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INCOME TAXES
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The Company is subject to income taxes in the U.S. (both federal and state) and in numerous foreign jurisdictions. Changes in the tax laws or regulations in these jurisdictions, or in positions by the relevant authorities regarding their application, administration, or interpretation, may affect our tax liability, return on investments, and business operations.

The Tax Cuts and Jobs Act imposes tax on U.S. shareholders for global intangible low-taxed income (“GILTI”) earned by certain non-U.S. subsidiaries. The Company has elected to account for GILTI as a period cost.

Income Before Income Taxes
For the years ended December 31
202320222021
U.S. income
$816 $1,090 $1,587 
Non-U.S. income
1,545 1,422 1,288 
Total
$2,361 $2,512 $2,875 

Provision for Income Taxes
For the years ended December 31
202320222021
Current
U.S. Federal$171 $396 $141 
Non – U.S.345 324 422 
U.S. State
42 97 55 
Deferred
U.S. Federal— (213)82 
Non – U.S.103 7 (101)
U.S. State82 (48)1 
Total$743 $563 $600 

Reconciliation of U.S. Federal Statutory Income Tax Rate to Actual Income Tax Rate
For the years ended December 31
202320222021
Income before taxes
$2,361 $2,512 $2,875 
Tax expected at 21%
496 528 604 
Foreign operations
63 43 (54)
Withholding taxes
28 4 11 
U.S. tax on foreign operations
(35)(36)(23)
Uncertain tax positions
11 6 11 
R&D benefits
(33)(33)(32)
State taxes, net of federal benefit
24 39 45 
Valuation allowance
19 8 33 
Spin-Off and separation costs
184 — — 
Other
(14)4 5 
Provision for income taxes
$743 $563 $600 
Actual income tax rate
31.5%22.4%20.9%

UNRECOGNIZED TAX BENEFITS.

The Company is subject to periodic tax audits by tax authorities in the U.S. (both federal and state) and the numerous countries in which we operate. In 2021, the Company settled with tax authorities in certain foreign jurisdictions. While the Company currently is being audited in a number of jurisdictions for tax years 2004-2022, including China, Germany, Norway, the United Kingdom, and the United States, we believe that there are no jurisdictions in which the ultimate outcome of unresolved issues or claims is likely to be material to the results of operations, financial position, or cash flows. We believe that we have made adequate provisions for all unrecognized tax benefits.
UNRECOGNIZED TAX BENEFITS RECONCILIATION.

The balance of unrecognized tax benefits, the amount of related interest and penalties, and what we believe to be the range of reasonably possible changes in the next 12 months are as follows.

202320222021
Balance at beginning of period
$465 $365 $684 
Additions for tax positions of the current year
— 9 9 
Additions for tax positions of prior years
156 137 14 
Reductions for tax positions of prior years
(203)(41)(78)
Settlements with tax authorities
(6)(1)(262)
Expiration of the statute of limitations
(3)(4)(2)
Balance at end of period
$409 $465 $365 

During the year ended December 31, 2023, $134 million of unrecognized tax benefits were contributed to the Company by GE as a part of the opening balance sheet adjustments, and are included in the Additions for tax positions of the prior years line in the table above. Also during the year ended December 31, 2023, a matter was closed with local tax authorities which resulted in the reversal of a net operating loss deferred tax asset and the related $183 million unrecognized tax benefit, which is included in the Reductions for tax positions of prior years line above. During the year ended December 31, 2022, $132 million of unrecognized tax benefits were contributed to the Company by GE, which are included in the Combined Statement of Financial Position as of December 31, 2022, and are included in the Additions for tax positions of prior years line in the table above.

Unrecognized Tax Benefits
For the years ended December 31
202320222021
Unrecognized tax benefits
$409 $465 $365 
Accrued interest on unrecognized tax benefits
72 56 53 
Reasonably possible reduction to the balance of unrecognized tax benefits in succeeding 12 months
29 45 36 
Portion that, if recognized, would reduce tax expense and effective tax rate
157 153 111 

In the first quarter of 2023, the Company changed its accounting policy for presentation of interest expense on uncertain tax positions from within Interest and other financial charges – net to within Benefit (provision) for income taxes. See Note 2, “Summary of Significant Accounting Policies” for further information. For the year ended December 31, 2023, $12 million of interest expense on uncertain tax positions was recorded in Benefit (provision) for income taxes and for the years ended December 31, 2022, and 2021, $12 million and $9 million of interest expense on uncertain tax positions were recorded in Interest and other financial charges – net, respectively, in the Consolidated and Combined Statements of Income. For the year ended December 31, 2023, $6 million of income tax penalties was recorded in (Benefit) provision for income taxes in the Consolidated Statement of Income. No accrual for penalties was made in the years ended December 31, 2022 or 2021.

DEFERRED INCOME TAXES.

