INCOME TAXES

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Income before income taxes and non-controlling interests was as follows:

	Year Ended December 31,
(dollars in millions)	2023		2022		2021
Domestic	$	2.6	$	125.0	$	92.0
Foreign	126.5		147.0		159.7
Total	$	129.1	$	272.0	$	251.7

Income tax expense consisted of the following:

	Year Ended December 31,
(dollars in millions)	2023		2022		2021
Current:
U.S.:
Federal	$	7.9	$	0.6	$	(3.9)
State and local	2.7		1.8		2.9
Foreign	72.3		68.3		96.0
Total current	82.9		70.7		95.0
Deferred:
U.S.:
Federal	(57.2)		17.5		(1.8)
State and local	(0.6)		8.3		(30.3)
Foreign	(12.1)		(10.7)		(14.6)
Total deferred	(69.9)		15.1		(46.7)
Income tax expense	$	13.0	$	85.8	$	48.3

Income tax expense differed from the amounts computed by applying the U.S. federal statutory tax rate to pre-tax income, as a result of the following:

	Year Ended December 31,
(dollars in millions)	2023			2022			2021
U.S. federal statutory tax rate	21		%	21		%	21		%
Taxes computed at U.S. statutory rate	$	27.1		$	57.1		$	52.9
State income taxes, net of federal benefit	1.8			4.6			5.7
U.S. tax on foreign operations	1.8			3.2			3.9
Foreign derived intangible income deduction	(10.8)			—			—
Foreign tax credits	(8.2)			—			—
Foreign tax on foreign operations	13.0			13.0			17.0
Change in valuation allowances	(0.1)			6.4			(63.6)
Tax on undistributed foreign earnings	5.1			5.9			4.7
Changes in uncertain tax positions	1.9			0.2			29.4
Non-deductible goodwill impairment and Kuprion Acquisition research and development charge	20.6			—			—
One-time impact of amended U.S. tax returns	(37.3)			—			—
Other, net	(1.9)			(4.6)			(1.7)
Income tax expense	$	13.0		$	85.8		$	48.3
Effective tax rate	10		%	32		%	19		%

The income tax expense of $13.0 million for the year ended December 31, 2023 includes a one-time benefit of $34.2 million related to changing an election to credit foreign taxes from our previous position which was to deduct foreign taxes. This is comprised of a $37.3 million one-time impact of our intention to amend prior U.S. tax returns offset by $3.1 million from the net increase of valuation allowances on foreign tax credit carryforwards. In addition, the election to credit foreign taxes for the 2023 fiscal year results in an incremental $8.2 million of tax expense reduction.

The rate for 2023 also includes an increase for non-deductible GAAP expenses related to a goodwill impairment charge of $80.0 million recognized in the third quarter of 2023 (see Note 7, Goodwill and Intangible Assets, to the Consolidated Financial Statements for further information), as well as $15.7 million of research and development expenses related to the Kuprion transaction (see Note 4, Acquisitions, to the Consolidated Financial Statements for further information). Other activity in the 2023 tax rate includes a benefit from a U.S. tax deduction related to Foreign Derived Intangible Income ("FDII"), offset by current and deferred taxes based on jurisdictional mix of earnings and withholding taxes.

The income tax expense of $85.8 million for the year ended December 31, 2022 includes current and deferred taxes based on jurisdictional earnings, withholding taxes, and the impact of GILTI and subpart F income regimes.

The income tax expense of $48.3 million for the year ended December 31, 2021 included the impact of a $29.4 million increase to the Company's provision for uncertain tax positions, partially offset by a $63.6 million benefit associated with the release of valuation allowances. The release of valuation allowances related to amounts previously recorded against certain U.S. tax attribute carryforwards, which primarily corresponded to certain state net operating losses and interest. The valuation allowances were released as the Company expects improved profitability in its domestic business and a shift to a three-year cumulative income position

The components of deferred income taxes at December 31, 2023 and 2022 were as follows:

