Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of deferred income taxes at December 31, 2022 and 2021 are as follows:

	2022		2021
Deferred income tax assets:
Accrued expenses	$	379	$	511
Bad debt reserves	301		246
Insurance reserves	147		156
Lease liabilities	200		216
Retirement liabilities	173		170
Deferred compensation	34		35
Federal and state operating loss carryforwards	208		201
Investment basis	340		—
Other	267		207
Subtotal	2,049		1,742
Less: valuation allowance	(203)		(212)
Total deferred income tax assets	1,846		1,530
U.S. federal and state intangible assets	2,059		2,071
Foreign (including Puerto Rico) intangible assets	380		452
Capitalized software	601		777
Depreciation and amortization	62		45
Investment basis	—		295
Retirement assets	317		314
Lease right-of-use asset	123		126
Prepaid expenses	201		152
Total deferred income tax liabilities	3,743		4,232
Net deferred income tax liabilities	$	1,897	$	2,702

We recognized $137 and $103 of deferred tax asset under the caption “Other noncurrent assets” at December 31, 2022 and 2021, respectively. We recognized $2,034 and $2,805 of deferred tax liability under the caption “Deferred tax liabilities, net” at December 31, 2022 and 2021.

As of December 31, 2022, we have established U.S. deferred taxes for undistributed earnings from certain non-U.S. subsidiaries, which are included in the Investment basis component above, consistent with prior years.

Significant components of the provision for income taxes for the years ended December 31, 2022, 2021 and 2020 consist of the following:

	2022		2021		2020
Current tax expense:
Federal	$	1,469	$	1,467	$	1,724
Foreign (including Puerto Rico)	98		18		7
State and local	179		165		461
Total current tax expense	1,746		1,650		2,192
Deferred tax expense (benefit)	4		180		(526)
Total income tax expense	$	1,750	$	1,830	$	1,666

State and local current tax expense is reported gross of federal benefit in the preceding table, and includes amounts related to audit settlements, uncertain tax positions, state tax credits and true up of prior years’ tax. Such items are included on a net of federal tax basis in multiple lines in the following rate reconciliation table.

A reconciliation of income tax expense recorded in the consolidated statements of income and amounts computed at the statutory federal income tax rate for the years ended December 31, 2022, 2021 and 2020 is as follows:

	2022				2021				2020
	Amount		Percent		Amount		Percent		Amount		Percent
Amount at statutory rate	$	1,631	21.0	%	$	1,664	21.0	%	$	1,310	21.0	%
State and local income taxes net of federal tax expense/benefit	238		3.0		258		3.3		235		3.8
Tax exempt interest and dividends received deduction	(19)		(0.2)		(22)		(0.3)		(22)		(0.4)
HIP fee	—		—		—		—		330		5.3
Basis adjustments from recent acquisitions	—		—		—		—		(110)		(1.8)
Other, net	(100)		(1.3)		(70)		(0.9)		(77)		(1.2)
Total income tax expense	$	1,750	22.5	%	$	1,830	23.1	%	$	1,666	26.7	%

During the year ended December 31, 2022, we recognized income tax expense of $1,750, or $7.21 per diluted share. The decrease in effective income tax rate is primarily due to the impact of geographic changes in the mix of 2022 earnings.

During the year ended December 31, 2021, we recognized income tax expense of $1,830, or $7.41 per diluted share. The HIP Fee payment was eliminated beginning in 2021.

During the year ended December 31, 2020, we recognized income tax expense of $1,666, or $6.55 per diluted share, which included income tax expense of $330, or $1.30 per diluted share, as a result of the non-tax deductibility of the HIP Fee payment.

The change in the carrying amount of gross unrecognized tax benefits from uncertain tax positions for the years ended December 31, 2022 and 2021 is as follows:

	2022		2021
Balance at January 1	$	271	$	249
Additions based on:
Tax positions related to current year	22		10
Tax positions related to prior years	57		17
Reductions based on:
Tax positions related to prior years	(1)		(5)
Balance at December 31	$	349	$	271

The table above excludes interest, net of related tax benefits, which is treated as income tax expense (benefit) under our accounting policy. The interest is included in the amounts described in the following paragraph.

The amount of unrecognized tax benefits that would impact our effective tax rate in future periods, if recognized, was $328 and $250 at December 31, 2022 and 2021, respectively. Also included in the table above, at December 31, 2022, is $2 that would be recognized as an adjustment to additional paid-in capital, which would not affect our effective tax rate. In addition to the contingent liabilities included in the table above, we filed protective state income tax refund claims of approximately $92 and $310 for 2022 and 2017, respectively. There were no equivalent protective state income tax refund claims filed in 2021, 2020, 2019 or 2018.

For the years ended December 31, 2022, 2021 and 2020 we recognized net interest expense of $13, $9 and $7, respectively. We had accrued approximately $55 and $42 for the payment of interest at December 31, 2022 and 2021, respectively.

As of December 31, 2022, as further described below, certain tax years remain open to examination by the Internal Revenue Service (“IRS”) and various state, local and foreign authorities. As a result of these examinations and discussions with taxing agencies, we have recorded amounts for uncertain tax positions. It is anticipated that the amount of unrecognized tax benefits will change in the next twelve months due to possible settlements of audits and changes in temporary items. However, the ultimate resolution of these items is dependent on the completion of negotiations with various taxing authorities. While it is difficult to determine when other tax settlements will actually occur, it is reasonably possible that one could occur in the next twelve months and our unrecognized tax benefits could be reduced within a range of approximately $33 to $143.

We are a member of the IRS Compliance Assurance Process (“CAP”). The objective of CAP is to reduce taxpayer burden and uncertainty while assuring the IRS of the accuracy of tax returns prior to filing, thereby reducing or eliminating the need for post-filing examinations.

As of December 31, 2022, the IRS examination of our 2022 and 2021 tax years continues to be in process.

In certain states, we pay premium taxes in lieu of state income taxes. Premium taxes are reported in selling, general and administrative expense.

At December 31, 2022, we had federal net operating loss carryforwards of $160 that will expire beginning 2032 through 2042 and $109 that have an indefinite carryforward period. State net operating loss carryforwards expire beginning 2023 through 2042, with some having an indefinite carryforward period.

Income taxes receivable totaled $440 and $173 at December 31, 2022 and 2021, respectively. We recognize the income tax receivable as an asset under the caption “Other current assets” in our consolidated balance sheets.

During 2022, 2021 and 2020, federal income taxes paid totaled $1,594, $1,299 and $1,790, respectively.