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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The components of income (loss) before income taxes for the years ended December 31, (in millions):
|  | 2022 |  | 2021 |  | 2020
Domestic |  | $ | (698) |  |  | $ | (353) |  |  | $ | (923) |
Foreign |  | 855 |  |  | 1,113 |  |  | (78) |
Total |  | $ | 157 |  |  | $ | 760 |  |  | $ | (1,001) |
The provision for income taxes consists of the following for the years ended December 31, (in millions):
| 2022 |  | 2021 |  | 2020
Current: |  |  |  |  |
Federal | $ | (245) |  |  | $ | 48 |  |  | $ | (50) |
State | 6 |  |  | 17 |  |  | 1 |
Foreign | 102 |  |  | 97 |  |  | 74 |
Total current | (137) |  |  | 162 |  |  | 25 |
Deferred: |  |  |  |  |
Federal | 163 |  |  | (26) |  |  | (136) |
State | (34) |  |  | (20) |  |  | (32) |
Foreign | (32) |  |  | 22 |  |  | (92) |
Total deferred | 97 |  |  | (24) |  |  | (260) |
Total income tax provision (benefit) | $ | (40) |  |  | $ | 138 |  |  | $ | (235) |
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:
| 2022 |  | 2021 |  | 2020
Statutory rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Add (deduct) effect of: |  |  |  |  |
State income taxes, net of federal income tax effect | (14.8) |  |  | (0.5) |  |  | 2.5 |
U.S. foreign inclusions and foreign tax credit (1) | (43.5) |  |  | 3.6 |  |  | 3.7 |
Foreign rate differential | (47.2) |  |  | (11.6) |  |  | 2.7 |
Change in uncertain tax positions | 16.7 |  |  | 0.1 |  |  | 4.5 |
Change in valuation allowance reserve | (13.8) |  |  | (3.8) |  |  | 2.9 |
Impairments | 20.7 |  |  | — |  |  | (4.4) |
Sale of businesses | (21.2) |  |  | — |  |  | — |
Capital loss | — |  |  | (2.1) |  |  | 3.0 |
Reversal of outside basis difference | 1.6 |  |  | 0.4 |  |  | (5.2) |
Non-deductible compensation | 1.9 |  |  | 0.4 |  |  | (1.2) |
Other taxes | 4.5 |  |  | 1.3 |  |  | (0.9) |
U.S. income inclusions on asset transfers | 50.3 |  |  | 11.1 |  |  | (6.9) |
Foreign exchange | 2.0 |  |  | — |  |  | — |
Other | (3.7) |  |  | (1.7) |  |  | 1.8 |
Effective rate | (25.5) | % |  | 18.2 | % |  | 23.5 | %
(1)The Company accounts for tax on global intangible low-taxed income (“GILTI”) as a period cost and the effects are included herein. At December 31, 2022, 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, 2022 and is recognizing deferred income taxes of approximately $8 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):
| 2022 |  | 2021
Deferred tax assets: |  |  |
Accruals | $ | 153 |  |  | $ | 156 |
Inventory | 84 |  |  | 56 |
Pension and postretirement benefits | 49 |  |  | 32 |
Net operating losses | 295 |  |  | 330 |
Foreign tax credits | 27 |  |  | 150 |
Capital loss carryforward | 41 |  |  | 257 |
Operating lease liabilities | 169 |  |  | 169 |
Other | 180 |  |  | 158 |
Total gross deferred tax assets | 998 |  |  | 1,308 |
Less valuation allowance | (148) |  |  | (186) |
Net deferred tax assets after valuation allowance | 850 |  |  | 1,122 |
Deferred tax liabilities: |  |  |
Accelerated depreciation | (119) |  |  | (107) |
Amortizable intangibles | (114) |  |  | (260) |
Outside basis differences | (96) |  |  | (96) |
Operating lease assets | (154) |  |  | (152) |
U.S. foreign inclusion recapture | (6) |  |  | (62) |
Other | (71) |  |  | (59) |
Total gross deferred tax liabilities | (560) |  |  | (736) |
Net deferred tax assets | $ | 290 |  |  | $ | 386 |
The net deferred tax amounts have been classified in the balance sheet at December 31, (in millions):
|  | 2022 |  | 2021
Noncurrent deferred tax assets |  | $ | 810 |  |  | $ | 814 |
Noncurrent deferred tax liabilities |  | (520) |  |  | (428) |
Total |  | $ | 290 |  |  | $ | 386 |
