Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of the provision (benefit) for income taxes for each of the three years in the period ended December 31, 2022 are as follows:

	Year ended December 31,
	2022		2021		2020
Current
Federal	$	(34)	$	78	$	290
Foreign	100		26		15
State and local	94		88		65
	160		192		370
Deferred
Federal	525		260		(107)
Foreign	(16)		14		6
State and local	28		(6)		(20)
	537		268		(121)
Total	$	697	$	460	$	249

A reconciliation of the provision (benefit) for income taxes and the amount computed by applying the statutory federal income tax rate of 21 percent to the income before provision (benefit) for income taxes for each of the three years in the period ended December 31, 2022 is as follows:

	Year ended December 31,
	2022		2021		2020
Computed tax at statutory tax rate	$	588	$	388	$	239
State income taxes, net of federal tax benefit	102		64		31
Other permanent items	18		1		(3)
Change in federal valuation allowance	15		—		(22)
Foreign restructuring (1)	(37)		—		—
Foreign tax rate differential	11		7		4
Total	$	697	$	460	$	249

 

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(1)    Reflects the impact of aligning the legal entity structure in Australia and New Zealand with our other foreign operations, which resulted in a tax depreciation benefit.

The components of deferred income tax assets (liabilities) are as follows:

	December 31, 2022		December 31, 2021
Reserves and allowances	$	186	$	165
Debt cancellation and other	18		16
Net operating loss and credit carryforwards	171		175
Interest carryforward (1)	84		—
Operating lease assets	216		210
Total deferred tax assets	675		566
Less: valuation allowance (2)	(19)		(9)
Total net deferred tax assets	656		557
Property and equipment, including rental equipment	(2,986)		(2,349)
Operating lease liabilities	(216)		(210)
Intangibles	(125)		(152)
Total deferred tax liability	(3,327)		(2,711)
Total net deferred tax liability	$	(2,671)	$	(2,154)

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(1)    Relates to the limitation of deductible interest, and is primarily due to tax depreciation benefits associated with the Ahern Rentals acquisition (see note 6 to the consolidated financial statements for further detail).

(2)    Relates to federal foreign tax credits, state net operating loss carryforwards and state tax credits that may not be realized.

We file income tax returns in the U.S., Canada and Europe. Without exception, we have completed our domestic and international income tax examinations, or the statute of limitations has expired in the respective jurisdictions, for years prior to 2012.

For financial reporting purposes, income before provision for income taxes for our foreign subsidiaries was $233, $134 and $83 for the years ended December 31, 2022, 2021 and 2020, respectively.

We have historically considered the undistributed earnings of our foreign subsidiaries to be indefinitely reinvested, and, accordingly, no taxes were provided on such earnings prior to the fourth quarter of 2020. In the fourth quarter of 2020, we identified cash in our foreign operations in excess of near-term working capital needs, and determined that such cash could no longer be considered indefinitely reinvested. As a result, our prior assertion that all undistributed earnings of our foreign subsidiaries should be considered indefinitely reinvested changed. In the fourth quarter of 2021, we identified additional cash in our foreign operations in excess of near-term working capital needs, and remitted $203 of cash from foreign operations (such amount represents the cumulative amount of identified cash in our foreign operations in excess of near-term working capital needs). The taxes recorded associated with the remitted cash were immaterial in both 2020 and 2021.

We continue to expect that the remaining balance of our undistributed foreign earnings will be indefinitely reinvested. If we determine that all or a portion of such foreign earnings are no longer indefinitely reinvested, we may be subject to additional foreign withholding taxes and U.S. state income taxes. At December 31, 2022, unremitted earnings of foreign subsidiaries were $875. Determination of the amount of unrecognized deferred tax liability on these unremitted earnings is not practicable.

We have net operating loss carryforwards (“NOLs”) of $344 for federal income tax purposes, $201 of which will expire in 2036 and 2037 (while the remaining federal NOLs have an indefinite life), $3 for foreign income tax purposes that expire from 2024 through 2030 and $659 for state income tax purposes that expire from 2023 through 2034.