Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Tax Disclosure

16 – Income Taxes

We provide for income taxes based on the laws and rates in effect in the countries in which operations are conducted, or in which we or our subsidiaries are considered resident for income tax purposes. The relationship between our pre-tax income or loss and our income tax provision or benefit varies from period to period as a result of various factors which include changes in total pre-tax income or loss, the jurisdictions in which our income is earned, the tax laws in those jurisdictions and in our operating structure.

Our income tax provision consisted of the following:

	Year Ended December 31,
(Dollars in millions)	2023		2022		2021
Total Current Provision	$	(143)	$	(83)	$	(96)
Total Deferred (Provision) Benefit	86		(4)		10
Income Tax Provision	$	(57)	$	(87)	$	(86)

The difference between the Irish income tax provision and the consolidated income tax provision is analyzed below:

	Year Ended December 31,
(Dollars in millions)	2023		2022		2021
Irish Income Tax (Provision) Benefit Tax Rate of 25%	$	(126)	$	(35)	$	86
Tax Provision on Operating Earnings/Losses Subject to Rates Different than the Irish Income Tax Rate	52		(155)		(189)
Tax (Provision) Benefit on Swiss Loss from internal liquidation of subsidiary and internal restructuring	48		(141)		124
Decrease (Increase) in Valuation Allowance attributed to Swiss Loss and internal restructuring	(46)		141		(124)
Decrease (Increase) in Valuation Allowance on Operating Earnings/Losses	35		64		52
Change in Uncertain Tax Positions	(20)		39		(35)
Income Tax Provision	$	(57)	$	(87)	$	(86)

Our income tax provisions generally do not correlate to our consolidated income (loss) before tax. Our income tax provisions are primarily driven by profits in certain jurisdictions, deemed profit countries and withholding taxes on intercompany and third-party transactions that do not directly correlate to ordinary income or loss. Certain charges and impairments recognized do not result in significant tax benefit as a result of being attributed to a non-income tax jurisdiction or our inability to forecast realization of the tax benefit of such losses.

For the year ended December 31, 2023, income tax expense was lower by $93 million, due to the release of valuation allowances where deferred tax assets are now considered more likely than not to be realized in the future, and $22 million, due to the recognition of a benefit from previously uncertain tax positions throughout the year. Those benefits were offset by the establishment of valuation allowances of approximately $50 million against the loss on the sale of Blue Chip Swap securities and currency devaluation in Argentina (see Note 17 – Blue Chip Swap Securities - Argentina). During the year ended December 31, 2022, income tax expense was lower by $35 million, due to the release of valuation allowances and $27 million, due to the recognition of a benefit from previously uncertain tax positions.

Deferred tax assets and liabilities are recognized for the estimated future tax effects of temporary differences between the tax basis of an asset or liability and its reported amount in the Consolidated Financial Statements. The measurement of deferred tax assets and liabilities is based on enacted tax laws and rates currently in effect in each of the jurisdictions in which we have operations.

The components of the net deferred tax asset were as follows: 

	December 31,		December 31,
(Dollars in millions)	2023		2022
Deferred Tax Assets:
Net Operating Losses Carryforwards	$	715	$	751
Unused Recognized Built in Losses	46		43
Accrued Liabilities and Reserves	191		143
Tax Credit Carryforwards	10		11
Employee Benefits	38		29
Property, Plant and Equipment	145		158
Inventory	33		38
U.S. Interest Deferral	59		57
Tax Base Adjustment	59
State Deferred	62		50
Other Differences between Financial and Tax Basis	108		89
Valuation Allowance	(1,316)		(1,300)
Total Deferred Tax Assets	150		69
Deferred Tax Liabilities:
Intangible Assets	(18)		(28)
Total Deferred Tax Liabilities	(18)		(28)
Net Deferred Tax Asset	$	132	$	41

We record deferred tax assets for net operating losses and temporary differences between the book and tax basis of assets and liabilities that are expected to produce tax deductions in future periods. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income in the appropriate tax jurisdiction during the periods in which those deferred tax assets would be deductible. The Company assesses the realizability of its deferred tax assets each period by considering whether it is more likely than not that all or a portion of the deferred tax assets will not be realized. The Company considers all available evidence (both positive and negative) when determining whether a valuation allowance is required, with emphasis on our past operating results, the existence of cumulative losses in the most recent years and our forecast of near- term taxable income. The Company evaluates possible sources of taxable income that may be available to realize the benefit of deferred tax assets, including projected future taxable income, the reversal of existing temporary differences, taxable income in carryback years and available tax planning strategies, in making this assessment.

The valuation allowance increased by $16 million in 2023. Approximately $11 million of the increase was recorded to tax expense and was primarily attributable to the Argentina items discussed above and the Switzerland items discussed below, offset by the release of valuation allowance and the utilization of net operating losses previously not expected to be realized against operating earnings of $20 million. The remaining $5 million of the increase in the valuation allowance was attributable to foreign currency translation.

