Income Taxes

9 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

We recognized total income tax benefit from continuing operations of $68 million and income tax expense from continuing operations of $74 million for the three months and nine months ended September 30, 2023, respectively, compared to income tax expense of $117 million and $460 million for the same periods in 2022.

The decrease in income tax expense for the three months ended September 30, 2023, compared to the same period in 2022, was primarily due to adjustments to the valuation allowance on foreign tax credit carryforwards as well as the tax effects of a decrease in pretax earnings. In the third quarter of 2023, we recognized a nonrecurring net tax benefit of $94 million primarily driven by a tax planning strategy resulting in the release of a valuation allowance on foreign tax credit carryforwards of $92 million. In the third quarter of 2022, we established a valuation allowance against foreign tax credit carryforwards as a result of a reduction in forecasted foreign-sourced income caused by revised estimates from certain previously executed and forecasted securitization transactions of $27 million. The release of valuation allowance on foreign tax credit carryforwards resulted in a significant variation in the customary relationship between pretax income and income tax expense for the three months ended September 30, 2023.

The decrease in income tax expense for the nine months ended September 30, 2023, compared to the same period in 2022, was primarily due to the tax effects of a decrease in pretax earnings, the release of valuation allowance on foreign tax credit carryforwards of $92 million during 2023, the establishment of valuation allowance on foreign tax credit carryforwards of $47 million during 2022, and an increase in qualified clean vehicle tax credits for purchased plug-in electric vehicles or fuel cell vehicles. The release of valuation allowance resulted in a significant variation in the customary relationship between pretax income and income tax expense for the nine months ended September 30, 2023.

As of each reporting date, we consider existing evidence, both positive and negative, that could impact our view with regard to future realization of deferred tax assets. We continue to believe it is more likely than not that the benefit for certain foreign tax credit carryforwards and state net operating loss carryforwards will not be realized. In recognition of this risk, we continue to provide a partial valuation allowance on the deferred tax assets relating to these carryforwards and it is reasonably possible that the valuation allowance may change in the next 12 months.