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Income Taxes | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Note 6. Income Taxes The components of Income (Loss) before Income Taxes follow:
(In millions) |  | 2024 |  |  | 2023 |  |  | 2022 |
U.S. |  | $ | (286 | ) |  | $ | (325 | ) |  | $ | 41 |
Foreign |  |  | 441 |  |  |  | (352 | ) |  |  | 358 |
|  | $ | 155 |  |  | $ | (677 | ) |  | $ | 399 |
A reconciliation of income taxes at the U.S. statutory rate to United States and Foreign Tax Expense follows:
(In millions) |  | 2024 |  |  | 2023 |  |  | 2022 |
U.S. federal income tax expense (benefit) at the statutory rate of 21% |  | $ | 33 |  |  | $ | (142 | ) |  | $ | 84 |
Net foreign losses (income) with no tax due to valuation allowances |  |  | 48 |  |  |  | 122 |  |  |  | 45 |
Adjustment for foreign income taxed at different rates and nontaxable foreign items |  |  | 38 |  |  |  | 5 |  |  |  | 33 |
U.S. charges (benefits) related to foreign tax credits, R&D and foreign derived intangible deduction |  |  | (30 | ) |  |  | 4 |  |  |  | (7 | )
Net establishment (release) of uncertain tax positions |  |  | 6 |  |  |  | (3 | ) |  |  | (4 | )
Net establishment (release) of foreign valuation allowances and write off of deferred taxes |  |  | 4 |  |  |  | — |  |  |  | 24 |
State income taxes, net of U.S. federal benefit |  |  | (8 | ) |  |  | (12 | ) |  |  | 6 |
Net establishment (release) of U.S. valuation allowances |  |  | 4 |  |  |  | — |  |  |  | — |
Goodwill impairment |  |  | — |  |  |  | 34 |  |  |  | — |
Deferred tax impact of enacted rate and law changes |  |  | — |  |  |  | — |  |  |  | (6 | )
Other |  |  | — |  |  |  | 2 |  |  |  | 15 |
United States and Foreign Tax Expense |  | $ | 95 |  |  | $ | 10 |  |  | $ | 190 |
The components of United States and Foreign Tax Expense by taxing jurisdiction, follow:
(In millions) |  | 2024 |  |  | 2023 |  |  | 2022 |
Current: |  |  |  |  |  |  |  |  |
Federal |  | $ | (29 | ) |  | $ | 37 |  |  | $ | — |
Foreign |  |  | 189 |  |  |  | 177 |  |  |  | 150 |
State |  |  | — |  |  |  | 26 |  |  |  | 12 |
|  |  | 160 |  |  |  | 240 |  |  |  | 162 |
Deferred: |  |  |  |  |  |  |  |  |
Federal |  |  | (78 | ) |  |  | (123 | ) |  |  | (28 | )
Foreign |  |  | 31 |  |  |  | (62 | ) |  |  | 46 |
State |  |  | (18 | ) |  |  | (45 | ) |  |  | 10 |
|  |  | (65 | ) |  |  | (230 | ) |  |  | 28 |
United States and Foreign Tax Expense |  | $ | 95 |  |  | $ | 10 |  |  | $ | 190 |
Income tax expense in 2024 was $95 million on income before income taxes of $155 million. In 2024, income tax expense includes a net discrete tax benefit totaling $2 million. In 2023, income tax expense was $10 million on a loss before income taxes of $677 million and includes net discrete tax benefits totaling $9 million, primarily related to additional prior year withholding tax creditable in the U.S. as a result of a tax law change. In 2022, income tax expense was $190 million on income before income taxes of $399 million and includes net discrete tax expense totaling $23 million, including a charge of $14 million to write off deferred tax assets related to tax loss carryforwards in the U.K. and a charge of $11 million to establish a full valuation allowance on our net deferred tax assets in Russia, partially offset by a net benefit of $2 million for various other items. The Organisation for Economic Co-operation and Development ("OECD") have published the Pillar Two model rules which adopt a global corporate minimum tax of 15% for multinational enterprises with average revenue in excess of €750 million. Certain jurisdictions in which we operate enacted legislation consistent with one or more of the OECD Pillar Two model rules effective in 2024. The model rules include minimum domestic top-up taxes, income inclusion rules and undertaxed profit rules, all aimed to ensure that multinational corporations pay a minimum effective corporate tax rate of 15% in each jurisdiction in which they operate. The Pillar Two model rules did not materially impact our annual effective tax rate in 2024. However, we are continuing to evaluate the Pillar Two model rules and related legislation and their potential impact on future periods. We consider both positive and negative evidence when measuring the need for a valuation allowance. The weight given to the evidence is commensurate with the extent to which it may be objectively verified. Current and cumulative financial reporting results are a source of objectively verifiable information. We give operating results during the most recent three-year period a significant weight in our analysis. We perform scheduling exercises to determine if sufficient taxable income of the appropriate character exists in the periods required in order to realize our deferred tax assets with limited lives (such as tax loss