Note 6 - Income Taxes

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Income Tax Disclosure [Text Block]

6.  Income Taxes

The following table presents the components of income before income taxes (in millions):

	Year ended December 31,
	2023		2022		2021
U.S. companies	$	105	$	1,157	$	1,282
Non-U.S. companies		711		640		1,144
Income before income taxes	$	816	$	1,797	$	2,426

The following table presents the current and deferred amounts of the provision for income taxes (in millions):

	Year ended December 31,
	2023			2022			2021
Current:
Federal	$	(82	)	$	(191	)	$	(172	)
State and municipal		(13	)		(16	)		(13	)
Foreign		(148	)		(250	)		(290	)
Deferred:
Federal		76			52			(97	)
State and municipal		7			8			(7	)
Foreign		(8	)		(14	)		88
Provision for income taxes	$	(168	)	$	(411	)	$	(491	)

Amounts reflected in the preceding tables are based on the location of the taxing authorities.

6.  Income Taxes (Continued)

The following table presents the reconciliation of the statutory U.S. federal income tax rate to the effective tax rate:

	Year ended December 31,
	2023			2022			2021
Statutory U.S. federal income tax rate		21.0	%		21.0	%		21.0	%
State income tax (benefit) provision, net of federal effect		(0.3	)		0.7			1.0
Tax credits		(6.9	)		(3.3	)		(2.6	)
Non-Taxable Items		(4.0	)
Foreign derived intangible income		(2.3	)		(2.7	)		(1.3	)
Stock compensation		(2.1	)		(0.8	)		(1.5	)
Remeasurement of deferred tax assets and liabilities		(0.3	)		(0.1	)
Differential arising from foreign earnings (1)		0.3			2.2			2.0
Non-deductible Items		4.7						1.4
Audit settlements & change in reserve		4.8			3.7			1.6
Valuation allowance		5.7			2.1			(0.5	)
Intercompany loan adjustment					0.6
Global intangible low-taxed income								0.2
Other items, net					(0.5	)		(1.1	)
Effective tax rate	20.6		%		22.9	%		20.2	%

(1) Includes impact of intercompany asset sales.

During the year ended December 31, 2023, the Company distributed an immaterial amount from foreign subsidiaries to their respective U.S. parent companies.  As of December 31, 2023, Corning has approximately $1.4 billion of indefinitely reinvested foreign earnings. It remains impracticable to calculate the tax cost of repatriating unremitted earnings which are considered indefinitely reinvested.

The following table presents the tax effects of temporary differences and carryforwards that gave rise to significant portions of the deferred tax assets and liabilities (in millions):

	December 31,
	2023			2022
Loss and tax credit carryforwards	$	275		$	281
Other assets		245			232
Research and development capitalization		362			280
Asset impairments and restructuring reserves		43			41
Postretirement medical and life benefits		103			102
Other accrued liabilities		319			311
Other employee benefits		344			346
Gross deferred tax assets		1,691			1,593
Valuation allowances		(207	)		(166	)
Total deferred tax assets		1,484			1,427
Intangible and other assets		(117	)		(108	)
Fixed assets		(223	)		(289	)
Finance leases		(209	)		(200	)
Total deferred tax liabilities		(549	)		(597	)
Net deferred tax assets	$	935		$	830

(1) The Company also has Luxembourg deferred tax asset net operating losses of up to $3.1 billion that have a remote possibility of realization and therefore, are not recognized in the deferred tax table above.

