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INCOME TAXES | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The components of (loss) income before income taxes were as follows:
|  | Year Ended December 31,
(in millions) |  | 2023 |  | 2022 |  | 2021
United States |  | $ | (6) |  |  | $ | (531) |  |  | $ | 51 |
Foreign |  | (169) |  |  | (524) |  |  | 494 |
Total (loss) income before income taxes |  | $ | (175) |  |  | $ | (1,055) |  |  | $ | 545 |
The components of the (benefit) provision for income taxes from operations were as follows:
|  | Year Ended December 31,
(in millions) |  | 2023 |  | 2022 |  | 2021
Current: |  |  |  |  |  |
U.S. federal |  | $ | 1 |  |  | $ | 1 |  |  | $ | 1 |
U.S. state |  | — |  |  | 4 |  |  | 4 |
Foreign |  | 86 |  |  | 118 |  |  | 154 |
Total |  | $ | 87 |  |  | $ | 123 |  |  | $ | 159 |
Deferred: |  |  |  |  |  |
U.S. federal |  | $ | 4 |  |  | $ | (145) |  |  | $ | 10 |
U.S. state |  | (3) |  |  | (17) |  |  | 2 |
Foreign |  | (131) |  |  | (66) |  |  | (37) |
Total |  | $ | (130) |  |  | $ | (228) |  |  | $ | (25) |
Total (benefit) provision for income taxes |  | $ | (43) |  |  | $ | (105) |  |  | $ | 134 |
The reconciliation of the U.S. federal statutory tax rate to the effective rate were as follows:
|  | Year Ended December 31,
(in millions, except percentages) |  | 2023 |  | 2022 |  | 2021
Statutory U.S. federal income tax rate |  | $ | (37) |  | 21.0 | % |  | $ | (222) |  | 21.0 | % |  | $ | 114 |  | 21.0 | %
Effect of: |  |  |  |  |  |  |  |  |
State income taxes, net of federal benefit |  | (2) |  | 1.4 |  |  | (11) |  | 1.0 |  |  | 4 |  | 0.8 |
Federal benefit of R&D and foreign tax credits |  | (17) |  | 10.0 |  |  | (8) |  | 0.8 |  |  | (5) |  | (0.9) |
US other permanent differences |  | 5 |  | (2.7) |  |  | 9 |  | (0.9) |  |  | 2 |  | 0.4 |
Tax effect of international operations |  | (65) |  | 37.2 |  |  | (5) |  | 0.5 |  |  | 2 |  | 0.3 |
Global Intangible Low Taxed Income (GILTI) |  | 12 |  | (7.0) |  |  | 20 |  | (1.9) |  |  | 13 |  | 2.4 |
Foreign Derived Intangible Income (FDII) |  | (9) |  | 5.2 |  |  | (8) |  | 0.8 |  |  | (7) |  | (1.3) |
Net effect of tax audit activity |  | (6) |  | 3.2 |  |  | 15 |  | (1.4) |  |  | 9 |  | 1.6 |
Tax effect of enacted statutory rate changes on Non-U.S. jurisdictions |  | 1 |  | (0.4) |  |  | (3) |  | 0.3 |  |  | 10 |  | 1.9 |
Federal tax on unremitted earnings of certain foreign subsidiaries |  | 2 |  | (0.9) |  |  | 1 |  | (0.1) |  |  | (1) |  | (0.2) |
Valuation allowance adjustments |  | 5 |  | (3.2) |  |  | (9) |  | 0.8 |  |  | (9) |  | (1.7) |
Tax effect of impairment of goodwill and intangibles |  | 60 |  | (34.6) |  |  | 114 |  | (10.8) |  |  | — |  | — |
Other |  | 8 |  | (4.4) |  |  | 2 |  | (0.2) |  |  | 2 |  | 0.3 |
Effective income tax rate on operations |  | $ | (43) |  | 24.8 | % |  | $ | (105) |  | 9.9 | % |  | $ | 134 |  | 24.6 | %
The tax effect of significant temporary differences giving rise to deferred tax assets and liabilities were as follows:
|  | Year Ended December 31,
(in millions) |  | 2023 |  | 2022
Deferred tax assets |  |  |  |  |
Employee benefit accruals |  | $ | 55 |  |  | $ | 55 |  |
Inventory |  | 15 |  |  | 9 |  |
Miscellaneous accruals |  | 51 |  |  | 37 |  |
Other |  | 44 |  |  | 48 |  |
Lease right-of-use liability |  | 46 |  |  | 48 |  |
Net unrealized gains/losses included in AOCI |  | 36 |  |  | — |  |
Foreign tax credit and R&D carryforward |  | 43 |  |  | 40 |  |
Tax loss carryforwards and other tax attributes |  | 948 |  |  | 654 |  |
Total deferred tax assets |  | $ | 1,238 |  |  | $ | 891 |  |
Less: Valuation allowances |  | (863) |  |  | (645) |  |
Total deferred tax assets, net |  | $ | 375 |  |  | $ | 246 |  |
Deferred tax liabilities |  |  |  |  |
Identifiable intangible assets |  | $ | (298) |  |  | $ | (325) |  |
Property, plant and equipment |  | (38) |  |  | (41) |  |
Lease right-of-use asset |  | (46) |  |  | (47) |  |
Net unrealized gains/losses included in AOCI |  | — |  |  | (13) |  |
Taxes on unremitted earnings of foreign subsidiaries |  | (8) |  |  | (6) |  |
Total deferred tax liabilities |  | (390) |  |  | (432) |  |
Net deferred tax liabilities |  | $ | (15) |  |  | $ | (186) |  |
Deferred tax assets and liabilities are included in the following Consolidated Balance Sheets line items at December 31 were as follows:
|  | Year Ended December 31,
(in millions) |  | 2023 |  | 2022
Assets |  |  |  |
Other noncurrent assets |  | $ | 213 |  |  | $ | 101 |
Liabilities |  |  |  |
Deferred income taxes |  | $ | 228 |  |  | $ | 287 |