At December 31, 2022, the Company has net operating losses (“NOLs”) of approximately $1.1 billion, comprised of $162 million in the U.S. and $941 million outside of the U.S. Approximately $886 million of these NOLs do not expire and approximately $217 million expire between 2023 and 2042. Additionally, approximately $15 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 $12 million are not reflected in the consolidated financial statements and approximately $32 million were utilized in the current year. At December 31, 2022, the Company has approximately $1.4 billion of post-apportioned state NOLs, which expire between 2023 and 2042. Additionally, approximately $2 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 $2 million are not reflected in the consolidated financial statements. The majority of the U.S. foreign tax credits are recognized as a deferred tax asset at December 31, 2022 and were generated at December 31, 2018 and can be carried back one year and carried forward ten years. The Company has approximately $101 million of U.S. capital loss carryforwards of which approximately $16 million were generated at December 31, 2020, $85 million were generated at December 31, 2021, and can be carried back three years and carried forward five years. The Company has approximately $273 million of post-apportioned state capital loss of which $128 million was generated at December 31, 2018, $139 million was generated at December 31, 2020 and $6 million was generated at December 31, 2021. Of these post-apportioned state capital loss carryforwards, $100 million can be carried back three years and carried forward five years, and $172 million can be carried forward five years. During the year ended December 31, 2022, the Company amended its 2017 U.S. federal income tax return to carryback foreign tax credits generated in 2018 and capital losses generated in 2018 and 2020. The Company also paid $10 million of tax for the one-time toll charge incurred in 2017 related to the Tax Credits and Jobs Act due to the IRS (defined below) not yet processing the amended 2017 tax return. This resulted in an increase in noncurrent income tax receivable of approximately $271 million, a decrease in income taxes payable of approximately $95 million, and an increase in deferred tax liabilities of approximately $356 million. 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, 2022, 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 $148 million and $186 million was recorded against certain deferred tax asset balances at December 31, 2022 and 2021, respectively. For 2022, the Company recorded a net valuation allowance decrease of $38 million, primarily related to NOLs in Brazil, China and Luxembourg, and other miscellaneous changes in the U.S., state and non-U.S. valuation allowances related to ongoing operations. 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 allowance related to ongoing operations. The following table summarizes the changes in gross unrecognized tax benefits periods indicated are as follows (in millions):
| 2022 |  | 2021 |  | 2020
Unrecognized tax benefits, January 1, | $ | 457 |  |  | $ | 452 |  |  | $ | 474 |
Increases (decreases): |  |  |  |  |
Increases in tax positions for prior years | 1 |  |  | 1 |  |  | 4 |
Decreases in tax positions for prior years | (3) |  |  | (4) |  |  | — |
Increase in tax positions for the current period | 44 |  |  | 23 |  |  | 40 |
Settlements with taxing authorities | (13) |  |  | (2) |  |  | — |
Lapse of statute of limitations | (10) |  |  | (12) |  |  | (66) |
Cumulative translation adjustments | — |  |  | (1) |  |  | — |
Unrecognized tax benefits, December 31, | $ | 476 |  |  | $ | 457 |  |  | $ | 452 |
If recognized, $412 million of unrecognized tax benefits at December 31, 2022, and $387 million at December 31, 2021, and 2020 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 2022, 2021, and 2020 the Company recognized income tax expense on interest and penalties of $5 million, $7 million and $5 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 $6 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. With few exceptions, the Company is no longer subject to other income tax examinations for years before 2016. 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, 2022. 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. On April 4, 2022, in a case not involving the Company, the United States District Court for the District of Colorado granted the taxpayer's motion for summary judgment that the Temporary Regulations were not validly issued on the basis of improper promulgation. The Company is monitoring the impact of this decision and intends to continue to vigorously defend its position.

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