XML 28 R14.htm IDEA: XBRL DOCUMENT v3.24.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES
Pre-tax income applicable to U.S. and non-U.S. operations is as follows: 
(Millions of dollars)
Year Ended December 31,
202320222021
United States$2,859 $2,502 $2,020 
Non-U.S. 5,129 3,041 3,079 
Total income before income taxes$7,988 $5,543 $5,099 


Provision for Income Taxes
The following is an analysis of the provision for income taxes: 
(Millions of dollars)
Year Ended December 31,
2023
2022
2021
Current tax expense (benefit)
U.S. federal$291 $486 $287 
State and local116 92 87 
Non-U.S.1,491 1,239 1,142 
1,898 1,817 1,516 
Deferred tax expense (benefit)
U.S. federal57 (12)63 
State and local5 7 8 
Non-U.S.(146)(378)(325)
(84)(383)(254)
Total income taxes$1,814 $1,434 $1,262 

Effective Tax Rate Reconciliation
For purposes of the effective tax rate reconciliation, the company utilizes the U.S. statutory income tax rate of 21%. An analysis of the difference between the provision for income taxes and the amount computed by applying the U.S. statutory income tax rate to pre-tax income follows:      
(Dollar amounts in millions)
Year Ended December 31,
202320222021
U.S. statutory income tax$1,677 21.0 %$1,164 21.0 %$1,071 21.0 %
State and local taxes – net of federal benefit105 1.3 %84 1.5 %83 1.6 %
Tax on Non-U.S. activities (a)169 2.1 %176 3.2 %219 4.3 %
Share-Based compensation(66)(0.8)%(41)(0.7)%(56)(1.1)%
Russia/Ukraine Charges— — %108 1.9 %— — %
Other (b)(71)(0.9)%(57)(1.0)%(55)(1.1)%
Provision for income taxes$1,814 22.7 %$1,434 25.9 %$1,262 24.7 %
 
________________________
(a)Primarily related to differences between the U.S. tax rate and the statutory tax rate in the countries in which the company operates. It also includes the U.S. tax impact of the non-U.S. activities and other non-U.S. permanent items and tax rate changes. Excluding 2021, which included an $83 million deferred income tax charge related to a tax rate increase in the U.K., these other items were not material.
(b)Includes net tax benefits related to tax audit settlements of $54 million in 2023, of $71 million in 2022, and $47 million in 2021.