The Company has $40 million of foreign tax credit carryforwards at December 31, 2023, of which $33 million will expire in 2025 and $7 million will expire at various times from 2028 through 2031. The Company has tax loss carryforwards related to certain foreign and domestic subsidiaries of approximately $3,889 million at December 31, 2023, of which $3,671 million expires at various times through 2043 and $218 million may be carried forward indefinitely. These are reflected as deferred income tax assets at December 31, 2023, comprising of tax benefits o f $873 million and $74 million, before valuation allowances, related to tax loss carryforwards and disallowed interest carryforwards, respectively. As of December 31, 2022 the Company’s deferred tax assets included $601 million of tax loss carryforwards and $53 million of disallowed interest carryforwards. The increase in tax loss carryforwards in 2023 is primarily a result of impairment losses. At December 31, 2023, the Company has recorded $791 million of valuation allowance to offset the tax benefit of net operating losses, $40 million to offset the tax benefit of foreign tax credits, and $32 million of valuation allowance for other deferred tax assets. The Company has recorded these valuation allowances due to the uncertainty that these assets can be realized in the future. The increase in the valuation allowance is attributable to the increase in the tax loss carryforwards generated in 2023 as there is uncertainty that these assets can be realized in the future. The Company has provided $8 million of withholding taxes on certain undistributed earnings of its foreign subsidiaries that the Company anticipates will be repatriated. Undistributed earnings of foreign subsidiaries and related companies that are considered to be permanently invested amounted to $2,303 million a t December 31, 2023 and $2,492 million at December 31, 2022. Tax Contingencies The total amount of gross unrecognized tax benefits at December 31, 2023 is approximately $136 million, including interest of which, approximately $40 million represents the amount of unrecognized tax benefits that, if recognized, would affect the effective income tax rate. It is reasonably possible that certain amounts of unrecognized tax benefits will significantly increase or decrease within twelve months of the reporting date of the Company’s consolidated financial statements. Expiration of statutes of limitations in various jurisdictions during the next twelve months could include unrecognized tax benefits of approximately $1 million, which, if recognized, would affect the effective income tax rate. The total amount of accrued interest and penalties were $4 million and $6 million at December 31, 2023 and 2022, respectively. The Company has consistently classified interest and penalties recognized in its consolidated financial statements as income taxes based on the accounting policy election of the Company. The Company recognized a tax benefit of $2 million for the years ended December 31, 2023 and 2022 related to interest and penalties. The increase in unrecognized tax benefits in 2023 is primarily related to a gain generated from an internal debt structuring in 2023. If this benefit was recognized, it would result in a reduction to deferred tax assets related to tax loss carryforwards, with an equal and offsetting reduction to the valuation allowance. Thus, the release of this reserve would not impact the effective tax rate. The Company is subject to U.S. federal income tax as well as income tax of multiple state and foreign jurisdictions. The significant jurisdictions include the United States, Germany, Sweden and Switzerland. The Company has concluded all U.S. federal income tax matters for years through 2014 with the Internal Revenue Service (“IRS”). The Company is currently under audit for the tax years 2015 and 2016. For additional information on the IRS audit, see Note 21, Commitments and Contingencies. The Company concluded audits in Germany through the tax year 2014 and is currently under audit for the years 2015 through 2017. The tax years 2018 through 2021 are subject to future potential audit adjustments in Germany. The activity recorded for unrecognized tax benefits were as follows:
|  | Year Ended December 31,
(in millions) |  | 2023 |  | 2022 |  | 2021
Unrecognized tax benefits at beginning of period |  | $ | 49 |  |  | $ | 34 |  |  | $ | 27 |
Gross change for prior-period positions |  | 1 |  |  | 12 |  |  | 6 |
Gross change for current year positions |  | 95 |  |  | 4 |  |  | 2 |
Decrease due to settlements and payments |  | (9) |  |  | — |  |  | — |
Decrease due to statute expirations |  | (4) |  |  | — |  |  | — |
Decrease due to effect from foreign currency translation |  | — |  |  | (1) |  |  | (1) |
Unrecognized tax benefits at end of period |  | $ | 132 |  |  | $ | 49 |  |  | $ | 34 |

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