Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

14. Income Taxes

Income taxes have been based on the following components of earnings before provision for income taxes in the Consolidated Statements of Earnings:

	Years Ended December 31,
	2021		2020		2019
Domestic	$	835,773	$	464,145	$	448,301
Foreign	565,053		377,589		394,708
Total	$	1,400,826	$	841,734	$	843,009

Income tax expense (benefit) for the years ended December 31, 2021, 2020 and 2019 is comprised of the following:

 

	Years Ended December 31,
	2021		2020		2019
Current:
U.S. federal	$	150,990	$	79,305	$	71,069
State and local	28,106		13,312		16,709
Foreign	154,147		97,106		102,284
Total current	333,243		189,723		190,062
Deferred:
U.S. federal	(14,143)		2,777		(6,033)
State and local	3,165		(10,526)		1,770
Foreign	(45,257)		(23,691)		(20,708)
Total deferred	(56,235)		(31,440)		(24,971)
Total expense	$	277,008	$	158,283	$	165,091

Differences between the effective income tax rate and the U.S. federal income statutory tax rate are as follows:

	Years Ended December 31,
	2021		2020		2019
U.S. federal income tax rate	21.0	%	21.0	%	21.0	%
State and local taxes, net of federal income tax benefit	1.8		1.7		1.7
Foreign operations tax effect	(0.2)		(0.8)		(1.3)
Foreign tax credits	—		—		(0.1)
Foreign-derived intangible income	(0.8)		(1.1)		(1.0)
Share awards	(0.8)		(1.2)		(1.7)
Dispositions	0.3		—		1.2
Audit resolutions	(1.4)		(0.9)		0.3
Other	(0.1)		0.1		(0.5)
Effective tax rate	19.8	%	18.8	%	19.6	%

The tax effects of temporary differences that give rise to deferred tax assets and liabilities are as follows:

	December 31, 2021		December 31, 2020
Deferred Tax Assets:
Accrued compensation, principally postretirement and other employee benefits	$	61,388	$	60,797
Accrued expenses, principally for state income taxes, interest and warranty	30,143		32,418
Net operating loss and other carryforwards	334,483		319,291
Inventories, principally due to reserves for financial reporting purposes and capitalization for tax purposes	28,698		23,723
Accounts receivable, principally due to allowance for doubtful accounts	9,988		7,118
Accrued insurance	4,708		4,165
Long-term liabilities, principally warranty, environmental and exit costs	3,043		2,273
Lease obligations	41,653		40,984
Total gross deferred tax assets	514,104		490,769
Valuation allowance	(306,066)		(287,679)
Total deferred tax assets, net of valuation allowances	$	208,038	$	203,090
Deferred Tax Liabilities:
Intangible assets, principally due to different tax and financial reporting bases and amortization lives	$	(392,208)	$	(387,897)
Property, plant and equipment, principally due to differences in depreciation	(77,918)		(62,667)
Lease right-of-use assets	(40,181)		(38,742)
Other liabilities	(28,786)		9,992
Total gross deferred tax liabilities	(539,093)		(479,314)
Net deferred tax liability	$	(331,055)	$	(276,224)
Classified as follows in the Consolidated Balance Sheets:
Other assets and deferred charges	$	33,062	$	22,199
Deferred income taxes	(364,117)		(298,423)
	$	(331,055)	$	(276,224)

As of December 31, 2021, the Company had non-U.S loss carryforwards of $1,128.7 million primarily resulting from non-operating activities. The entire balance of the non-U.S. losses as of December 31, 2021 is available to be carried forward, with $274.4 million of these losses expiring during the years 2022 through 2042. The remaining $854.3 million of such losses can be carried forward indefinitely.

The Company has $305.1 million of state tax loss carryovers as of December 31, 2021. The balance of the state losses as of December 31, 2021 is available for carry over, with $289.3 million of these losses expiring during the years 2022 and 2042, and the remaining $15.8 million being carried over indefinitely.

The Company maintains valuation allowances by jurisdiction against the deferred tax assets related to certain of these carryforwards for which it is more likely than not that some portion or all will not be realized.

Unrecognized Tax Benefits

The Company files federal, state, local and foreign tax returns. The Company is routinely audited by the tax authorities in these jurisdictions, and a number of audits are currently underway. It is reasonably possible during the next twelve months that uncertain tax positions may be settled, which could result in a decrease in the gross amount of unrecognized tax benefits. This decrease may result in an income tax benefit. Due to the potential for resolution of federal, state and foreign examinations, and the expiration of various statutes of limitation, the Company's gross unrecognized tax benefits balance may change within the next twelve months by a range of zero to $30.6 million. All significant federal, state, local and international matters have been concluded through 2016. The Company believes adequate provision has been made for all income tax uncertainties.

The following table is a reconciliation of the beginning and ending balances of the Company’s unrecognized tax benefits:

	Total
Unrecognized tax benefits at January 1, 2019	$	93,461
Additions based on tax positions related to the current year	4,493
Additions for tax positions of prior years	6,668
Reductions for tax positions of prior years	(9,217)
Cash settlements	(922)
Lapse of statutes	(11,269)
Unrecognized tax benefits at December 31, 2019	83,214
Additions based on tax positions related to the current year	3,134
Additions for tax positions of prior years	5,490
Reductions for tax positions of prior years	(3,599)
Cash settlements	(6,214)
Lapse of statutes	(9,687)
Unrecognized tax benefits at December 31, 2020 (1)	72,338
Additions based on tax positions related to the current year	5,859
Additions for tax positions of prior years	3,784
Reductions for tax positions of prior years	(13,008)
Cash settlements	(1,490)
Lapse of statutes	(2,831)
Unrecognized tax benefits at December 31, 2021 (1)	$	64,652

(1) If recognized, the net amount of potential tax benefits that would impact the Company’s effective tax rate is $58.0 million. During the years ended December 31, 2021, 2020 and 2019, the Company recorded income of $2.7 million, $0.1 million and $0.6 million, respectively, as a component of provision for income taxes related to the accrued interest and penalties on net reductions to unrecognized tax benefits. The Company had accrued interest and penalties of $15.1 million at December 31, 2021 and $17.8 million at December 31, 2020, which are not included in the above table.