Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of income before income taxes were as follows: 

	2021		2020		2019
U.S.	$	143	$	97	$	1
Foreign	(562)		628		630
	$	(419)	$	725	$	631

The provision for income taxes consisted of the following: 

	2021		2020		2019
Current tax:
U.S. federal	$	2	$	—	$	(1)
State and foreign	239		161		165
	$	241	$	161	$	164
Deferred tax:
U.S. federal	$	46	$	38	$	17
State and foreign	(344)		—		(45)
	(298)		38		(28)
Total	$	(57)	$	199	$	136

The provision for income taxes differs from the amount of income tax determined by applying the U.S. statutory federal income tax rate to pre-tax income as a result of the following items:

	2021		2020		2019
U.S. statutory rate at 21%	$	(88)	$	152	$	133
Tax on foreign income	(29)		27		10
Valuation allowance changes	26		(11)		(33)
State taxes	9		5		7
U.S. taxes on foreign income, net of credits	13		14		15
Tax contingencies	8		1		19
Tax law changes	(8)		4		(11)
Other items, net	12		7		(4)
Income tax provision / (benefit)	$	(57)	$	199	$	136

The Company benefits from certain incentives in Brazil which allow it to pay reduced income taxes. The incentives expire at various dates beginning in December 2025. These incentives increased net income attributable to the Company by $21 in 2021 and $17 in both 2020 and 2019.

The Company paid taxes of $253, $189 and $173 in 2021, 2020 and 2019.

In 2021, tax on foreign income includes income tax charges of $42 in continuing operations for reorganizations and other transactions required to prepare the European Tinplate business for sale. Additionally, the Company recorded an income tax charge of $44 to establish a valuation allowance for deferred tax assets related to tax loss carryforwards in France. The Company believes that it is more likely than not that these tax loss carryforwards will not be utilized after the sale of the European Tinplate business. See Note B for more information regarding the sale of the European Tinplate business.

In 2021, the Company also recorded a tax benefit of $18 related to a deferred tax valuation allowance release resulting from improved profitability in a Transit Packaging corporate entity. Additionally, the Company also recorded income tax benefits related to tax law changes in India, Turkey and the U.K.

In 2019, the Company recorded an income tax benefit of $36 related to a deferred tax valuation allowance release resulting from an internal reorganization in Transit Packaging. Additionally, the Company recorded a charge of $15 related to the settlement of a pre-acquisition tax contingency that arose from a transaction that occurred prior to its acquisition of Signode in 2018. The Company also recorded a benefit of $9 arising from tax law changes in India.

As of December 31, 2021, the Company had not provided deferred taxes on approximately $1,500 of earnings in certain non-U.S. subsidiaries because such earnings are indefinitely reinvested in its international operations. Upon distribution of such earnings in the form of dividends or otherwise, the Company may be subject to incremental foreign tax. It is not practicable to estimate the amount of foreign tax that might be payable.

The components of deferred taxes at December 31 were:

	2021				2020
	Assets		Liabilities		Assets		Liabilities
Tax carryforwards	$	346	$	—	$	424	$	—
Intangible assets	—		317		—		354
Property, plant and equipment	21		176		24		130
Pensions	105		$	13	124		$	101
Accruals and other	96		109		89		84
Asbestos	56		—		61		—
Postretirement and postemployment benefits	31		—		35		—
Lease liabilities	29		—		34		—
Right of use assets	—		28		—		33
Valuation allowances	(227)		—		(204)		—
Total	$	457	$	643	$	587	$	702

Tax carryforwards expire as follows:

Year	Amount
2022	$	10
2023	12
2024	13
2025	28
2026	24
Thereafter	142
Unlimited	117

Tax carryforwards expiring after 2026 include $110 of U.S. state tax loss carryforwards. The unlimited category includes $33 of Luxembourg tax loss carryforwards and $62 of French tax loss carryforwards.

Realization of any portion of the Company’s deferred tax assets is dependent upon the availability of taxable income in the relevant jurisdictions. The Company considers all sources of taxable income, including (i) taxable income in any available carryback period, (ii) the reversal of taxable temporary differences, (iii) tax-planning strategies, and (iv) taxable income expected to be generated in the future other than from reversing temporary differences. The Company also considers whether there have been cumulative losses in recent years. The Company records a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The Company’s valuation allowances at December 31, 2021 include $167 primarily related to the portion of U.S. state tax loss carryforwards that the Company does not believe are more likely than not to be utilized prior to their expiration. The Company’s ability to utilize state tax loss carryforwards is impacted by several factors including taxable income, expiration dates, limitations imposed by certain states on the amount of loss carryforwards that can be used in a given year to offset taxable income and whether the state permits the Company to file a combined return.

Management’s estimate of the appropriate valuation allowance in any jurisdiction involves a number of assumptions and judgments, including the amount and timing of future taxable income. Should future results differ from management’s estimates, it is possible there could be future adjustments to the valuation allowances that would result in an increase or decrease in tax expense in the period such changes in estimates are made.

A reconciliation of unrecognized tax benefits follows:

	2021		2020		2019
Balance at January 1	$	42	$	39	$	35
Additions for prior year tax positions	9		1		20
Lapse of statute of limitations	(1)		—		(1)
Settlements	—		—		(15)
Foreign currency translation	(2)		2		—
Balance at December 31	$	48	$	42	$	39

The Company’s unrecognized tax benefits include potential liabilities related to transfer pricing, foreign withholding taxes, and non-deductibility of expenses and exclude $2 of interest and penalties as of December 31, 2021.

The total interest and penalties recorded in income tax expense was less than $1 in 2021, 2020 and 2019. As of December 31, 2021, unrecognized tax benefits of $48, if recognized, would affect the Company's effective tax rate.

The Company’s unrecognized tax benefits are not expected to increase over the next twelve months and are expected to decrease as open tax years lapse or claims are settled. The Company is unable to estimate a range of reasonably possible changes in its unrecognized tax benefits in the next twelve months as it is unable to predict when, or if, the tax authorities will commence their audits, the time needed for the audits, and the audit findings that will require settlement with the applicable tax authorities, if any.

The tax years that remained subject to examination by major tax jurisdictions as of December 31, 2021 were, 2010 and subsequent years for Germany; 2013 and subsequent years for India; 2015 and subsequent years for Spain; 2016 and subsequent years for France, Italy, Mexico and the U.K.; 2017 and subsequent for Brazil and 2018 and subsequent years for Canada and the U.S. The U.S. also remains subject to exam for 2017, specifically as it relates to the transition tax incurred related to the 2017 Tax Act. In addition, tax authorities in certain jurisdictions, including France, Belgium and the U.S., may examine earlier years when tax carryforwards that were generated in those years are subsequently utilized.