XML 38 R21.htm IDEA: XBRL DOCUMENT v3.22.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of income (loss) before income taxes for the years ended December 31, (in millions):
202120202019
Domestic$(420)$(928)$(1,249)
Foreign1,113 (78)397 
Total$693 $(1,006)$(852)
The provision for income taxes consists of the following for the years ended December 31, (in millions):
202120202019
Current:
Federal$48 $(50)$8 
State17 1 11 
Foreign97 74 42 
Total current162 25 61 
Deferred:
Federal(39)(136)(355)
State(24)(33)(63)
Foreign22 (92)(650)
Total deferred(41)(261)(1,068)
Total income tax provision (benefit)121 (236)(1,007)
Total income tax provision - discontinued operations— — 31 
Total income tax provision (benefit) - continuing operations$121 $(236)$(1,038)
A reconciliation of the U.S. statutory rate to the effective income tax rate on a continuing basis is as follows for the years ended December 31:
202120202019
Statutory rate21.0 %21.0 %21.0 %
Add (deduct) effect of:
State income taxes, net of federal income tax effect(0.9)2.4 3.8 
U.S. foreign inclusions and foreign tax credit (1)
3.9 3.6 (1.6)
Foreign rate differential(12.7)2.7 4.9 
Change in uncertain tax positions0.1 4.5 5.9 
Change in valuation allowance reserve(4.2)3.0 (5.9)
Impairments— (4.4)(3.3)
Capital loss(2.3)3.0 25.4 
Reversal of outside basis difference0.4 (5.2)0.4 
Non-deductible compensation0.4 (1.2)(1.6)
Other taxes1.4 (0.9)1.6 
U.S. income inclusions on asset transfers12.2 (6.9)(2.2)
Outbound transfer of U.S. assets (2)
— — 70.5 
Other(1.9)1.9 3.0 
Effective rate17.4 %23.5 %121.9 %
(1)The Company accounts for tax on global intangible low-taxed income (“GILTI”) as a period cost and the effects are included herein.

(2)In connection with the Company's execution to rationalize its legal entities along with centralizing the ownership of certain intellectual property rights for its comprehensive management and protection, the Company transferred these intellectual property rights to a wholly-owned subsidiary, which resulted in the creation of deferred tax assets and a corresponding income tax benefit of $522 million for the year ended December 31, 2019.

At December 31, 2021, the Company has accumulated unremitted earnings generated by our foreign subsidiaries of approximately $6.0 billion. A portion of these earnings were subject to U.S. federal taxation with the one-time toll charge. The Company does not assert indefinite reinvestment on a portion of its unremitted earnings of certain foreign subsidiaries as of December 31, 2021 and is recognizing deferred income taxes of approximately $9 million, primarily related to the future withholding tax effects of those
unremitted foreign earnings. With respect to unremitted earnings of $6.0 billion and any other additional outside basis differences where the Company is continuing to assert indefinite reinvestment, any future reversals could be subject to additional foreign withholding taxes, U.S. state taxes and certain tax impacts relating to foreign currency exchange effects on any future repatriations of the unremitted earnings. The determination of any unrecognized deferred tax liabilities on the amount of unremitted earnings and other outside basis differences where the Company is asserting indefinite reinvestment is not practicable.
Deferred tax assets (liabilities) consist of the following at December 31, (in millions):
20212020
Deferred tax assets:
Accruals$156 $138 
Inventory79 39 
Pension and postretirement benefits32 60 
Net operating losses330 350 
Foreign tax credits150 185 
Capital loss carryforward257 241 
Operating lease liabilities169 162 
Other158 158 
Total gross deferred tax assets1,331 1,333 
Less valuation allowance(186)(213)
Net deferred tax assets after valuation allowance1,145 1,120 
Deferred tax liabilities:
Accelerated depreciation(107)(92)
Amortizable intangibles(260)(282)
Outside basis differences(96)(93)
Operating lease assets(152)(145)
U.S. foreign inclusion recapture(62)(30)
Other(59)(54)
Total gross deferred tax liabilities(736)(696)
Net deferred tax assets$409 $424 

The net deferred tax amounts have been classified in the balance sheet at December 31, (in millions):
20212020
Noncurrent deferred tax assets$814 $838 
Noncurrent deferred tax liabilities(405)(414)
Total$409 $424 

At December 31, 2021, the Company has net operating losses (“NOLs”) of approximately $1.3 billion, comprised of $206 million in the U.S. and $1.1 billion outside of the U.S. Approximately $931 million of these NOLs do not expire and approximately $332 million expire between 2022 and 2039. Additionally, approximately $59 million of U.S. federal NOLs are subject to varying limitations on their use under Section 382 of the Internal Revenue Code of 1986, as amended. Of these U.S. federal NOLs, approximately $55 million are not reflected in the consolidated financial statements and approximately $32 million were utilized in the current year. At December 31, 2021, the Company has approximately $1.2 billion of post-apportioned state NOLs, which expire between 2022 and 2039. Additionally, approximately $14 million of post-apportioned state NOLs are subject to varying limitations on their use under Section 382 of the Internal Revenue Code of 1986, as amended. Of these post-apportioned state NOLs, approximately $14 million are not reflected in the consolidated financial statements and approximately $18 million were utilized in the current year.