carryforwards and tax credits) prior to their expiration. We also consider prudent tax planning strategies (including an assessment of their feasibility) to accelerate taxable income if required to utilize expiring deferred tax assets. A valuation allowance is not required to the extent that, in our judgment, positive evidence exists with a magnitude and duration sufficient to result in a conclusion that it is more likely than not that our deferred tax assets will be realized. At December 31, 2024 and December 31, 2023, we had approximately $1.3 billion and $1.2 billion of U.S. federal, state and local net deferred tax assets, respectively, inclusive of valuation allowances totaling $26 million and $22 million, respectively, in each period, primarily for state tax loss carryforwards with limited lives. As of December 31, 2024, approximately $1.1 billion of these U.S. net deferred tax assets had unlimited lives and approximately $200 million had limited lives, including $24 million of foreign tax credits, and the majority do not start to expire until 2030. As of December 31, 2023, approximately $1.0 billion of these U.S. net deferred tax assets had unlimited lives and approximately $200 million had limited lives, including $22 million of foreign tax credits, and the majority do not start to expire until 2030. In the U.S., we have a cumulative loss for the three-year period ended December 31, 2024 primarily driven by non-recurring items such as rationalization charges, pension curtailments and settlements, one-time costs associated with the Goodyear Forward plan, and intangible asset impairments. In assessing our ability to utilize our net deferred tax assets, we primarily considered objectively verifiable information, including the improvement of our U.S. operating results during 2024 as a result of lower raw material and transportation costs and benefits from the Goodyear Forward plan compared to 2023 as well as non-deductible interest and future royalty income from foreign subsidiaries. In addition, we considered our current forecasts of future profitability in assessing our ability to realize our deferred tax assets as well as the impact of tax planning strategies. These forecasts include the impact of recent trends and various macroeconomic factors such as the impact of raw material, transportation, labor and energy costs on our profitability. Our tax planning strategies include accelerating income on cross border transactions, including sales of inventory or raw materials to our subsidiaries, reducing U.S. interest expense by, for example, reducing intercompany loans through repatriating current year earnings of foreign subsidiaries, repatriation of certain foreign royalty income, and other financing transactions, all of which would increase our domestic profitability. We believe our improvement in U.S. operating results for the year ended December 31, 2024 compared to the year ended December 31, 2023, as well as forecasts of future profitability, provide us sufficient positive evidence to conclude that it is more likely than not that, at December 31, 2024, our U.S. net deferred tax assets will be fully utilized. However, macroeconomic factors such as raw material, transportation, potential tariff, labor and energy costs possess a high degree of volatility and can significantly impact our profitability. In addition, certain tax provisions, such as the annual interest expense limitation under Section 163(j) of the Internal Revenue Code of 1986, if amended, could impact our analysis of the realizability of our U.S. deferred tax assets. If our U.S. operating results significantly decline in the future, we may need to record a valuation allowance which could adversely impact our operating results. As such, we will closely monitor our U.S. operations as well as any tax law changes to assess the realizability of our U.S. deferred tax assets. At December 31, 2024 and December 31, 2023, we also had approximately $1.5 billion of foreign net deferred tax assets and related valuation allowances of approximately $1.2 billion. Our losses in various foreign taxing jurisdictions in recent periods represented sufficient negative evidence to require us to maintain a full valuation allowance against certain of these net foreign deferred tax assets. Most notably, in Luxembourg, we maintain a valuation allowance of approximately $1.0 billion on all of our net deferred tax assets. Each reporting period, we assess available positive and negative evidence and estimate if sufficient future taxable income will be generated to utilize these existing deferred tax assets. We do not believe that sufficient positive evidence required to release valuation allowances on our foreign deferred tax assets having a significant impact on our financial position or results of operations will exist within the next twelve months. Temporary differences and carryforwards giving rise to deferred tax assets and liabilities at December 31 follow:
