Income Taxes (Tables)

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Source of pre-tax income and components of income tax expense

The source of pre-tax income and the components of income tax expense are as follows:

	Year Ended December 31,
(in millions)	2020			2019			2018
Income (loss) components:
Domestic	$	(33)		$	203		$	208
Foreign	318			213			377
Total pre-tax income	$	285		$	416		$	585
Income tax expense components:
Current:
Domestic – federal	$	24		$	39		$	9
Domestic – state and local	5			13			13
Foreign	33			40			61
Total Current	62			92			83
Deferred:
Domestic – federal	$	(21)		$	7		$	17
Domestic – state and local	(8)			(1)			5
Foreign	(2)			(83)			(69)
Total Deferred	(31)			(77)			(47)
Total income tax provision	$	31		$	15		$	36
Effective income tax rate	10.9		%	3.7		%	6.1		%

Schedule of effective income tax rate reconciliation

Reconciliations between taxes at the U.S. federal income tax rate and taxes at our effective income tax rate on earnings before income taxes are as follows:

	Year Ended December 31,
	2020		2019		2018
Tax provision at U.S. statutory rate	21.0	%	21.0	%	21.0	%
Increase (decrease) in tax rate resulting from:
State income taxes	0.7		2.7		2.3
Uncertain tax positions	(3.9)		0.4		2.6
Valuation allowance	0.5		1.2		(47.1)
Tax exempt interest	(4.5)		(3.0)		(1.4)
Foreign tax rate differential	(0.9)		0.7		2.9
Impact of foreign earnings, net	5.3		1.6		(1.7)
Tax incentives	(7.4)		(9.6)		(6.2)
Intercompany sale of assets	—		—		35.5
Other – net	2.2		1.7		(0.3)
Rate change	(1.3)		(18.1)		—
Goodwill impairment	2.9		7.8		—
Federal R&D tax credit	(1.3)		(1.2)		(0.8)
Stock compensation	(2.4)		(1.5)		(0.7)
Effective income tax rate	10.9	%	3.7	%	6.1	%

Components of net deferred tax assets and liabilities

The following is a summary of the components of the net deferred tax assets and liabilities recognized in the Consolidated Balance Sheets:

	December 31,
(in millions)	2020		2019
Deferred tax assets:
Employee benefits	$	127	$	106
Accrued expenses	35		26
Loss and other tax credit carryforwards	270		240
Inventory	6		6
Lease Liabilities	64		57
Other	41		3
	543		438
Valuation allowance	(217)		(191)
Net deferred tax asset	$	326	$	247
Deferred tax liabilities:
Intangibles	$	138	$	160
Investment in foreign subsidiaries	5		7
Property, plant and equipment	77		78
Lease right-of-use assets	62		57
Other	30		29
Total deferred tax liabilities	$	312	$	331

Reconciliation of Deferred Tax Asset Valuation Allowance

A reconciliation of the change in valuation allowance on deferred tax assets is as follows:

(in millions)	2020		2019		2018
Valuation allowance — January 1	$	191	$	234	$	350
Change in assessment (a)	1		(2)		1
Current year operations	7		2		(271)
Foreign currency and other (b)	18		(43)		154
Valuation allowance — December 31	$	217	$	191	$	234

(a)    Increase in assessment in 2020 is primarily attributable to loss positions in various jurisdictions. Decrease in assessment in 2019 is primarily attributable to profitability of certain jurisdictions.

(b)    Included in foreign currency and other in 2019 is a decrease in net operating losses due primarily to the liquidation of a foreign subsidiary for which a valuation allowance was maintained. Included in foreign currency and other in 2018 is an increase in net operating losses due to amended prior year tax returns for which a valuation allowance was recorded.

Deferred taxes classification

Deferred taxes are classified in the Consolidated Balance Sheets as follows:

	December 31,
(in millions)	2020		2019
Non-current assets	$	256	$	226
Non-current liabilities	(242)		(310)
Total net deferred tax liabilities	$	14	$	(84)

Tax attributes available to reduce future taxable income

Tax attributes available to reduce future taxable income begin to expire as follows:

(in millions)	December 31, 2020		First Year of Expiration
U.S. net operating loss	$	7	December 31, 2024
State net operating loss	97		December 31, 2021
State excess interest expense	10		Indefinitely
State tax credits	1		Indefinitely
Foreign net operating loss	1,153		December 31, 2021
Foreign tax credits	4		December 31, 2030

Reconciliation of the beginning and ending amount of unrecognized tax benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

(in millions)	2020		2019		2018
Unrecognized tax benefits — January 1	$	129	$	136	$	130
Current year tax positions	—		3		—
Prior year tax positions	(3)		(5)		7
Settlements	(12)		(5)		(1)
Unrecognized tax benefits — December 31	$	114	$	129	$	136

Earliest open tax years by major jurisdiction

The following table summarizes our earliest open tax years by major jurisdiction:

Jurisdiction	Earliest Open Year
Italy	2014
Luxembourg	2016
Sweden	2013
Germany	2012
United Kingdom	2014
United States	2017
Switzerland	2017