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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block] Income Taxes
The provision for income taxes consists of the following components (in millions):

Year Ended December 31,
 202220212020
Current:
Federal$212 $195 $156 
State60 47 38 
Foreign107 116 90 
Total current provision for income taxes$379 $358 $284 
Deferred:
Federal$— $(3)$(7)
State(2)— (6)
Foreign8 (24)(21)
Total deferred (benefit) provision for income taxes$6 $(27)$(34)
Provision for income taxes$385 $331 $250 

Income taxes have been based on the following components of income from continuing operations before provision for income taxes (in millions):
Year Ended December 31,
 202220212020
Domestic$1,078 $978 $713 
Foreign440 421 172 
Income from continuing operations before provision for income taxes$1,518 $1,399 $885 
The U.S. federal statutory rate is reconciled to the effective tax rate as follows:

Year Ended December 31,
 202220212020
U.S. federal statutory rate21.0 %21.0 %21.0 %
State income taxes, net of state credits and federal tax impact3.0 %2.7 %3.2 %
Impact of rates on international operations1.1 %1.2 %1.9 %
Change in valuation allowances0.4 %(0.8)%1.7 %
Non-deductible expenses1.0 %0.4 %0.8 %
Excess tax benefits from stock-based compensation(0.2)%(0.1)%— %
Other, net(1.0)%(0.8)%(0.4)%
Effective tax rate25.3 %23.6 %28.2 %

Beginning in 2018, the Tax Cuts and Jobs Act ("Tax Act") imposed a new regime of taxation on foreign subsidiary earnings referred to as GILTI. We have elected to account for GILTI in the year the tax is incurred. As part of the transition of U.S. international taxation from a worldwide tax system to a modified territorial tax system, the Tax Act imposed a one-time transition tax on the deemed repatriation of historical earnings of foreign subsidiaries as of December 31, 2017. Our transition tax liability was $42 million payable in eight installments from 2018 through 2025. The next required installment of $6 million is recorded in Other current liabilities and the remaining $19 million is recorded in Other noncurrent liabilities on the Consolidated Balance Sheets.

Undistributed earnings of our foreign subsidiaries amounted to approximately $1,487 million at December 31, 2022. Beginning in 2018, the Tax Act generally provided a 100% participation exemption from further U.S. taxation of dividends received from 10-percent or more owned foreign corporations held by U.S. corporate shareholders. Although foreign dividend income is generally exempt from U.S. federal tax in the hands of the U.S. corporate shareholders, either as a result of the participation exemption, or due to the previous taxation of such earnings under the transition tax and GILTI regimes, companies must still apply the guidance of ASC 740: Income Taxes to account for the tax consequences of outside basis differences and other tax impacts of their investments in non-U.S. subsidiaries. Further, the 2017 transition tax reduced a majority of the previous outside basis differences in our foreign subsidiaries, and most of any new differences arising have extensive interaction with the GILTI regime discussed above.

Based on a review of our global financing and capital expenditure requirements as of December 31, 2022, we continue to plan to permanently reinvest the undistributed earnings of our international subsidiaries. Thus, no deferred U.S. income taxes or potential foreign withholding taxes have been recorded. Due to the complexity of the U.S. tax regime, it remains impractical to estimate the amount of deferred taxes potentially payable were such earnings to be repatriated.

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law in the United States. The IRA, among other provisions, enacted a 15% corporate minimum tax effective for taxable years beginning after December 31, 2022 and a 1% excise tax on the repurchase of corporate stock after December 31, 2022. We do not currently expect the corporate minimum tax provisions of the IRA to have a material impact on our financial results. The impact of the excise tax provisions will be dependent upon the volume of any future stock repurchases.
The significant components of the deferred tax assets and liabilities are as follows (in millions):

