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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES
Income before income taxes and equity income for U.S. and non-U.S. operations are as follows:
Year Ended December 31,
 202120202019
 (in millions)
U.S. loss$(2)$(65)$(1)
Non-U.S. income912 2,019 1,127 
Income before income taxes and equity loss$910 $1,954 $1,126 
The provision (benefit) for income taxes is comprised of:
Year Ended December 31,
202120202019
 (in millions)
Current income tax expense (benefit):
U.S. federal$1 $(53)$8 
Non-U.S.156 154 156 
U.S. state and local4 — 1 
Total current161 101 165 
Deferred income tax expense (benefit), net:
U.S. federal(17)(14)(23)
Non-U.S.(43)(37)(8)
U.S. state and local— (1)(2)
Total deferred(60)(52)(33)
Total income tax provision$101 $49 $132 
Cash paid or withheld for income taxes was $172 million, $106 million and $189 million for the years ended December 31, 2021, 2020 and 2019, respectively.
For purposes of comparability and consistency, the Company uses the notional U.S. federal income tax rate when presenting the Company’s reconciliation of the income tax provision. The Company is an Irish resident taxpayer. A reconciliation of the provision for income taxes compared with the amounts at the notional U.S. federal statutory rate was:
 Year Ended December 31,
 202120202019
 (in millions)
Notional U.S. federal income taxes at statutory rate$191 $410 $236 
Income taxed at other rates(81)(339)(92)
Change in valuation allowance(17)10 (18)
Other change in tax reserves19 30 20 
Intragroup reorganizations(7)(49)— 
Withholding taxes37 26 19 
Tax credits(23)(16)(18)
Change in tax law(7)(2)1 
Other adjustments(11)(21)(16)
Total income tax expense$101 $49 $132 
Effective tax rate11 %3 %12 %
The Company’s tax rate is affected by the tax rates in Ireland and other jurisdictions in which the Company operates, the relative amount of income earned by jurisdiction and the relative amount of losses or income for which no tax benefit or expense was recognized due to a valuation allowance. Included in the non-U.S. income taxed at other rates are tax incentives obtained in various non-U.S. countries, primarily the High and New Technology Enterprise (“HNTE”) status in China and a Free Trade Zone exemption in Honduras which totaled $10 million in 2021, $5 million in 2020 and $19 million in 2019, as well as tax benefit for income earned, and no tax benefit for losses incurred, in jurisdictions where a valuation allowance has been recorded. The Company currently benefits from tax holidays in various non-U.S. jurisdictions with expiration dates from 2022 through 2041. The income tax benefits attributable to these tax holidays are approximately $1 million (less than $0.01 per share) in 2021, $1 million (less than $0.01 per share) in 2020 and $7 million ($0.03 per share) in 2019.
The effective tax rate in the year ended December 31, 2021 was impacted by favorable provision to return adjustments as well as releases of valuation allowances as a result of the Company’s determination that it was more likely than not that certain deferred tax assets would be realized. The Company also accrued $19 million of reserve adjustments for uncertain tax positions.
The effective tax rate in the year ended December 31, 2020 was impacted by changes in reserves, provision to return adjustments, changes in valuation allowances and the tax impact of certain intragroup reorganizations meant to streamline and simplify the Company’s operating and legal structure, which resulted in the recognition of losses for tax purposes. The effective tax rate was also impacted by the beneficial impact from the gain on the formation of the Motional autonomous driving joint venture. The tax expense associated with the gain was insignificant as Aptiv’s aggregate autonomous driving assets were exempt from capital gains tax in the jurisdiction from which they were sold. The aggregate autonomous driving assets had been acquired, purchased or developed in taxable transactions in prior periods and reflect changes made to the corporate entity operating structure for intellectual property following the separation of its former Powertrain Systems segment.
The effective tax rate in the year ended December 31, 2019 was impacted by releases of valuation allowances as a result of the Company’s determination that it was more likely than not that certain deferred tax assets would be realized, as well as favorable provision to return adjustments. The Company also accrued $20 million of reserve adjustments for uncertain tax positions, which included reserves for ongoing audits in foreign jurisdictions, as well as for changes in estimates based on relevant new or additional evidence obtained related to certain of the Company’s tax positions, including tax authority administrative pronouncements and court decisions.
The Tax Cuts and Jobs Act, which was enacted in the U.S. in 2017, created a provision known as Global Intangible Low-Taxed Income (“GILTI”) that imposes a tax on certain earnings of foreign subsidiaries. U.S. GAAP allows companies to make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax is incurred. We have elected to account for GILTI in the year the tax is incurred.
As described above, certain of the Company’s Chinese subsidiaries benefit from a reduced corporate income tax rate as a result of their HNTE status. Aptiv regularly submits applications to reapply for HNTE status as they expire. The Company believes each of the applicable entities will continue to renew HNTE status going forward and has reflected this in calculating total income tax expense.
