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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Earnings before taxes consists of the following:
Year Ended December 31,
(Dollars in millions)202420232022
Earnings before taxes
Domestic$236 $197 $531 
Foreign28 (5)(6)
Total
$264 $192 $525 
Income tax provision consists of the following:
Year Ended December 31,
(Dollars in millions)202420232022
Current:
Federal$15 $61 $93 
State11 14 24 
Foreign2 1 — 
Total current
28 76 117 
Deferred:
Federal16 (44)5 
State4 (7)(6)
Foreign3 (1)4 
Total deferred
23 (52)3 
Total
$51 $24 $120 
The reconciliation from the statutory federal income tax rate to our effective income tax rate follows:
Year Ended December 31,
202420232022
Statutory federal rate21.0 %21.0 %21.0 %
State rate, net of federal benefit4.2 %2.5 %2.8 %
Foreign rate differential(1.5)%0.1 %(0.3)%
Research & development credit, net of reserves(7.1)%(18.0)%(0.5)%
Excess tax benefits from share-based compensation(1.2)%(0.1)%— %
Nondeductible officer compensation1.2 %0.8 %0.3 %
Nondeductible expenses0.6 %0.2 %0.1 %
Global intangible low-taxed income2.1 %0.2 %0.2 %
Change in valuation allowance0.7 %1.0 %1.5 %
Change in tax reserves0.2 %1.1 %— %
Purchase tax credits(0.7)%— %— %
Divestiture impact— %4.7 %(1.9)%
Other(0.2)%(1.0)%(0.3)%
Effective tax rate19.3 %12.5 %22.9 %
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2024 and 2023 are as follows:
 December 31,
(Dollars in millions)20242023
Deferred tax assets:
Federal net operating loss$1 $3 
State net operating loss6 8 
Foreign net operating loss7 7 
Tax credit carryforwards19 13 
Lease liabilities44 54 
Capitalized R&D, net of amortization143 88 
Accrued compensation and benefits27 25 
Contract liabilities20 20 
Accrued expenses3 3 
Pension and post-retirement plans12 13 
Inventory capitalization8 8 
Disallowed interest— 1 
Other7 15 
Total gross deferred tax assets
297 258 
Less valuation allowance25 21 
Deferred tax assets272 237 
Deferred tax liabilities:
Right-of-use assets$(40)$(50)
Long-term contracts(55)— 
Intangible assets(39)(41)
Property, plant and equipment, net(23)(25)
Other(2)(2)
Deferred tax liabilities
(159)(118)
Net deferred tax asset
$113 $119 
As of December 31, 2024, and 2023 the Company had U.S. federal net operating loss carryforwards of $18 million and $22 million, respectively, which we anticipate we will be able to utilize prior to their expiration which commences in 2032. The annual utilization of our federal NOL is limited to approximately $3 million pursuant to Section 382 of the Tax Code. Our foreign net operating losses have expirations ranging from 2041 to indefinite. In 2024, we recorded an additional valuation allowance in Canada of $2 million. As of December 31, 2024 and 2023, we had apportioned state net operating loss carryforwards of $105 million and $145 million, respectively, which are associated with jurisdictions in which we currently file and the Company expects to utilize prior to expiration except for those for which we have recorded a valuation allowance. Our state net operating losses have expirations ranging from 2024 to 2041 and are offset by a valuation allowance of $2 million.
On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 (the “IRA”) which, among other items, allows a company to purchase transferable tax credits. During 2024, the Company purchased $25 million in tax credits for approximately $23 million in cash. These credits were used to offset the Company’s federal tax liability for 2023.
Cash paid for income taxes, net of refunds was $71 million, $45 million, and $89 million in 2024, 2023 and 2022, respectively.
Tax Uncertainties
The Company maintains reserves for uncertain tax positions related to unrecognized income tax benefits. These reserves involve considerable judgment and estimation and are evaluated by management at least quarterly based on the best information available. The Company’s total liability for unrecognized tax benefits as of December 31, 2024, 2023 and 2022 was approximately $48 million, $40 million and $24 million, respectively; all of which will impact the effective tax rate when recognized. Approximately $2 million, $2 million and $2 million as of December 31, 2024, 2023 and 2022, respectively, was recorded within (and as an offset to) deferred tax assets. In addition, the Company does not believe there are any tax positions for which it is reasonably possible that the unrecognized tax benefits will vary significantly over the next twelve months. The table below summarizes the activity associated with our unrecognized tax benefits:
(Dollars in millions)202420232022
Balance at January 1,
$40 $24 $22 
Increase related to prior year tax positions2 11 1 
Increase related to current year tax positions6 6 2 
Decreases related to prior year tax positions— (1)— 
Lapse of statute of limitations— — (1)
Balance at December 31,
$48 $40 $24 
The Company is subject to U.S. federal income tax as well as income tax of multiple state and foreign jurisdictions. The Company has substantially concluded all U.S. federal income tax matters for years through the tax year ended December 31, 2018 except as it relates to the net operating loss carryforward and tax credit carryforwards. Substantially all material state and local matters have been concluded for years through the tax year ended December 31, 2017. The Company has substantially concluded all material tax matters in foreign jurisdictions for years through the tax years ending 2017.
As of December 31, 2024, the Company has accumulated undistributed earnings generated by our foreign subsidiaries and most have been taxed in the U.S. as a result of the Tax Cuts and Jobs Act of 2017 (“TCJA”). The TCJA allows for a dividend received deduction for repatriation of foreign earnings. We intend to indefinitely reinvest these earnings. Should the Company’s undistributed earnings from its investment in non‐U.S. subsidiaries be distributed in the future in the form of dividends or otherwise, the Company may be subject to foreign and domestic income taxes and withholding taxes.