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Note 16 - Income Taxes
 12 Months Ended
Dec. 31, 2024
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

Note 16.  Income Taxes

 

Income tax expense —

 

  

2024

  

2023

  

2022

 

Current

            

U.S. federal and state

 $16  $38  $19 

Non-U.S.

  152   187   112 

Total current

  168   225   131 
             

Deferred

            

U.S. federal and state

  (37)  (94)  160 

Non-U.S.

  8   (10)  (7)

Total deferred

  (29)  (104)  153 

Total expense

 $139  $121  $284 

 

We record interest and penalties related to uncertain tax positions as a component of income tax expense or benefit. Net interest expense for the periods presented herein is not significant.

 

Income before income taxes —

 

  

2024

  

2023

  

2022

 

U.S. operations

 $(312) $(246) $(343)

Non-U.S. operations

  392   424   312 

Earnings (loss) before income taxes

 $80  $178  $(31)

 

Income tax audits — We conduct business globally and, as a result, file income tax returns in multiple jurisdictions that are subject to examination by taxing authorities throughout the world. With few exceptions, we are no longer subject to U.S. federal, state and local or foreign income tax examinations for years before 2008.

 

We are currently under audit by U.S. and foreign authorities for certain taxation years. When the issues related to these periods are settled, the total amounts of unrecognized tax benefits for all open tax years may be modified. Audit outcomes and the timing of the audit settlements are subject to uncertainty and we cannot make an estimate of the impact on our financial position at this time.

 

GILTI Policy Elections — The SEC staff has indicated that a company should make and disclose certain policy elections related to accounting for global intangible low-taxed income (GILTI). As to whether we will recognize deferred taxes for basis differences expected to reverse as GILTI or account for the effect of GILTI as a period cost when incurred, we intend to account for the tax effect of GILTI as a period cost. As to the realizability of the tax benefit provided by net operating losses, we are electing to utilize the tax law ordering approach. Recent macroeconomic factors have resulted in losses in the United States. A valuation allowance has been provided for deferred tax assets where GILTI is not a source of income; however, the GILTI tax law ordering approach provides positive evidence for certain other deferred tax assets without a valuation allowance.

 

Foreign income repatriation — We continue to analyze and adjust the estimated impact of the non-U.S. income and withholding tax liabilities based on the amount and source of these earnings, as well as the expected means through which those earnings may be taxed. We recognized net expense of $18 in 2024, $7 in 2023 and net benefit of $1 in 2022, related to future income taxes and non-U.S. withholding taxes on repatriations from operations that are not permanently reinvested. We also paid withholding taxes of $12, $12 and $6 during 2024, 2023 and 2022 related to the actual transfer of funds to the U.S. The unrecognized tax liability associated with the operations in which we are permanently reinvested is $47 at December 31, 2024.

 

Effective tax rate reconciliation —

 

  

2024

  

2023

  

2022

 
  

$

  

%

  

$

  

%

  

$

  

%

 

U.S. federal income tax rate

  16   21   37   21   (7)  21 
                         

Adjustments resulting from:

                        

State and local income taxes, net of federal benefit

  1   1   (5)  (3)  (6)  19 

Non-U.S. income / expense

  16   20   35   20   (2)  7 

Credits and tax incentives

  13   16   9   5   (27)  87 

U.S. tax and withholding tax on non-US earnings

  41   51   41   23   42   (135)

Intercompany sale of certain operating assets

        (54)  (30)  (1)  3 

Settlement and return adjustments

  4   5   23   13   (7)  23 

Enacted change in tax rates

  3   4         (4)  13 

Goodwill impairment

              47   (151)

Miscellaneous items

  3   3   7   4   (6)  19 

Valuation allowance adjustments

  42   53   28   15   255   (822)

Effective income tax rate

  139   174   121   68   284   (916)

 

During 2024, we recorded tax expense of $22 for valuation allowances related to foreign jurisdictions and tax expense of $11 due to revisions in our assertions on unremitted earnings in foreign jurisdictions.

 

During 2023, we recorded tax expense of $19 for income tax reserves associated with prior tax years in foreign jurisdictions. In addition, we recorded net benefit of $55 on the intercompany sale of intangible assets to the U.S.

 

During 2022, we recognized tax expense of $240 to record valuation allowance in the U.S., which includes $189 on U.S. federal credits and attributes and $51 related to U.S. state attributes. In addition, we recorded a tax benefit of $32 to adjust U.S. tax credits. A pre-tax goodwill impairment charge of $191 with an associated income tax benefit of $2 was also recorded.

