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INCOME TAXES
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
INCOME TAXES
Note 13 — INCOME TAXES
The Company is subject to taxation in the U.S. and numerous international jurisdictions. In determining the effective income tax rate, the Company analyzes various factors, including annual earnings, the laws of taxing jurisdictions in which the earnings were generated, the impact of state and local income taxes, the ability to use tax credits, net operating loss carryforwards, and available planning alternatives. Discrete items, including the effect of changes in tax laws, statutory tax rates, and valuation allowances or other non-recurring tax adjustments are reflected in the period in which they occur as an addition to or reduction from, the tax provision. We recognize tax on global intangible low-taxed income (GILTI) and the deduction of foreign-derived intangible income (FDII) as a period expense in the period in which the tax is incurred.
In January 2019, the Organization for Economic Co-operation and Development (OECD) announced further work in continuation of its Base Erosion and Profit Shifting project, focusing on two "pillars." Pillar One provides a framework for the reallocation of certain residual profits of multinational enterprises to market jurisdictions where goods or services are used or consumed. Pillar Two consists of two interrelated rules referred to as Global Anti-Base Erosion ("GloBe") Rules, which operate to impose a minimum tax rate of 15% calculated on a jurisdictional basis for companies with revenue above €750 million. Certain European jurisdictions are in the process of enacting legislation to adopt GloBE rules with effective dates beginning in 2024. As a result of the transition rules, Avient does not currently expect there to be a material impact to its financial statements. The Company will continue to monitor legislative and regulatory developments in this area.
Income from continuing operations, before income taxes is summarized below based on the geographic location of the operation to which such earnings are attributable.
Income (loss) from continuing operations, before income taxes consists of the following:
(In millions)
2023
2022
2021
Domestic$(2.7)$(82.4)$(22.1)
International90.0 146.2 225.6 
Income from continuing operations, before income taxes
$87.3 $63.8 $203.5 
A summary of income tax expense (benefit) from continuing operations is as follows:
(In millions)
2023
2022
2021
Current income tax expense (benefit):
Domestic$18.5 $(76.2)$23.4 
International53.8 56.4 50.8 
Total current income tax expense (benefit)$72.3 $(19.8)$74.2 
Deferred income tax expense (benefit):
Domestic$(35.8)$2.6 $(26.8)
International(25.5)(2.1)4.5 
Total deferred income tax (benefit) expense$(61.3)$0.5 $(22.3)
Total income tax expense (benefit)$11.0 $(19.3)$51.9 
A reconciliation of the applicable U.S. federal statutory tax rate to the consolidated effective income tax rate from continuing operations along with a description of significant reconciling items is included below for the years ended December 31, 2023, 2022 and 2021.
2023
2022
2021
U.S. federal income tax rate21.0 %21.0 %21.0 %
International tax rate differential:
Asia0.9 1.1 0.4 
Europe(5.2)(12.4)(1.8)
North and South America4.5 5.9 1.1 
Total international tax rate differential0.2 (5.5)(0.3)
Net tax on GILTI and FDII1.9 2.8 (1.0)
International tax on certain current and prior year earnings3.9 0.2 2.0 
Non-deductible acquisition related costs— 0.9 0.1 
Non-deductible interest5.3 2.9 — 
Research and development credit(3.7)(5.0)(1.1)
Capital losses(5.4)(88.1)(0.6)
State and local tax, net(2.3)(4.0)0.2 
International permanent items(7.5)12.1 0.2 
Net impact of uncertain tax positions(5.3)12.9 1.0 
Changes in valuation allowances3.6 15.4 2.6 
Other0.9 4.2 1.4 
Effective income tax rate12.6 %(30.2)%25.5 %
The effective tax rates for all periods differed from the applicable U.S. federal income tax rate as a result of permanent items, state and local income taxes, differences in international tax rates and certain other items. Permanent items primarily consist of income or expense not taxable or deductible. Significant or other items impacting the effective income tax rate are described below.
2023 Significant items
The consolidated effective income tax rate from continuing operations was 12.6%, which was lower than the U.S. federal rate of 21%. This lower rate was primarily driven by the recognition of tax benefits of 7.5% associated with tax impairments of investments in affiliates, driven in part from European restructuring actions. Further, we recognized a 5.4% tax benefit from federal and state capital losses associated with an international affiliate's tax status change in 2022. Finally, we recognized tax benefits from the reduction of uncertain tax positions as well as the U.S. R&D tax credit, which reduced the tax rate, 5.3% and 3.7%, respectively. Partially offsetting these benefits were non-deductible foreign interest, 5.3%, tax associated with foreign income repatriation, 3.9%, and an increase of our valuation allowance which impacted the rate 3.6%.
