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Tax Matters (Tables)
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Schedule of Income before Income Tax, Domestic and Foreign The components of Income before provision for taxes on income follow:
Year Ended December 31,
(MILLIONS OF DOLLARS)202220212020
United States$1,645 $1,308 $1,109 
International1,011 1,180 887 
Income before provision for taxes on income
$2,656 $2,488 $1,996 
Schedule Of Components Of Provision For Income Taxes The components of Provision for taxes on income based on the location of the taxing authorities follow:
Year Ended December 31,
(MILLIONS OF DOLLARS)202220212020
United States:
Current income taxes:
Federal$514 $311 $232 
State and local81 35 36 
Deferred income taxes:
Federal(198)(84)(29)
State and local(49)(10)(14)
Total U.S. tax provision
348 252 225 
International:
Current income taxes235 188 154 
Deferred income taxes(38)14 (19)
Total international tax provision197 202 135 
Provision for taxes on income$545 $454 $360 
Schedule of Effective Income Tax Rate Reconciliation
The reconciliation of the U.S. statutory income tax rate to our effective tax rate follows:
Year Ended December 31,
202220212020
U.S. statutory income tax rate21 %21 %21 %
State and local taxes, net of federal benefits
0.9 0.8 0.9 
Unrecognized tax benefits and tax settlements and resolution of certain tax positions(a)
0.1 0.1 0.1 
Foreign Derived Intangible Income(0.2)(1.1)— 
U.S. Research and Development Tax Credit (0.7)(0.6)(0.7)
Share-based payments(0.6)(0.9)(1.3)
Non-deductible / non-taxable items
0.1 0.3 0.4 
Taxation of non-U.S. operations(0.4)(1.3)(1.6)
All other—net0.3 (0.1)(0.8)
Effective tax rate 20.5 %18.2 %18.0 %
(a)    For a discussion about unrecognized tax benefits and tax settlements and resolution of certain tax positions, see D. Tax Contingencies.
Our effective income tax rate was 20.5%, 18.2% and 18.0% in 2022, 2021 and 2020, respectively.
The higher effective tax rate for 2022, compared with 2021, was attributable to a less favorable jurisdictional mix of earnings (which includes the impact of the location of earnings and repatriation costs), a lower benefit in the U.S. related to foreign-derived intangible income and lower net discrete tax benefits in 2022. Jurisdictional mix of earnings can vary depending on repatriation decisions, operating fluctuations in the normal course of business and the impact of non-deductible and non-taxable items.
The higher effective tax rate for 2021, compared with 2020, was primarily attributable to changes in the jurisdictional mix of earnings, which includes the impact of the location of earnings, repatriation costs, operating fluctuations in the normal course of business and the impact of non-deductible and non-taxable items, as well as higher net discrete tax benefits in 2020, partially offset by a benefit in the U.S. related to foreign-derived intangible income in 2021.
In 2022, the company implemented an initiative to maximize its cash position in the U.S. This initiative resulted in a tax benefit in the U.S. in connection with a prepayment from a related foreign entity in Belgium which qualifies as foreign-derived intangible income; however, this income tax benefit has been deferred for 2022 and will be recognized in future periods. This deferred benefit is included in Other current assets on our Consolidated Balance Sheets as of December 31, 2022 in the amount of $38 million.
On August 16, 2022, the U.S. Inflation Reduction Act of 2022 (the “IRA”) was enacted which, among other changes, implements a 15% alternative minimum tax on financial statement income of certain large corporations, a 1% excise tax on net stock repurchases and several tax incentives to promote clean energy. The alternative minimum tax and excise tax are effective for taxable years beginning after December 31, 2022 and the incentives to promote clean energy have various different effective dates. We do not currently expect the IRA to have a material impact on our financial results, including our annual estimated effective tax rate.
Schedule of Deferred Tax Assets and Liabilities
The components of our deferred tax assets and liabilities follow:
As of December 31,
20222021
(MILLIONS OF DOLLARS)
Assets (Liabilities)
Prepaid/deferred items$192 $109 
Inventories22 10 
Capitalized R&D for tax111 — 
Identifiable intangible assets(154)(187)
Property, plant and equipment(204)(183)
Employee benefits61 58 
Restructuring and other charges1 3 
Legal and product liability reserves14 14 
Net operating loss/credit carryforwards112 132 
Unremitted earnings(4)(7)
All other9 5 
Subtotal160 (46)
Valuation allowance(129)(174)
Net deferred tax asset/(liability)(a)(b)
$31 $(220)
(a)    The change in the total net deferred tax asset/(liability) from December 31, 2021 to December 31, 2022 is primarily attributable to an increase in deferred tax assets related to prepaid/deferred items as a result of a prepayment from a related foreign entity in Belgium and an increase in deferred tax assets related to the capitalization and amortization of research & development costs for U.S. tax purposes.
(b)    In 2022, included in Noncurrent deferred tax assets ($173 million) and Noncurrent deferred tax liabilities ($142 million). In 2021, included in Noncurrent deferred tax assets ($100 million) and Noncurrent deferred tax liabilities ($320 million).
Schedule of Unrecognized Tax Benefits Roll Forward
The reconciliation of the beginning and ending amounts of gross unrecognized tax benefits follows:
(MILLIONS OF DOLLARS)202220212020
Balance, January 1$(189)$(188)$(182)
Increases based on tax positions taken during a prior period(a)
(20)(1)(6)
Decreases based on tax positions taken during a prior period(a)
9 7 6 
Increases based on tax positions taken during the current period(a)
(4)(9)(9)
Settlements7 — — 
Lapse in statute of limitations(a)
3 2 3 
Balance, December 31(b)
$(194)$(189)$(188)
(a)    Primarily included in Provision for taxes on income.
(b)    In 2022, included in Noncurrent deferred tax assets and Other noncurrent assets ($2 million) and Other taxes payable ($192 million). In 2021, included in Noncurrent deferred tax assets and Other noncurrent assets ($1 million) and Other taxes payable ($188 million). In 2020, included in Noncurrent deferred tax assets and Other noncurrent assets ($1 million) and Other taxes payable ($187 million).