of valuation allowance |  | $ | 35.5 |  |  | $ | 35.2 |
Deferred tax liabilities: |  |  |  |
Basis difference in intangible assets |  | $ | (108.8) |  |  | $ | (119.1) |
Basis difference in fixed assets |  | (28.2) |  |  | (19.1) |
Other |  | (0.3) |  |  | (0.2) |
Total deferred tax liabilities |  | $ | (137.3) |  |  | $ | (138.4) |
Net deferred tax asset (liability) |  | $ | (101.8) |  |  | $ | (103.2) |
Balance sheet classification: |  |  |  |
Long-term deferred tax assets |  | $ | 2.7 |  |  | $ | 6.3 |
Long-term deferred tax liability |  | (104.5) |  |  | (109.5) |
Net deferred tax asset (liability) |  | $ | (101.8) |  |  | $ | (103.2) |
Our total valuation allowance as of December 31, 2023 and 2022 was $46.4 million and $19.3 million, respectively. The change in valuation allowance primarily resulted from the transfer of state net operating losses and associated valuation allowances from SpinCo to the Company as a result of the Separation. As of December 31, 2023, we had U.S. federal, U.S. state and non-U.S. tax loss and credit carryforwards that will expire, if unused, as follows:
(in millions) Year of expiration |  | U.S. Federal Tax Credits |  | U.S. Federal Tax Losses |  | U.S. State Tax Credits |  | U.S. State Tax Losses |  | Non- U.S. Tax Losses |  | Total
2024-2028 |  | $ | — |  |  | $ | — |  |  | $ | 1.1 |  |  | $ | 67.9 |  |  | $ | 0.2 |  |  |
After 2028 |  | 10.6 |  |  | 0.6 |  |  | 0.3 |  |  | 535.4 |  |  | 0.3 |  |  |
Indefinite |  | — |  |  | — |  |  | — |  |  | 4.6 |  |  | 15.2 |  |  |
Total tax carryforwards |  | $ | 10.6 |  |  | $ | 0.6 |  |  | $ | 1.4 |  |  | $ | 607.9 |  |  | $ | 15.7 |  |  |
Deferred tax asset on tax carryforwards |  | $ | 10.6 |  |  | $ | 0.1 |  |  | $ | 1.1 |  |  | $ | 33.0 |  |  | $ | 3.6 |  |  | $ | 48.4 |
Valuation allowance on tax carryforwards |  | (10.6) |  |  | (0.1) |  |  | (1.1) |  |  | (31.6) |  |  | (3.0) |  |  | (46.4) |
Net deferred tax asset on tax carryforwards |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 1.4 |  |  | $ | 0.6 |  |  | $ | 2.0 |
As of December 31, 2023 and 2022, we determined that it was more likely than not that $46.4 million and $13.3 million, respectively, of our deferred tax assets related to tax loss and credit carryforwards will not be realized. As a result, we recorded a valuation allowance against these deferred tax assets. We also determined that it is more likely than not that a portion of the benefit related to U.S. state and non-U.S. deferred tax assets other than tax loss and credit carryforwards will not be realized. Accordingly, as of December 31, 2023 and 2022, a valuation allowance of $0.0 million and $6.0 million, respectively, was established against these U.S. state and non-U.S. deferred tax assets. Our total valuation allowance as of December 31, 2023 and 2022 was $46.4 million and $19.3 million, respectively. Unrecognized Tax Benefits A reconciliation of the beginning and ending amount of our gross unrecognized tax benefits, excluding interest and penalties, is as follows:
(in millions) |  | 2023 |  | 2022 |  | 2021
Balance of liability as of January 1, |  | $ | 7.6 |  |  | $ | 10.3 |  |  | $ | 11.4 |
Increase as a result of tax positions taken during a prior year |  | — |  |  | — |  |  | — |
Decrease as a result of tax positions taken during a prior year |  | (0.2) |  |  | — |  |  | — |
Increase as a result of tax positions taken during the current year |  | 0.5 |  |  | 0.4 |  |  | 0.2 |
Decrease as a result of settlements with taxing authorities |  | (0.1) |  |  | — |  |  | (0.8) |
Reduction as a result of a lapse of the statute of limitations |  | (5.2) |  |  | (3.1) |  |  | (0.5) |
Other |  | 13.9 |  |  | — |  |  | — |
Balance of liability as of December 31, |  | $ | 16.5 |  |  | $ | 7.6 |  |  | $ | 10.3 |
As of December 31, 2023, 2022 and 2021, the amount of our unrecognized tax benefits that, if recognized, would affect our effective tax rate was $18.4 million, $7.8 million and $10.8 million, respectively. The difference between these amounts and those reflected in the table above relates to (1) offsetting tax effects from other tax jurisdictions, and (2) interest expense, net of deferred taxes. As of December 31, 2023, the Company has recorded a gross unrecognized tax benefit of $13.9 million due to the Separation from SpinCo which is included in the above table as “Other.” This reflects SpinCo’s share of gross unrecognized tax benefit for pre-Separation periods when SpinCo’s operations were included in the Company’s consolidated tax returns. The Company has also recorded an indemnification receivable of $7.1 million from SpinCo per the terms of the Tax Matters Agreement described in Note 1, “Nature of Operations and Significant Accounting Policies.” We recognize interest and penalties related to unrecognized tax benefits as a component of our income tax expense. During the years ended December 31, 2023, 2022 and 2021, we recognized interest and penalty (income) of $(0.1) million, $(0.4) million and $(2.5) million, respectively, in our Consolidated and Combined Statements of Operations. As of December 31, 2023 and 2022, we had accrued $2.8 million and $1.2 million, respectively, of interest and penalties related to unrecognized tax benefits on our Consolidated and Combined Balance Sheets. During the next twelve months, it is reasonably possible that our unrecognized tax benefits could change by $9.4 million due to settlements of income tax examinations, the expiration of statutes of limitations or other resolution of uncertainties. However, if the ultimate resolution of income tax examinations results in amounts that differ from this estimate, we will record additional income tax expense or benefit in the period in which such matters are effectively settled. Income Tax Examinations Our income tax returns are subject to examination by the U.S. federal, U.S. state and local, and non-U.S. tax authorities. With few exceptions, the years open to examinations are as follows:
Jurisdiction |  | Year
U.S. federal |  | 2020 - 2022
U.S. state and local |  | 2017 - 2022
Non-U.S. |  | 2017 - 2022
Currently, we and our subsidiaries are under examination in various jurisdictions. The Tax Matters Agreement specifies the rights, responsibilities, and obligations after the Separation with respect to tax liabilities and benefits. The agreement specifies the portion, if any, of this tax liability for which we and SpinCo will bear responsibility, and we and SpinCo agreed to indemnify each other against any amounts for which they are not responsible. The Accrued Income Tax Liability computed on a stand-alone entity basis resulted in a decrease of approximately $10.2 million adjusted in our Consolidated and Combined Statements of Changes in Equity through “Crane Net Investment” upon the Separation. As of December 31, 2023, we had an accrued income tax liability of $12.8 million included in “U.S. and foreign taxes on income” in our Consolidated and Combined Balance Sheets.

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