INCOME TAXES

9 Months Ended

Sep. 30, 2024

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Our effective income tax rate was 25.5% and 39.3% for the three months ended September 30, 2024 and 2023, respectively, and 24.9% and 31.4% for the nine months ended September 30, 2024 and 2023, respectively. The tax rate for the three and nine months ended September 30, 2024 is higher than the U.S. statutory rate primarily due to the tax cost of global activities, reconciling adjustments to recorded tax account balances associated with the Spin-Off, withholding taxes, and state taxes, partially offset by research and development benefits.

The effective tax rate for 2023 is higher than the U.S. statutory rate primarily due to the tax cost of global activities, including the U.S. taxation on international operations, tax effect of foreign currency movement, withholding taxes, and state taxes. Benefit (provision) for income taxes for the three and nine months ended September 30, 2023 included $105 million of deferred tax provision associated with the Tax Matters Agreement (“TMA”) with GE including the effect of completing the 2022 GE U.S. federal tax return. In addition, Other (income) expense – net for the three and nine months ended September 30, 2023 included a $30 million benefit related to changes in tax indemnities with GE also associated with the TMA and the effect of completing the 2022 GE U.S. federal tax return.

Post Spin-Off, the Company’s previously undistributed earnings of our foreign subsidiaries are no longer indefinitely reinvested in non-U.S. businesses due to current U.S. funding needs. Therefore, in the first quarter of 2023, an incremental deferred tax liability of $30 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.

The Company is currently being audited in a number of jurisdictions for tax years 2004-2022, including China, Germany, Norway, the United Kingdom, and the United States.