Deferred Income Taxes
The Company accounts for income taxes and the related accounts under the liability method. Deferred income tax assets and liabilities reflect the impact of temporary differences between amounts of assets and liabilities for financial reporting purposes and the bases of such assets and liabilities as measured by tax laws. Significant components of the deferred tax assets and liabilities are as follows:
 December 31,
 20212020
 (in millions)
Deferred tax assets:
Pension$76 $106 
Employee benefits30 29 
Net operating loss carryforwards699 746 
Warranty and other liabilities77 69 
Operating lease right-of-use assets78 77 
Other184 171 
Total gross deferred tax assets1,144 1,198 
Less: valuation allowances(766)(832)
Total deferred tax assets (1)$378 $366 
Deferred tax liabilities:
Fixed assets$55 $57 
Tax on unremitted profits of certain foreign subsidiaries65 64 
Intangibles174 201 
Operating lease liabilities78 77 
Total gross deferred tax liabilities372 399 
Net deferred tax assets (liabilities)$6 $(33)
(1)Reflects gross amount before jurisdictional netting of deferred tax assets and liabilities.
Deferred tax assets and liabilities are classified as long-term in the consolidated balance sheets. Net deferred tax assets and liabilities are included in the consolidated balance sheets as follows:
 December 31,
 20212020
 (in millions)
Long-term assets$159 $174 
Long-term liabilities(153)(207)
Total deferred tax asset (liability)$6 $(33)
The net deferred tax asset of $6 million as of December 31, 2021 is primarily comprised of deferred tax assets in Mexico, Germany, the U.K. and the U.S. offset by deferred tax liability amounts primarily in Korea, China, Singapore and Japan.
Net Operating Loss and Tax Credit Carryforwards
As of December 31, 2021, the Company has gross deferred tax assets of approximately $695 million for non-U.S. net operating loss (“NOL”) carryforwards with recorded valuation allowances of $640 million. These NOLs are available to offset future taxable income and realization is dependent on generating sufficient taxable income prior to expiration of the loss carryforwards. The NOLs primarily relate to Luxembourg, Poland, Germany, the U.K., Ireland and France. The NOL carryforwards have expiration dates ranging from one year to an indefinite period.
Deferred tax assets include $87 million and $93 million of tax credit carryforwards with recorded valuation allowances of $71 million and $86 million at December 31, 2021 and 2020, respectively. These tax credit carryforwards expire at various times from 2022 through 2041.
Cumulative Undistributed Foreign Earnings
No income taxes have been provided on indefinitely reinvested earnings of certain foreign subsidiaries at December 31, 2021.
Withholding taxes of $65 million have been accrued on undistributed earnings that are not indefinitely reinvested and are primarily related to China, Honduras, Morocco and Germany. There are no other material liabilities for income taxes on the undistributed earnings of foreign subsidiaries, as the Company has concluded that such earnings are either indefinitely reinvested or should not give rise to additional income tax liabilities as a result of the distribution of such earnings.
Uncertain Tax Positions
The Company recognizes tax benefits only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Unrecognized tax benefits are tax benefits claimed in the Company’s tax returns that do not meet these recognition and measurement standards.
A reconciliation of the gross change in the unrecognized tax benefits balance, excluding interest and penalties is as follows:
Year Ended December 31,
202120202019
 (in millions)
Balance at beginning of year$231 $217 $209 
Additions related to current year12 35 20 
Additions related to prior years20 31 51 
Reductions related to prior years(36)(20)(46)
Reductions due to expirations of statute of limitations(3)(28)(11)
Settlements— (4)(6)
Balance at end of year$224 $231 $217 
A portion of the Company’s unrecognized tax benefits would, if recognized, reduce its effective tax rate. The remaining unrecognized tax benefits relate to tax positions that, if recognized, would result in an offsetting change in valuation allowance and for which only the timing of the benefit is uncertain. Recognition of these tax benefits would reduce the Company’s effective tax rate only through a reduction of accrued interest and penalties. As of December 31, 2021 and 2020, the amounts of unrecognized tax benefit that would reduce the Company’s effective tax rate were $207 million and $213 million, respectively. For the year ended December 31, 2019, the Company recorded approximately $26 million of additional reserves for uncertain tax positions, primarily related to prior year net operating loss and other carryforwards on which full valuation allowances have been recorded. For 2021 and 2020, respectively, $105 million and $103 million of reserves for uncertain tax positions would be offset by the write-off of a related deferred tax asset, if recognized.
The Company recognizes interest and penalties relating to unrecognized tax benefits as part of income tax expense. Total accrued liabilities for interest and penalties were $28 million and $25 million at December 31, 2021 and 2020, respectively. Total interest and penalties recognized as part of income tax expense were expenses of $4 million, $13 million and $7 million for the years ended December 31, 2021, 2020 and 2019, respectively.
The Company files tax returns in multiple jurisdictions and is subject to examination by taxing authorities throughout the world. Taxing jurisdictions significant to Aptiv include Barbados, China, Germany, Ireland, Luxembourg, Mexico, South Korea, the U.K. and the U.S. Open tax years related to these taxing jurisdictions remain subject to examination and could result in additional tax liabilities. In general, the Company’s affiliates are no longer subject to income tax examinations by foreign tax authorities for years before 2002. It is reasonably possible that audit settlements, the conclusion of current examinations or the expiration of the statute of limitations in several jurisdictions could impact the Company’s unrecognized tax benefits. A reversal of approximately $5 million is reasonably possible in the next 12 months, due to the running of statutes of limitations in various taxing jurisdictions.