Income Taxes

12 Months Ended

Dec. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Note 7. Income Taxes

The sources of income (loss) from continuing operations, before income taxes, classified between domestic entities and those entities domiciled outside of the U.S., are as follows:

	Year Ended December 31,
	2024		2023		2022
	(Dollars in millions)
Domestic entities	$	(65)	$	(94)	$	7
Entities outside the U.S.	408		441		489
	$	343	$	347	$	496

Tax expense (benefit)

Tax expense (benefit) consists of:

	Year Ended December 31,
	2024		2023		2022
	(Dollars in millions)
Current:
Federal	$	(3)	$	12	$	9
State	1		—		1
Foreign	56		50		50
	$	54	$	62	$	60
Deferred:
Federal	$	(9)	$	(14)	$	9
State	(1)		1		—
Foreign	17		37		37
	$	7	$	24	$	46
	$	61	$	86	$	106

The U.S. federal statutory income tax rate is reconciled to our effective income tax rate as follows:

	Year Ended December 31,
	2024		2023		2022
	(Dollars in millions)
U.S. federal statutory income tax rate	21.0	%	21.0	%	21.0	%
Taxes on non-U.S. earnings different from U.S. tax	(3.3)	%	(3.6)	%	(3.4)	%
Reserves for tax contingencies	(4.7)	%	0.2	%	(0.4)	%
Non-deductible and permanent items	—	%	—	%	0.7	%
Withholding and other taxes on foreign earnings	7.0	%	7.0	%	3.9	%
Tax law changes	0.1	%	(1.7)	%	0.1	%
Changes in valuation allowance	(4.9)	%	5.5	%	(0.6)	%
All other items	2.6	%	(3.6)	%	0.1	%
	17.8	%	24.8	%	21.4	%

The effective tax rate decreased by 7.0 percentage points in 2024 compared to 2023. The decrease was primarily due to releases of reserves due to statute of limitation expirations and settlements with taxing authorities and release of valuation allowance related to deferred tax assets in Brazil (net of US branch taxes). In addition, there was prior year expense due to rate change impact on deferred tax assets attributable to the certification by the Chinese government of the High and New Technology Enterprise status of the Company’s China operations, which reduced the tax rate to 15% for the respective entity. These increases were partially offset by prior year tax benefits in Switzerland due to law changes (net of valuation allowance) and in Korea for prior year tax settlements.

The effective tax rate increased by 3.4 percentage points in 2023 compared to 2022. The increase was primarily due to the rate change impact on deferred tax assets attributable to the certification by the Chinese government of the High and New Technology Enterprise status of the Company’s China operations, which reduced the tax rate to 15% for the respective entity. Further, withholding tax and other taxes on foreign earnings have comparatively increased due to one-time non-recurring benefit recorded in 2022 related to accrued taxes on distributable reserves. These increases were partially offset by 2023 tax benefits in Switzerland due to law changes (net of valuation allowance) and in Korea for prior year tax settlements.

Deferred tax assets (liabilities)

The tax effects of temporary differences and tax carryforwards which give rise to future income tax benefits and

payables are as follows:

	December 31,
	2024		2023
	(Dollars in millions)
Deferred tax assets:
Intangibles and fixed assets	$	112	$	139
Pension	—		4
Accruals and reserves	29		30
Net operating losses and other tax attribute carryforwards	34		35
Outside basis differences	29		13
Other	70		55
Total deferred tax assets	274		276
Valuation allowance	(29)		(52)
Net deferred tax assets	$	245	$	224
Deferred tax liabilities:
Outside basis differences	$	(18)	$	(9)
Other	(45)		(26)
Total deferred tax liabilities	(63)		(35)
Net deferred tax asset	$	182	$	189

As of December 31, 2024, the Company had foreign net operating loss carryforwards of approximately $67 million with the majority in the below jurisdictions:

Jurisdiction	Expiration Period	Net Operating Loss Carryforwards
		(Dollars in millions)
Brazil	Indefinite	$	42
Luxembourg	2038	14
China	2034	9
Other	Various	2
		$	67

We also have net operating loss carryforwards in certain US state jurisdictions, the tax effect of which is not significant.

We maintain a valuation allowance of $29 million against a portion of total deferred tax assets. In the event we determine that we will not be able to realize our net deferred tax assets in the future, we will reduce such amounts through an increase to tax expense in the period such determination is made. Conversely, if we determine that we will be able to realize net deferred tax assets in excess of the carrying amounts, we will decrease the recorded valuation allowance through a reduction to tax expense in the period that such determination is made. Our valuation allowance decreased $23 million from the prior period primarily attributable to a determination that we can ultimately benefit net deferred tax assets recorded in Brazil due to current and future forecasted earnings. Our balance sheet presents a deferred tax asset of $207 million and a deferred tax liability of $25 million after considering jurisdictional netting.

The Company does not intend to permanently reinvest the undistributed earnings of our foreign subsidiaries and have recorded a deferred tax liability, mainly consisting of withholding taxes, of approximately $18 million as of December 31, 2024. The company has historically considered a portion of its undistributed foreign earnings in China as permanently reinvested. In the fourth quarter of 2024 the Company changed this assertion and these earnings are no longer considered permanently reinvested.

The following table summarizes the activity related to the Company’s uncertain tax positions (excluding interest and penalties and related tax attributes):

	December 31,
	2024			2023		2022
	(Dollars in millions)
Change in unrecognized tax benefits:
Balance at beginning of year	$	66		$	71	$	80
Gross increases related to current period tax positions	5			3		4
Gross increases related to prior periods tax positions	2			—		5
Gross decreases related to prior periods tax positions	—			—		—
Decrease related to resolutions of audits with tax authorities	(6)			—		—
Expiration of the statute of limitations for the assessment of taxes	(17)		—	(8)		(14)
Foreign currency translation	(2)			—		(4)
Balance at end of year	$	48		$	66	$	71

As of December 31, 2024, 2023, and 2022 there were $48 million, $66 million, and $71 million, respectively, of unrecognized tax benefits that, if recognized, would be recorded as a component of tax expense. The amount of unrecognized tax benefits that is reasonably possible to be resolved in the next twelve months (inclusive of interest and penalties) is expected to be approximately $22 million, all of which, if recognized, would reduce tax expense and the effective tax rate.

Estimated interest and penalties related to uncertain tax benefits are classified as a component of tax expense in the Consolidated Statements of Operations and totaled $2 million of benefit, $5 million of expense, and $2 million of expense for the years ended December 31, 2024, 2023, and 2022, respectively. Accrued interest and penalties were $32 million, $34 million, and $29 million, as of December 31, 2024, 2023, and 2022, respectively.

We are currently under audit in multiple jurisdictions, primarily India for tax years 2021 through 2023 and U.S. for tax years 2018 through 2020. Based on the outcome of these examinations, or as a result of the expiration of statutes of limitations for specific jurisdictions, it is possible that certain unrecognized tax benefits for tax positions taken on previously filed tax returns will significantly change from those recorded as liabilities in our financial statements.