Deferred income taxes generally have not been recognized on the cumulative undistributed earnings of our non-Irish subsidiaries because they are considered to be indefinitely reinvested. Distribution of these earnings in the form of dividends or otherwise may result in a combination of income and withholding taxes payable in various countries. As of December 31, 2023, the pool of positive undistributed earnings of our non-Irish subsidiaries that are considered indefinitely reinvested and may be subject to tax, if distributed, amounts to approximately $1.4 billion. Due to complexities in the tax laws and the manner of repatriation, it is not practicable to estimate the unrecognized amount of deferred income taxes and the related dividend withholding taxes associated with these undistributed earnings.

At December 31, 2023, we had approximately $3.6 billion of net operating losses (“NOLs”) in various jurisdictions. Our non-indefinite loss carryforwards, if not utilized, will mostly expire for U.S. subsidiaries from 2030 through 2037 and at various dates from 2024 through 2043 for non-U.S. subsidiaries.

Upon emergence from bankruptcy in December 2019, our U.S. subsidiaries experienced an ownership change as the Company’s emergence was considered an “ownership change” for purposes of Internal Revenue Code section 382. The Internal Revenue Code sections 382 and 383 impose limitations on the ability of a company to utilize tax attributes after experiencing an “ownership change.” As a result, we estimated our annual limitation is approximately $23 million against the utilization of our U.S. loss carryforwards and other tax attributes, including unused recognized built-in losses and U.S. interest deferral. Upon emergence, we estimated that the maximum U.S. NOLs available for utilization in the future was $713 million as of December 31, 2019.

In 2021, we executed a liquidation transaction of one of our Swiss holding companies which resulted in the forfeiture of impairment losses of $1.3 billion generated in 2020. In addition, the liquidation transaction resulted in approximately $5.6 billion of tax losses (NOLs) in Switzerland of which $3.4 billion was deemed worthless and excluded from the deferred tax table, and $2.2 billion was recorded as an NOL and included in the table as management expects to utilize those NOLs on our future tax returns. However, in addition to recording a deferred tax asset of $303 million related to the $2.2 billion tax losses, we recorded a valuation allowance against the full $303 million because it will offset future income that is otherwise exempt from tax. In 2023, we recognized a deferred tax asset of $59 million relating to a final agreement with the taxing authorities in relation to an adjustment in tax base beginning of 2021, and we recorded a $57 million valuation allowance against the deferred tax asset as it is more likely than not that a majority of it will not be realized.

A tabular reconciliation of the total amounts of uncertain tax positions at the beginning and end of the period is as follows:

	Year Ended December 31,
(Dollars in millions)	2023		2022		2021
Balance at Beginning of Year	$	191	$	235	$	222
Additions as a Result of Tax Positions Taken During a Prior Period	9		14		23
Reductions as a Result of Tax Positions Taken During a Prior Period	(12)		(15)		(8)
Additions as a Result of Tax Positions Taken During the Current Period	19		11		12
Reductions Relating to Settlements with Taxing Authorities	(3)		(36)		(5)
Reductions as a Result of a Lapse of the Applicable Statute of Limitations	(6)		(11)		(2)
Foreign Exchange Effects	5		(7)		(7)
Balance at End of Year	$	203	$	191	$	235

Substantially all of the uncertain tax positions, if released in future periods, would impact our effective tax rate. Within the total balance is $37 million and $38 million as of December 31, 2023, and 2022, respectively, that would be offset by net operating losses and other tax attributes if settled. Our income tax provision includes penalties and interest expense (benefit) on uncertain tax positions of $12 million, $(2) million and $17 million for years ended December 31, 2023, 2022, and 2021, respectively. The expense of $12 million in 2023 includes $(11) million of interest and penalty release related to benefit from previously uncertain tax positions. The amounts in the table above exclude cumulative accrued interest and penalties of $115 million and $98 million at December 31, 2023 and 2022 respectively, which are included in other non-current liabilities.

We are subject to income tax in many of the approximately 75 countries where we operate. As of December 31, 2023, the following table summarizes the tax years that remain subject to examination for the major jurisdictions in which we operate: 

Tax Jurisdiction	Tax Years under Examination
Argentina	2013 - 2023
Canada	2015 - 2023
Mexico	2013 - 2023
Russia	2020 - 2023
Saudi Arabia	2019 - 2023
Switzerland	2019 - 2023
United States (Federal)	2020 - 2023

We are continuously under tax examination in various jurisdictions and cannot predict the timing or outcome regarding the resolutions or if they will have a material impact on our financial statements. As of December 31, 2023, we anticipate that it is reasonably possible that the amount of uncertain tax positions may decrease by up to $13 million in the next twelve months due to expiration of statutes of limitations, settlements and/or conclusions of tax examinations.