Income Taxes

12 Months Ended

Dec. 31, 2023

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,
	2023		2022		2021
Domestic	$	755,429	$	731,796	$	835,773
Foreign	514,577		555,709		565,053
Total	$	1,270,006	$	1,287,505	$	1,400,826

Income tax expense (benefit) for the years ended December 31, 2023, 2022 and 2021 is comprised of the following:

 

	Years Ended December 31,
	2023		2022		2021
Current:
U.S. federal	$	143,294	$	106,768	$	150,990
State and local	18,873		1,450		28,106
Foreign	143,216		140,696		154,147
Total current	305,383		248,914		333,243
Deferred:
U.S. federal	(28,471)		(4,760)		(14,143)
State and local	4,047		303		3,165
Foreign	(67,781)		(22,328)		(45,257)
Total deferred	(92,205)		(26,785)		(56,235)
Total expense	$	213,178	$	222,129	$	277,008

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

	Years Ended December 31,
	2023		2022		2021
U.S. federal income tax rate	21.0	%	21.0	%	21.0	%
State and local taxes, net of federal income tax benefit	1.6		1.6		1.8
Foreign operations tax effect	0.4		0.1		(0.2)
Foreign-derived intangible income	(1.3)		(1.3)		(0.8)
Share awards	(0.4)		(0.2)		(0.8)
Withholding tax	2.4		0.1		0.1
Change in valuation allowance	(5.5)		(0.7)		—
Dispositions	—		—		0.3
Audit resolutions	(0.6)		(3.2)		(1.4)
Other	(0.8)		(0.1)		(0.2)
Effective tax rate	16.8	%	17.3	%	19.8	%

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

	December 31, 2023		December 31, 2022
Deferred Tax Assets:
Accrued compensation, postretirement and other employee benefits	$	46,068	$	46,008
Accrued expenses	20,154		20,608
Net operating loss and other carryforwards	326,437		317,186
Inventories	28,729		30,569
Allowance for credit losses	7,679		9,224
Accrued insurance	4,574		3,978
Long-term liabilities, warranty and environmental costs	1,864		2,851
Lease obligations	55,634		47,887
Capitalized research and development	54,397		26,548
Total gross deferred tax assets	545,536		504,859
Valuation allowance	(209,931)		(271,203)
Total deferred tax assets, net of valuation allowances	$	335,605	$	233,656
Deferred Tax Liabilities:
Intangible assets	$	(405,504)	$	(417,809)
Property, plant and equipment	(78,668)		(82,658)
Lease right-of-use assets	(52,769)		(45,202)
Other liabilities	(34,642)		(27,447)
Total deferred tax liabilities	(571,583)		(573,116)
Net deferred tax liability	$	(235,978)	$	(339,460)
Classified as follows in the Consolidated Balance Sheets:
Other assets and deferred charges	$	110,405	$	35,690
Deferred income taxes	(346,383)		(375,150)
	$	(235,978)	$	(339,460)

As of December 31, 2023, the Company has $271,255 of deferred tax assets recorded related to non-U.S. tax loss carryforwards primarily resulting from non-operating activities and tax credit carryforwards. The non-U.S. losses and credits as of December 31, 2023 are available to be carried forward, with $59,816 expiring during the years 2024 through 2043, and the remaining $211,439 carried forward indefinitely.

As of December 31, 2023, the Company has $55,182 of deferred tax assets recorded related to U.S. federal and state tax loss and tax credit carryforwards. The U.S. federal and state tax losses and credits as of December 31, 2023 are available to be carried forward, with $52,206 expiring during the years 2024 through 2043, and the remaining $2,976 carried forward 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. For the year ended December 31, 2023, the Company recorded a net valuation allowance release of $69,716 against non-U.S. tax loss carryforwards mainly related to an internal reorganization on the basis of management’s reassessment of the amount of its deferred tax assets that are more likely than not to be realized.

In 2023, the Company recorded $30,413 of withholding taxes on current and future distributions from certain foreign subsidiaries. If management decides to repatriate additional foreign earnings, the Company would need to adjust the income tax provision in the period that management makes that decision.

Unrecognized Tax Benefits

The Company files U.S federal, state, local and non-U.S. 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 U.S federal, state and non-U.S. 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 $4,578. All significant U.S. federal, state, local and non-U.S. matters have been concluded through 2020. 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, 2021	$	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
Additions based on tax positions related to the current year	3,315
Additions for tax positions of prior years	3,421
Reductions for tax positions of prior years	(39,439)
Cash settlements	(411)
Lapse of statutes	(3,352)
Unrecognized tax benefits at December 31, 2022 (1)	28,186
Additions based on tax positions related to the current year	1,235
Additions for tax positions of prior years	2,223
Reductions for tax positions of prior years	(3,361)
Cash settlements	(1,791)
Lapse of statutes	(3,983)
Unrecognized tax benefits at December 31, 2023 (1)	$	22,509

(1) If recognized, the net amount of potential tax benefits as of December 31, 2023 that would impact the Company's effective tax rate is $18,367. During the years ended December 31, 2023, 2022 and 2021, the Company recorded income of $1,378, $8,931 and $2,654, 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 $4,798 at December 31, 2023 and $6,175 at December 31, 2022, which are not included in the above table.