The majority of the U.S. foreign tax credits are recognized as a deferred tax asset at December 31, 2021 and were generated at December 31, 2018 and can be carried back one year and carried forward ten years. The Company has approximately $828 million of U.S. capital loss carryforwards of which approximately $313 million were generated at December 31, 2018, $427 million were generated at December 31, 2020, and $88 million were generated at December 31, 2021 and can be carried back three years and carried forward five years. The Company has approximately $291 million of post-apportioned state capital loss of which $110 million was generated at December 31, 2018, and $181 million was generated at December 31, 2020. Of these post-apportioned
state capital loss carryforwards, $136 million can be carried back three years and carried forward five years, and $155 million can be carried forward five years.

The Company routinely reviews valuation allowances recorded against deferred tax assets on a more likely than not basis as to whether the Company will realize the deferred tax assets. In making such a determination, the Company takes into consideration all available and appropriate positive and negative evidence, including projected future taxable income, future reversals of existing taxable temporary differences, the ability to carryback net operating losses, and available tax planning strategies. Although realization is not assured, based on this existing evidence, the Company believes it is more likely than not that the Company will realize the benefit of existing deferred tax assets, net of the valuation allowances.

At December 31, 2021, the Company has a valuation allowance recorded against certain deferred tax assets, primarily state and foreign NOLs and various income tax credits, which the Company believes do not meet the more likely than not threshold to be realized due to uncertainty of future taxable income within the applicable tax jurisdictions. A valuation allowance of $186 million and $213 million was recorded against certain deferred tax asset balances at December 31, 2021 and 2020, respectively. For 2021, the Company recorded a net valuation allowance decrease of $27 million, primarily related to NOLs in the U.K. and Luxembourg, and other miscellaneous changes in the U.S., state and non-U.S. valuation allowances related to ongoing operations. For 2020, the Company recorded a net valuation allowance decrease of $58 million, primarily related to U.S. NOLs and other deferred tax assets related to a subsidiary previously excluded from the Company’s U.S. consolidated income tax return and other miscellaneous changes in U.S., state and non-U.S. valuation allowances related to ongoing operations.
The following table summarizes the changes in gross unrecognized tax benefits periods indicated are as follows (in millions):
202120202019
Unrecognized tax benefits, January 1,$452 $474 $463 
Increases (decreases):
Increases in tax positions for prior years1 4 35 
Decreases in tax positions for prior years(4)— (31)
Increase in tax positions for the current period23 40 84 
Purchase accounting adjustments (See Footnote 1)
— — (9)
Settlements with taxing authorities(2)— (2)
Lapse of statute of limitations(12)(66)(66)
Cumulative translation adjustments(1)— — 
Unrecognized tax benefits, December 31,$457 $452 $474 
If recognized, $387 million, $387 million and $437 million of unrecognized tax benefits at December 31, 2021, 2020, and 2019 respectively, would affect the effective tax rate. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as a component of income tax expense. During 2021, 2020, and 2019 the Company recognized income tax expense on interest and penalties of $7 million, $5 million and $11 million, respectively, due to the accrual of current year interest on existing positions offset by the resolution of certain tax contingencies.

The Company anticipates approximately $9 million of unrecognized tax benefits will reverse within the next 12 months. It is reasonably possible due to activities of various worldwide taxing authorities, including proposed assessments of additional tax and possible settlement of audit issues, that additional changes to the Company’s unrecognized tax benefits could occur. In the normal course of business, the Company is subject to audits by worldwide taxing authorities regarding various tax liabilities. The Company’s U.S. federal income tax returns for 2011 to 2015 and 2017 to 2019, as well as certain state and non-U.S. income tax returns for various years, are under examination.

The Company files numerous consolidated and separate income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The statute of limitations for the Company’s U.S. federal income tax returns has expired for years prior to 2011 and for 2016. The Company’s Canadian tax returns are subject to examination for years after 2014. With few exceptions, the Company is no longer subject to other income tax examinations for years before 2015.

On June 18, 2019, the U.S. Treasury and the Internal Revenue Service (“IRS”) released temporary regulations under IRC Section 245A (“Section 245A”) as enacted by the 2017 U.S. Tax Reform Legislation (“2017 Tax Reform”) and IRC Section 954(c)(6) (the “Temporary Regulations”) to apply retroactively to the date the 2017 Tax Reform was enacted. On August 21, 2020, the U.S. Treasury and IRS released finalized versions of the Temporary Regulations (collectively with the Temporary Regulations, the “Regulations”). The Regulations seek to limit the 100% dividends received deduction permitted by Section 245A for certain dividends received from controlled foreign corporations and to limit the applicability of the look-through exception to foreign
personal holding company income for certain dividends received from controlled foreign corporations. Before the retroactive application of the Regulations, the Company benefited in 2018 from both the 100% dividends received deduction and the look-through exception to foreign personal holding company income. The Company analyzed the Regulations and concluded the relevant Regulations were not validly issued. Therefore, the Company has not accounted for the effects of the Regulations in its Consolidated Financial Statements for the period ending December 31, 2021. The Company believes it has strong arguments in favor of its position and believes it has met the more likely than not recognition threshold that its position will be sustained. However, due to the inherent uncertainty involved in challenging the validity of regulations as well as a potential litigation process, there can be no assurances that the relevant Regulations will be invalidated or that a court of law will rule in favor of the Company. If the Company’s position on the Regulations is not sustained, the Company would be required to recognize an income tax expense of approximately $180 million to $220 million related to an income tax benefit from fiscal year 2018 that was recorded based on regulations in existence at the time. In addition, the Company may be required to pay any applicable interest and penalties. The Company intends to vigorously defend its position.