	December 31,
(dollars in millions)	2023		2022
Deferred tax assets:
Net operating losses	$	87.8	$	98.5
Interest carryforward	81.4		39.4
Capital loss carryforward	53.5		54.2
Tax credits	64.6		32.2
Employee benefits	17.9		18.1
Research and development costs	33.2		28.0
Accrued liabilities	6.4		6.3
Other	40.0		49.6
Total gross deferred tax assets	384.8		326.3
Valuation allowances	(143.6)		(153.2)
Total deferred tax assets	241.2		173.1
Deferred tax liabilities:
Intangible assets	154.5		175.6
Property, plant and equipment	33.2		28.1
Undistributed foreign earnings	32.3		28.2
Goodwill	9.6		10.9
Total deferred tax liabilities	229.6		242.8
Net deferred tax asset (liability)	$	11.6	$	(69.7)

The Company provides for income and withholding taxes on previously unremitted earnings of foreign subsidiaries. At December 31, 2023, the Company had accrued a deferred tax liability of $32.3 million of income and withholding taxes that would be due upon the distribution of such earnings from non-U.S. subsidiaries to the U.S.

During 2022, the Company’s plans and expectations around the use of cash in subsidiaries and indefinitely reinvested amounts changed and, as a result, the prior assertion was modified and the Company is no longer asserting any of its available foreign earnings are permanently reinvested.

At December 31, 2023, the Company had federal, state and foreign net operating loss carryforwards of approximately $0.9 million, $540.0 million and $243.7 million, respectively. The U.S. federal net operating loss carryforwards expire between 2027 and 2037 or may be carried forward indefinitely. The majority of the state net operating loss carryforwards expire between 2024 and 2039. The foreign tax net operating loss carryforwards expire between 2024 through 2037 or may be carried forward indefinitely. In addition, at December 31, 2023, the Company had capital loss carryforwards, foreign tax credits, and other tax credits of approximately $226 million, $51.7 million and $6.8 million, respectively, available for carryforward. The capital loss carryforwards expire at the end of 2024. The carryforward periods of the remaining tax credits range from ten years to an unlimited period of time. If certain changes in the Company's ownership occur, there could be an annual limitation on the amount of utilizable carryforwards.

Uncertain Tax Positions

The following table summarizes the activity related to the Company’s unrecognized tax benefits:

	Year Ended December 31,
(dollars in millions)	2023		2022		2021
Unrecognized tax benefits at beginning of period	$	99.8	$	106.6	$	82.5
Additions based upon prior year tax positions	19.6		1.0		22.9
Additions based on current year tax positions	9.6		5.3		8.1
Reductions for prior period positions	(15.1)		(5.7)		(4.9)
Reductions for settlements and payments	(1.6)		(1.7)		(0.1)
Reductions due to closed statutes	(1.3)		(1.9)		(1.0)
Currency translation adjustment	0.6		(3.8)		(0.9)
Total unrecognized tax benefits at end of period	$	111.6	$	99.8	$	106.6

At December 31, 2023, the Company had $112 million of total unrecognized tax benefits, all of which, if recognized, would impact the Company’s effective tax rate. Due to expected settlements and statute of limitations expirations, the Company estimates that $11.2 million of the total unrecognized benefits will reverse within the next twelve months.

The Company recognizes interest and/or penalties related to income tax matters as part of income tax expense, which totaled $3.7 million, $1.1 million and $2.5 million, for 2023, 2022 and 2021, respectively. The Company's liability for interest and penalties totaled $13.0 million and $10.7 million at December 31, 2023 and 2022, respectively.

At December 31, 2023, the following tax years remained subject to examination by the major tax jurisdictions indicated below:

Major Jurisdictions	Open Years
China	2018	through current
Germany	2018	through current
Taiwan	2018, 2022	through current
United Kingdom	2008, 2021	through current
United States	2020	through current

The Company is currently undergoing tax examinations in several jurisdictions. Although the Company believes it has appropriately accrued for the expected outcome of uncertain tax matters and made reasonable provisions for taxes ultimately expected to be paid, tax liabilities may need to be adjusted as tax examinations continue to progress.