Net Deferred Tax Liabilities
Net deferred tax liabilities included in the consolidated balance sheets are comprised of the following: 
(Millions of dollars)
December 31,
20232022
Deferred tax liabilities
Fixed assets$2,686 $2,775 
Goodwill215 173 
Other intangible assets 2,872 2,939 
Subsidiary/equity investments586 545 
Other (a)456 471 
$6,815 $6,903 
Deferred tax assets
Carryforwards$285 $289 
Benefit plans and related (b)(c)243 165 
Inventory82 68 
Accruals and other (d)858 1,001 
$1,468 $1,523 
Less: Valuation allowances (e)(176)(276)
$1,292 $1,247 
Net deferred tax liabilities$5,523 $5,656 
Recorded in the consolidated balance sheets as (Note 7):
Other long-term assets226 230 
Deferred credits5,749 5,886 
$5,523 $5,656 
________________________
(a)Includes $221 million in 2023 and $206 million in 2022 related to right-of-use lease assets.
(b)Includes deferred tax asset of $60 million and deferred tax liability of $54 million in 2023 and 2022, respectively, related to pension / OPEB funded status (see Notes 7 and 16).
(c)The amounts are net of non-US deferred tax liabilities of $187 million in 2023 and $315 million in 2022.
(d)Includes $228 million in 2023 and $212 million in 2022 related to lease liabilities.
(e)Summary of changes in valuation allowances relating to deferred tax assets follows (millions of dollars):
202320222021
Balance, January 1,$(276)$(235)$(243)
Income tax (charge) benefit65 (44)8 
Other, including write-offs 34 — — 
Translation adjustments1 3 — 
Balance, December 31,$(176)$(276)$(235)
The company evaluates deferred tax assets quarterly to ensure that estimated future taxable income will be sufficient in character (e.g., capital gain versus ordinary income treatment), amount and timing to result in their recovery. After considering the positive and negative evidence, a valuation allowance is established to reduce the assets to their realizable value when management determines that it is more likely than not (i.e., greater than 50% likelihood) that a deferred tax asset will not be realized. Considerable judgment is required in establishing deferred tax valuation allowances.
As of December 31, 2023, the company had $285 million of deferred tax assets relating to net operating losses (“NOLs”) and tax credits and $176 million of valuation allowances. These deferred tax assets include $235 million relating to NOLs of which $82 million expire within 5 years, $24 million expire after 5 years and $129 million have no expiration. The deferred tax assets also include $50 million related to credits of which $3 million expire within 5 years, $40 million expire after 5 years, and $7 million have no expiration. The valuation allowances of $176 million primarily relate to NOLs. Management has determined, based on financial projections and available tax strategies, that it is unlikely that the benefit of these losses will be realized. If events or circumstances change, valuation allowances are adjusted at that time resulting in an income tax benefit or charge.
The company has $586 million of non-U.S income and withholding taxes accrued related to its investment in non-U.S. subsidiaries and equity investments. A provision has not been made for any additional non-U.S. income or withholding taxes at December 31, 2023 on approximately $4 billion of unremitted non-U.S. earnings on which the company intends to remain indefinitely reinvested or on other outside basis differences in its investments unrelated to unremitted earnings. A determination of these deferred taxes related to these amounts is not practicable.
Uncertain Tax Positions
Unrecognized income tax benefits represent income tax positions taken on income tax returns but not yet recognized in the consolidated financial statements. The company has unrecognized income tax benefits totaling $304 million, $325 million and $387 million as of December 31, 2023, 2022 and 2021, respectively. If recognized, the majority of the unrecognized tax benefits and related interest and penalties would be recorded as a benefit to income tax expense on the consolidated statements of income.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: 
(Millions of dollars)202320222021
Unrecognized income tax benefits, January 1$325 $387 $452 
Additions for tax positions of prior years 108 26 11 
Reductions for tax positions of prior years (a)(121)(45)(11)
Additions for current year tax positions— — 19 
Reductions for settlements with taxing authorities (a)(b)(1)(23)(60)
Other (c)(7)(20)(24)
Unrecognized income tax benefits, December 31$304 $325 $387 
 
________________________
(a)2023 and 2022 amounts are primarily related to the settlement of tax audits.
(b)Settlements are uncertain tax positions that were effectively settled with the taxing authorities, including positions where the company has agreed to amend its tax returns to eliminate the uncertainty.
(c)Other includes reductions for statute of limitation lapses and foreign currency translation.

The company classifies interest income and expense related to income taxes as tax expense in the consolidated statements of income. The company recognized net interest benefit of $17 million and $3 million and expense of $15 million for the years ended December 31, 2023, 2022 and 2021, respectively. The company had $14 million and $35 million of accrued interest and penalties as of December 31, 2023 and 2022, respectively, which were recorded in other long-term liabilities in the consolidated balance sheets (See Note 7).
As of December 31, 2023, the company remained subject to examination in the following major tax jurisdictions for the tax years as indicated below: 
Major tax jurisdictionsOpen Years
North and South America
United States2020 through 2023
Canada2014 through 2023
Mexico2014 through 2023
Brazil2008 through 2023
Europe and Africa
France2019 through 2023
Germany2018 through 2023
Spain2010 through 2023
United Kingdom2021 through 2023
Asia and Australia
Australia2019 through 2023
China2018 through 2023
India2006 through 2023
South Korea2020 through 2023
The company is currently under audit in a number of jurisdictions. As a result, it is reasonably possible that some of these matters will conclude or reach the stage where a change in unrecognized income tax benefits may occur within the next twelve months. At the time new information becomes available, the company will record any adjustment to income tax expense as required. Final determinations, if any, are not expected to be material to the consolidated financial statements. The company is also subject to income taxes in many hundreds of state and local taxing jurisdictions that are open to tax examinations.