We regularly evaluate the recoverability of our deferred tax assets and establish a valuation allowance, if necessary, to reduce the deferred tax assets to an amount that is more likely than not to be realized (a likelihood of more than 50%). Significant judgment is required in determining whether a valuation allowance is necessary and the amount of such valuation allowance. In assessing the recoverability of our deferred tax assets at December 31, 2023, we considered all available evidence, including the nature of financial statement losses, reversing taxable temporary differences, estimated future operating profits, and tax planning actions and strategies.

Deferred Income Taxes
As of
December 31, 2023December 31, 2022
Total assets
$4,474 $1,550 
Total liabilities
(68)(370)
Net deferred income tax asset (liability)
$4,406 $1,180 
Components of the Net Deferred Income Tax Asset (Liability)
As of
December 31, 2023December 31, 2022
Deferred tax assets:
Employee benefits
$1,418 $222 
Contract liabilities
171 193 
Inventories
95 84 
Operating loss carryforwards
648 176 
Other accrued expenses
68 70 
Receivables
45 42 
Lease liabilities
75 57 
Tax credit carryforwards
59 128 
Contract assets
79 99 
U.S. interest restriction carryforwards
61 — 
Goodwill and other intangible assets
1,461 — 
Property, plant, and equipment
261 338 
Capitalized R&D
547 554 
Other
8 — 
Total deferred income tax asset
4,996 1,963 
Valuation allowances
(540)(272)
Total deferred income tax asset after valuation allowance
4,456 1,691 
Deferred tax liabilities:
Goodwill and other intangible assets
— (458)
ROU assets
(50)(47)
Other
— (6)
Total deferred income tax liability
(50)(511)
Net deferred income tax asset (liability)
$4,406 $1,180 

Effective January 1, 2022, U.S. taxpayers are required to capitalize certain R&D expenses and amortize them over five or fifteen years pursuant to the Internal Revenue Code of 1986, as amended. This provision increased our taxable income for the years ended December 31, 2023 and 2022, and resulted in additional cash payments for U.S. federal and state income taxes. A deferred tax asset on 2023 R&D expenses was recorded related to this provision with a balance of $267 million as of December 31, 2023. A deferred tax asset on 2022 R&D expenses was recorded related to this provision with a balance of $197 million and $293 million as of December 31, 2023 and 2022, respectively. In the event the capitalization of research costs is adjusted through retroactive legislation effective for 2022, the Company expects to record a reduction to the 2022 deferred tax asset resulting in a charge to tax expense under the Tax Matters Agreement with GE.

In connection with the Spin-Off, certain deferred income taxes were contributed to the Company by GE. During 2022, a net deferred income tax asset of $80 million was contributed to the Company by GE and are recognized within Deferred income taxes in the Combined Statement of Financial Position as of December 31, 2022.

Also, in connection with the Spin-Off, our net deferred income tax assets increased by $3,099 million primarily due to transfers from GE, including $964 million related to pension and postretirement benefits, with the remainder primarily attributable to tax attributes that were not part of the Company’s stand-alone operations, and changes to valuation on a GE HealthCare basis.
Valuation allowances primarily relate to non-U.S. deferred taxes where there were historical losses and U.S. federal and state credit carryforwards. Activity in the valuation allowance for the years ended December 31, 2023, 2022, and 2021 consists of the following:

Valuation Allowances
Balance at December 31, 2020
$250 
Provision for income taxes39 
Foreign currency exchange and other(10)
Balance at December 31, 2021
$279 
Provision for income taxes(5)
Foreign currency exchange and other(2)
Balance at December 31, 2022
$272 
Provision for income taxes(12)
Foreign currency exchange and other280 
Balance at December 31, 2023
$540 

As a result of the Spin-Off, there was an increase in the valuation allowance of $269 million, which is included in the Foreign currency exchange and other line of the table above.

NET OPERATING LOSSES.

As a result of the Spin-Off, there was an increase in the net operating loss deferred tax asset of $1,075 million. As of December 31, 2023, the Company had net operating loss carryforwards of $6,526 million primarily related to France, Ireland, Brazil, Germany, and the Netherlands, which can be carried forward indefinitely. The gross net operating loss carryforwards resulted in a deferred tax asset of $1,241 million as of December 31, 2023. This amount excludes accruals of $149 million for unrecognized tax benefits the Company has recorded related to the underlying tax positions which generated the net operating losses and expected impacts to U.S. foreign tax credits of $444 million.

UNDISTRIBUTED EARNINGS.

Post Spin-Off, the Company’s previously undistributed earnings of certain of our foreign subsidiaries are no longer indefinitely reinvested in non-U.S. businesses due to current U.S. funding needs. Therefore, in 2023, an incremental deferred tax liability of $21 million was recorded for withholding and other foreign taxes due upon future distribution of earnings. In addition, the Company is providing for withholding and other foreign taxes due upon future distribution of current period earnings. However, the Company generally considers instances of outside basis differences in foreign subsidiaries that would incur additional U.S. tax upon an unforeseen future reversal (e.g., capital gain distribution or disposition to an unrelated third party) of approximately $7,729 million to be permanent in duration. Quantification of the deferred tax liability, if any, associated with indefinitely reinvested basis differences is not practicable.