 

Deferred tax assets and liabilities — Temporary differences and carryforwards give rise to the following deferred tax assets and liabilities.

 

  

2024

  

2023

 

Net operating loss carryforwards

 $272  $218 

Postretirement benefits, including pensions

  53   65 

Research and development costs

  269   238 

Expense accruals

  104   65 

Other tax credits recoverable

  209   217 

Capital loss carryforwards

  43   53 

Inventory reserves

  44   37 

Postemployment and other benefits

  4   5 

Intangibles

  50   56 

Leasing activities

  86   77 

Other

  110   75 

Total

  1,244   1,106 

Valuation allowances

  (667)  (550)

Deferred tax assets

  577   556 

Unremitted earnings

  (35)  (16)

Depreciation

  (36)  (58)

Deferred tax liabilities

  (71)  (74)

Net deferred tax assets

 $506  $482 

 

 

We have generated deferred tax assets in foreign jurisdictions where realization of the future economic benefits were, in previous reporting periods, considered so remote that the benefits were not recognized. As of December 31, 2023 the unrecognized deferred tax asset was $88. In 2024, we concluded that the future economic benefits of the tax assets are no longer remote and therefore, deferred tax assets of $96 were recognized as of December 31, 2024. We also concluded that it is not more likely than not that the tax benefits associated with the deferred tax assets will be realized; therefore, offsetting valuation allowances were recognized.

 

Carryforwards — Our deferred tax assets include benefits expected from the utilization of net operating loss (NOL), capital loss and credit carryforwards in the future. The following table identifies the net operating loss deferred tax asset components and the related allowances that existed at  December 31, 2024. Due to time limitations on the ability to realize the benefit of the carryforwards, additional portions of these deferred tax assets may become unrealizable in the future.

 

  

Deferred

         

Earliest

 
  

Tax

  

Valuation

  

Carryforward

  

Year of

 
  

Asset

  

Allowance

  

Period

  

Expiration

 

Net operating losses

              

U.S. state

 $51  $(51) 

Various

  

2025

 

Brazil

  10   (4) 

Unlimited

    

France

  5   (5) 

Unlimited

    

Australia

  14      

Unlimited

    

Italy

  19   (19) 

Unlimited

    

Germany

  4   (4) 

Unlimited

    

Sweden

  8   (8) 

Unlimited

    

South Africa

  7   (7) 

Unlimited

    

U.K.

  21   (21) 

Unlimited

    

Luxembourg

  68   (68) 

Various

  

2035

 

Canada

  64   (58) 

20

  

2027

 

China

  1   (1) 

5

  

2026

 

Total

 $272  $(246)      

 

In addition to the NOL carryforwards listed in the table above, we have deferred tax assets related to capital loss carryforwards of $43 which are fully offset with valuation allowances at  December 31, 2024. We also have deferred tax assets of $219 related to other credit carryforwards which are largely offset with valuation allowances of $207 at  December 31, 2024. The capital losses can generally be carried forward indefinitely while the other credits are generally available for 10 to 20 years.

 

Unrecognized tax benefits — Unrecognized tax benefits are the difference between a tax position taken, or expected to be taken, in a tax return and the benefit recognized for accounting purposes. Interest income or expense, as well as penalties relating to income tax audit adjustments and settlements, are recognized as components of income tax expense or benefit. Interest of $20 and $21 was accrued on the uncertain tax positions at  December 31, 2024 and 2023.

 

Reconciliation of gross unrecognized tax benefits —

 

  

2024

  

2023

  

2022

 

Balance, beginning of period

 $112  $102  $126 

Decrease related to expiration of statute of limitations

  (7)  (8)  (6)

Decrease related to prior years tax positions

  (6)  (5)  (43)

Decrease related to settlements

  (4)      

Increase related to prior years tax positions

  4   5   7 

Increase related to current year tax positions

  13   18   18 

Balance, end of period

 $112  $112  $102 

 

We anticipate that the change in our gross unrecognized tax benefits will not be significant in the next twelve months as a result of examinations in various jurisdictions. The settlement of these matters will not impact the effective tax rate. Gross unrecognized tax benefits of $85 would impact the effective tax rate if recognized. If other open matters are settled with the IRS or other taxing jurisdictions, the total amounts of unrecognized tax benefits for open tax years may be modified.