(In millions) |  | 2024 |  |  | 2023 |
Tax loss carryforwards and credits |  | $ | 1,233 |  |  | $ | 1,155 |
Capitalized research and development expenditures |  |  | 486 |  |  |  | 490 |
Prepaid royalty income |  |  | 344 |  |  |  | 427 |
Accrued expenses deductible as paid |  |  | 316 |  |  |  | 343 |
Partnership basis differences |  |  | 299 |  |  |  | 317 |
Lease liabilities |  |  | 83 |  |  |  | 82 |
Postretirement benefits and pensions |  |  | 67 |  |  |  | 87 |
Other prepayments income |  |  | 32 |  |  |  | 153 |
Property basis differences |  |  | 29 |  |  |  | — |
Rationalizations and other provisions |  |  | 25 |  |  |  | 58 |
Vacation and sick pay |  |  | 24 |  |  |  | 25 |
Other |  |  | 139 |  |  |  | 137 |
|  |  | 3,077 |  |  |  | 3,274 |
Valuation allowance |  |  | (1,252 | ) |  |  | (1,275 | )
Total deferred tax assets |  |  | 1,825 |  |  |  | 1,999 |
Intangible property basis differences related to Cooper Tire acquisition |  |  | (167 | ) |  |  | (205 | )
Property basis differences |  |  | — |  |  |  | (166 | )
Right-of-use assets |  |  | (80 | ) |  |  | (81 | )
Total net deferred tax assets |  | $ | 1,578 |  |  | $ | 1,547 |
At December 31, 2024, we had $960 million of tax assets for net operating loss, capital loss and tax credit carryforwards related to certain foreign subsidiaries. These carryforwards are primarily from countries with unlimited carryforward periods, but include $73 million of tax credit carryforwards in various European countries that are subject to expiration from 2025 to 2034. A valuation allowance totaling $1,226 million has been recorded against these and other deferred tax assets where recovery of the asset or carryforward is uncertain. In addition, we had $217 million of federal and $56 million of state tax assets, primarily for net operating loss and tax credit carryforwards. The federal carryforwards include $25 million of foreign tax credits that are subject to expiration from 2028 to 2034 and $141 million of tax assets related to research and development credits and other federal credits that are subject to expiration from 2030 to 2044. The state carryforwards include $45 million that are subject to expiration from 2025 to 2044. A valuation allowance of $26 million has been recorded against federal and state deferred tax assets where recovery is uncertain. At December 31, 2024, we had unrecognized tax benefits of $98 million that, if recognized, would have a favorable impact on our tax expense of $60 million. We had accrued interest of $1 million as of December 31, 2024. If not favorably settled, $24 million of the unrecognized tax benefits and all the accrued interest would require the use of our cash. We do not expect changes during 2024 to our unrecognized tax benefits to have a significant impact on our financial position or results of operations. A summary of our unrecognized tax benefits and changes during the year follows:
(In millions) |  | 2024 |  |  | 2023 |  |  | 2022 |
Balance at January 1 |  | $ | 92 |  |  | $ | 87 |  |  | $ | 90 |
Increases related to prior year tax positions |  |  | 20 |  |  |  | 5 |  |  |  | 10 |
Decreases related to prior year tax positions |  |  | — |  |  |  | — |  |  |  | — |
Settlements |  |  | — |  |  |  | (1 | ) |  |  | (12 | )
Foreign currency impact |  |  | (14 | ) |  |  | 4 |  |  |  | (1 | )
Increases related to current year tax positions |  |  | — |  |  |  | — |  |  |  | 2 |
Lapse of statute of limitations |  |  | — |  |  |  | (3 | ) |  |  | (2 | )
Balance at December 31 |  | $ | 98 |  |  | $ | 92 |  |  | $ | 87 |
We are open to examination in the U.S. for 2021 and in Germany from 2018 onward. Generally, for our remaining tax jurisdictions, years from 2019 onward are still open to examination. We have undistributed earnings and profits of our foreign subsid iaries totaling approximately $2.7 billion at December 31, 2024. We have concluded that no provision for tax in the U.S. is required because substantially all of the remaining undistributed earnings and profits have been or will be reinvested in property, plant and equipment and working capital outside of the U.S. A foreign withholding tax charge would be required if these earnings and profits were distributed to the U.S. We estimate the foreign withholding tax charge to be approximately $100 million (net of foreign tax credits) using various assumptions. Future events, including changes in our business operations and tax law changes, could impact our current estimate. Net cash payments for income taxes were $170 million, $200 million and $174 million in 2024, 2023 and 2022, respectively.

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