2022 Significant items
We recognized a net tax benefit of 88.1% in 2022 from federal and state capital loss deductions associated with an international affiliate's tax status change. We also recognized a tax benefit of 5.5% associated with earnings in foreign jurisdictions with statutory rates below the U.S. federal income tax rate. Further, the state and local tax benefit was 4.0%, driven by a U.S. tax loss.
Offsetting these benefits in 2022 were the tax impact of international permanent items of 12.1%, which primarily included an unfavorable tax effect of withholding taxes. We also increased our valuation allowance, which impacted the rate 15.4%, for deferred tax assets that are unlikely to create income tax benefits before their expiration. Further, uncertain tax positions increased, which impacted the rate 12.9%, primarily associated with European restructuring charges which are not expected to realize and a tax effect of non-deductible foreign interest of 2.9%.
2021 Significant items
For 2021, changes in valuation allowances, which impacted the rate 2.6%, related to losses in jurisdictions for which we do not expect to be able to realize the associated tax benefit. We also recognized uncertain tax positions, which impacted the rate 1.0%, primarily associated with European restructuring actions taken in 2021.
Components of our deferred tax assets (liabilities) as of December 31, 2023 and 2022 were as follows:
(In millions)
2023
2022
Deferred tax assets:
Employment costs21.4 21.0 
Environmental accruals38.5 29.2 
Net operating loss carryforwards66.0 54.3 
Operating leases7.8 11.8 
Research and development45.8 39.2 
Capitalized and carryforward interest48.7 18.2 
Financial Derivatives48.3 16.7 
Other, net52.2 54.4 
Gross deferred tax assets$328.7 $244.8 
Valuation allowances(39.6)(35.3)
Total deferred tax assets, net of valuation allowances$289.1 $209.5 
Deferred tax liabilities:
Property, plant and equipment$(101.3)$(117.4)
Goodwill and intangibles(351.2)(337.3)
Operating leases(7.6)(12.0)
Other, net(18.3)(11.7)
Total deferred tax liabilities$(478.4)$(478.4)
Net deferred tax (liabilities) assets$(189.3)$(268.9)
Consolidated Balance Sheets:
Non-current deferred income tax assets$92.3 $73.6 
Non-current deferred income tax liabilities$(281.6)$(342.5)

As of December 31, 2023, we had gross state net operating loss carryforwards of $23.6 million that expire between 2024 and 2037 or that have indefinite carryforward periods. Various international subsidiaries have gross net operating loss carryforwards totaling $270.7 million that expire between 2024 and 2040 or that have indefinite carryforward periods.
As of December 31, 2023, no tax provision has been made on approximately $89.8 million of undistributed earnings of certain non-U.S. subsidiaries as these amounts continue to be indefinitely reinvested consistent with our policy. Additionally, no deferred income taxes were recorded on taxable outside basis differences as it was not practicable to determine the tax provision impact. Tax on certain foreign earnings as of December 31, 2023 and 2022 is included in the Other, net deferred tax liabilities line in the table above are $9.2 million and $7.4 million, respectively.
We made worldwide income tax payments of $156.4 million, $109.7 million and $102.1 million in 2023, 2022, and 2021, respectively. We received refunds of $5.2 million, $29.4 million and $12.6 million in 2023, 2022, and 2021, respectively.
The Company records tax provisions for uncertain tax positions in accordance with FASB ASC Topic 740, Income Taxes. A reconciliation of unrecognized tax benefits is as follows:
Unrecognized Tax Benefits
(In millions)
2023
2022
2021
Balance as of January 1,$25.4 $19.8 $9.5 
Increases as a result of positions taken during current year1.9 10.6 5.9 
Increases as a result of positions taken for prior years0.4 0.4 0.2 
Balance related to acquired businesses— — 5.4 
Reductions for tax positions of prior years(10.7)(4.3)— 
Decreases as a result of lapse of statute of limitations(0.6)(0.6)(1.5)
Other, net0.5 (0.5)0.3 
Balance as of December 31,$16.9 $25.4 $19.8 

We recognize interest and penalties related to uncertain tax positions in the tax provision. As of December 31, 2023 and 2022, we had $2.5 million and $1.5 million accrued for interest and penalties, respectively.
Expected tax settlements during the next twelve months are expected to be immaterial to our unrecognized tax benefit accruals. If all unrecognized tax benefits were recognized, the net impact on the tax provision would be a benefit of $16.3 million.
The Company is currently being audited by U.S. federal, state and international taxing jurisdictions. With limited exceptions, we are no longer subject to U.S. federal, state and international tax examinations for periods preceding 2017.