December 31,
20222021
Deferred Tax Assets:
Accrued expenses and reserves$71 $76 
Qualified and nonqualified retirement plans11 31 
Inventory15 11 
Accounts receivable19 18 
Interest deduction carryforwards28 32 
Stock-based compensation9 7 
Operating lease liabilities307 338 
Net operating loss carryforwards19 25 
Other17 25 
Total deferred tax assets, gross496 563 
Less: valuation allowance(44)(45)
Total deferred tax assets$452 $518 
Deferred Tax Liabilities:
Goodwill and other intangible assets$236 $238 
Property, plant and equipment86 93 
Trade name82 91 
Operating lease assets, net291 323 
Other12 20 
Total deferred tax liabilities$707 $765 
Net deferred tax liability$(255)$(247)

Deferred tax assets and liabilities are reflected on the Consolidated Balance Sheets as follows (in millions):

December 31,
20222021
Noncurrent deferred tax assets$25 $32 
Noncurrent deferred tax liabilities280 279 

Noncurrent deferred tax assets and noncurrent deferred tax liabilities are included in Other noncurrent assets and Deferred income taxes, respectively, on the Consolidated Balance Sheets.

We have net operating loss carryforwards, primarily for certain international tax jurisdictions, the tax benefits of which totaled approximately $19 million and $25 million at December 31, 2022 and 2021, respectively. At December 31, 2022 and 2021, we had tax credit carryforwards for certain U.S. state jurisdictions, the tax benefits of which totaled less than $1 million at both dates. As of December 31, 2022 and 2021, we had interest deduction carryforwards in Italy and Germany, the tax benefits of which totaled $28 million and $32 million, respectively. As of December 31, 2022 and 2021, we had capital loss carryforwards, the tax benefit of which totaled an insignificant amount and $4 million, respectively. As of December 31, 2022 and 2021, valuation allowances of $44 million and $45 million, respectively, were recorded for deferred tax assets related to the foreign interest deduction carryforwards, certain foreign and U.S. net operating loss carryforwards and capital loss carryforwards. The $1 million net decrease in valuation allowances was primarily attributable to utilization of net operating loss carryforwards and U.S. capital loss carryforward valuation allowance activity.

The net operating losses generally carry forward for a period of five years to indefinitely. The interest deduction carryforwards in Italy and Germany do not expire. Realization of these deferred tax assets is dependent on the generation of sufficient taxable income prior to the expiration dates, where applicable, or in the case of interest deduction carryforward, subject to legislative thin capitalization constraints, typically based on profitability. Based on historical and projected operating results, we believe
that it is more likely than not that earnings will be sufficient to realize the deferred tax assets for which valuation allowances have not been provided. While we expect to realize the deferred tax assets, net of valuation allowances, changes in tax laws or in estimates of future taxable income may alter this expectation.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in millions):

 202220212020
Balance at January 1$5 $2 $2 
Additions based on tax positions related to the current year— — 1 
Additions based on tax positions related to prior years2 5 — 
Reductions for tax positions of prior year— (2)— 
Settlements with taxing authorities(2)— (1)
Balance at December 31$5 $5 $2 

Included in the balance of unrecognized tax benefits above as of December 31, 2022, 2021 and 2020, are approximately $5 million, $4 million and $2 million, respectively, of tax benefits that, if recognized, would affect the effective tax rate. The balance of unrecognized tax benefits at December 31, 2022, 2021 and 2020, includes an insignificant amount of tax benefits that, if recognized, would result in adjustments to deferred taxes.

We recognize interest and penalties accrued related to unrecognized tax benefits as income tax expense. Attributable to the unrecognized tax benefits noted above, we had accumulated interest and penalties of $1 million, $1 million, and less than $1 million at December 31, 2022, 2021 and 2020, respectively. During the years ended December 31, 2022, 2021 and 2020, we recorded $1 million or less of interest and penalties through the income tax provision, prior to any reversals for lapses in the statutes of limitations.

During the twelve months beginning January 1, 2023, it is reasonably possible that we will reduce unrecognized tax benefits by $1 million, most of which would impact our effective tax rate.

The Company and/or its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various U.S. state and international jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state and local, or international income tax examinations by tax authorities for years before 2015. Adjustments from examinations, if any, are not expected to have a material effect on our Consolidated Financial Statements.