6.  Income Taxes (Continued)

Net deferred tax assets on the consolidated balance sheets consisted of the following (in millions):

	December 31,
	2023			2022
Deferred tax assets	$	1,153		$	1,073
Other liabilities		(218	)		(243	)
Net deferred tax assets	$	935		$	830

The following table presents details of the deferred tax assets for loss and tax credit carryforwards (in millions):

			Expiration
	Total		2024-2028		2029-2033		2034-2038		Indefinite
Net operating losses	$	274	$	63	$	38	$	33	$	140
Tax credits		1				1
Balance as of December 31, 2023	$	275	$	63	$	39	$	33	$	140

The following table presents the changes in the deferred tax valuation allowance (in millions):

	2023			2022			2021
Balance as of January 1	$	166		$	138		$	167
Additions		66			81			13
Reductions		(25	)		(53	)		(42	)
Balance as of December 31	$	207		$	166		$	138

The following table presents the reconciliation of the beginning and ending amount of unrecognized tax benefits (in millions):

	2023			2022			2021
Balance as of January 1	$	206		$	178		$	131
Additions based on tax positions related to the current year		54			10			54
Additions for tax positions of prior years		127			24			17
Reductions for tax positions of prior years		(3	)		(5	)		(21	)
Settlements and lapse of statute of limitations		(11	)		(1	)		(3	)
Balance as of December 31	$	373		$	206		$	178

During 2020, the Internal Revenue Service (“IRS”) opened an audit for tax years 2015-2018.  In addition, during 2023, the IRS opened an audit for tax years 2019-2020.  The Company does not expect additional material exposure for the tax years under audit. However, if upon conclusion of these matters, the ultimate determination of taxes owed is for an amount materially different than the current position, the overall tax expense and effective tax rate could be materially impacted in the period of adjustment.

The additions for tax positions of prior years were primarily due to tax audits, development of tax court cases and tax law changes in various jurisdictions.

Included in the balance as of  December 31, 2023, 2022 and 2021 are $174 million, $169 million and $120 million, respectively, of unrecognized tax benefits that would impact the Company’s effective tax rate if recognized.

Interest and penalties associated with uncertain tax positions are recognized as part of tax expense. For the years ended  December 31, 2023, 2022 and 2021 the amounts recognized were not material.

6.  Income Taxes (Continued)

It is possible that the amount of unrecognized tax benefits will change due to one or more of the following events during the next twelve months: audit activity, tax payments, or final decisions in matters that are the subject of controversy in various jurisdictions. The Company believes that adequate tax reserves are provided for these matters. However, if upon conclusion of these matters, the ultimate determination of taxes owed is for an amount materially different than the current reserves, the Company’s overall tax expense and effective tax rate could be materially impacted in the period of adjustment. As of December 31, 2023, the Company is not expecting any significant movements in the uncertain tax benefits in the next twelve months.

Corning Incorporated, as the common parent company, and all 80%-or-more-owned of its U.S. subsidiaries join in the filing of consolidated U.S. federal income tax returns. The statute of limitations is closed for all periods ending through December 31, 2013. All returns for periods ended through December 31, 2014, have been audited by and settled with the IRS.

Corning Incorporated and its U.S. subsidiaries file income tax returns on a combined, unitary or stand-alone basis in multiple state and local jurisdictions, which generally have statutes of limitations ranging from 3 to 5 years. Various state income tax returns are currently in the process of examination or administrative appeal. The Company does not expect any material proposed adjustments from any of these audits.

Corning’s foreign subsidiaries file income tax returns in the countries where their operations are located.  Generally, these countries have statutes of limitations ranging from 3 to 10 years.  The statute of limitations is closed through the following years in these major jurisdictions:  China (2014), Japan (2016), Taiwan (2018) and South Korea (2014).

Corning Precision Materials, a South Korean subsidiary, is currently appealing certain tax assessments and tax refund claims for tax years 2010 through 2019. The Company was required to deposit the disputed tax amounts with the South Korean government as a condition of its appeal of any tax assessment. During 2023, $99 million was no longer under dispute and was refunded to the Company. The non-current receivable balance was $261 million and $349 million as of  December 31, 2023 and  December 31, 2022, respectively, for the amount on deposit with the South Korean government. Corning believes that it is more likely than not that the Company will prevail in the appeals process relating to these matters.