Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The income tax expense (benefit) components recognized in Cont Ops follow:

	Year Ended December 31,
(in millions)	2023		2022		2021
Current:
Federal	$	(3)	$	1	$	1
Foreign	240		148		47
State and local	12		5		(5)
Total current	249		154		43
Deferred:
Federal	—		—		—
Foreign	(13)		17		(23)
State and local	—		—		—
Total deferred	(13)		17		(23)
Total income tax expense	$	236	$	171	$	20

A reconciliation of U.S. statutory federal income tax expense (benefit) to income tax expense (benefit) from Cont Ops follows:

	Year Ended December 31,
(in millions)	2023		2022		2021
U.S. statutory federal tax expense (benefit)	$	66	$	51	$	(73)
Increase (decrease) in taxes resulting from:
State and local income taxes	6		—		12
Goodwill Impairment	—		10		36
Sale of foreign subsidiaries	(10)		—		—
NCI	13		15		(7)
Foreign tax differential, net	48		(106)		(11)
Valuation allowance, net	122		194		103
Stranded tax effects from AOCI	—		—		(52)
Other, net	(9)		7		12
Total income tax expense	$	236	$	171	$	20

Deferred taxes reflect the tax effects of differences between the amounts recorded as assets and liabilities for financial reporting purposes and the amounts recognized for income tax purposes. The tax effects of significant temporary differences giving rise to deferred tax assets and liabilities are as follows:

	December 31,
(in millions)	2023		2022
Deferred tax assets:
Accrued liabilities not currently deductible:
Employee compensation and benefits	$	105	$	107
Project and non-project reserves	20		33
Net operating loss carryforward	399		397
Tax basis of investment in excess of book basis, net	123		66
U.S. foreign tax credit carryforward	611		567
AOCI	42		21
Other	115		57
Total deferred tax assets	1,415		1,248
Valuation allowance	(1,340)		(1,211)
Deferred tax assets, net	$	75	$	37
Deferred tax liabilities:
Book basis of property and equipment in excess of tax basis	(19)		(10)
Dividend withholding on unremitted non-U.S. earnings	(60)		(46)
Other	(15)		(20)
Total deferred tax liabilities	(94)		(76)
Deferred tax liabilities, net of deferred tax assets	$	(19)	$	(39)

As of December 31, 2023, we are indefinitely reinvested only with respect to unremitted earnings required to meet our working capital and long-term investment needs in the non-US jurisdictions where we operate. Beyond those limits, we expect current earnings to be available for distribution. Deferred tax liabilities of approximately $35 million have not been recorded with respect to unremitted earnings that are considered indefinitely reinvested, primarily associated with foreign withholding and income taxes that would be due upon remittance. We have no intention of initiating any actions that would lead to taxation of the earnings deemed indefinitely reinvested.

As of December 31, 2023, tax credit carryforwards, principally federal, and tax loss carryforwards, principally federal, state, and foreign, were as follows:

(in millions)	Federal FTC		Federal NOLs		State NOLs		Foreign NOLs
Expiration periods:
2024-2028	$	21	$	—	$	9	$	25
2029-2033	532		—		76		56
2034-2043	58		—		276		5
Indefinite	—		—		319		1,355

We are in a 3-year cumulative loss on a consolidated, jurisdictional basis in the Netherlands, the U.K. and the U.S. Such cumulative loss constitutes significant negative evidence (with regards to future taxable income) for assessing likelihood of realization. We also considered positive evidence but concluded it did not outweigh this significant negative evidence of a 3-year cumulative loss. Accordingly, we recognized non-cash charges to tax expense of $92 million and $50 million to record a valuation allowance against net U.S. deferred tax assets and $30 million and $120 million against certain net foreign deferred tax assets during 2023 and 2022, respectively.

In the normal course of business, we are subject to examination by taxing authorities worldwide, including such major jurisdictions as Australia, Canada, Chile, the Netherlands, the United Kingdom, and the United States. Although we believe our reserves for our tax positions are reasonable, the outcome of tax audits could be materially different, both favorably and unfavorably. With a few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations for years before 2012.

A summary of unrecognized tax benefits follows:

(in millions)	2023		2022
Balance at beginning of year	$	49	$	48
Change in tax positions of prior years	3		1
Change in tax positions of current year	—		—
Reduction in tax positions for statute expirations	—		—
Reduction in tax positions for audit settlements	—		—
Balance at end of year	$	52	$	49

If recognized, the total amount of unrecognized tax benefits as of December 31, 2023 and 2022, would favorably impact the effective tax rates by $36 million and $31 million, respectively. We had $20 million and $15 million of accrued interest and penalties as of December 31, 2023 and 2022, respectively. We believe the amount of unrecognized tax benefits related to our uncertain tax positions may change within the next 12 months.

U.S. and foreign earnings (loss) from Cont Ops before taxes are as follows:

	Year Ended December 31,
(in millions)	2023		2022		2021
United States	$	185	$	(465)	$	(394)
Foreign	130		709		48
Total	$	315	$	244	$	(346)