Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of the (provision) benefit for income taxes on continuing operations were as follows:

	Year Ended December 31
Millions of dollars	2023		2022		2021
Current income taxes:
Federal	$	(21)	$	(17)	$	6
Foreign	(472)		(417)		(270)
State	(12)		(11)		(6)
Total current income taxes	(505)		(445)		(270)
Deferred income taxes:
Federal	(123)		(159)		533
Foreign	(59)		103		(47)
State	(14)		(14)		—
Total deferred income taxes	(196)		(70)		486
Income tax (provision) benefit	$	(701)	$	(515)	$	216

The United States and foreign components of income from continuing operations before income taxes were as follows:

	Year Ended December 31
Millions of dollars	2023		2022		2021
United States	$	1,666	$	992	$	283
Foreign	1,697		1,118		969
Total income from continuing operations before income taxes	$	3,363	$	2,110	$	1,252

Reconciliations between the actual (provision) benefit for income taxes on continuing operations and that computed by applying the United States statutory rate to income from continuing operations before income taxes were as follows:

	Year Ended December 31
	2023		2022		2021
United States statutory rate	21.0	%	21.0	%	21.0	%
Valuation allowance against tax assets	0.8		(2.9)		(44.5)
Impact of foreign income taxed at different rates	0.2		3.0		2.5
State income taxes	0.7		0.8		0.1
Impact of impairments and other charges	0.6		0.7		—
Adjustments of prior year taxes	(1.3)		0.2		1.3
Other items, net	(1.2)		1.6		2.4
Total effective tax rate on continuing operations	20.8	%	24.4	%	(17.2)	%

During the year ended December 31, 2023, we recorded a total income tax provision of $701 million on pre-tax income of $3.4 billion, resulting in an effective tax rate of 20.8%. The effective tax rate for 2023 was primarily impacted by our geographic mix of earnings, tax adjustments related to the reassessment of prior year tax accruals, and changes of valuation allowance on some of our deferred tax assets.

During the year ended December 31, 2022, we recorded a total income tax provision of $515 million on pre-tax income of $2.1 billion, resulting in an effective tax rate of 24.4%. The effective tax rate for 2022 was primarily impacted by our geographic mix of earnings, tax adjustments related to the reassessment of prior year tax accruals, and valuation allowances on some of our deferred tax assets.

During the year ended December 31, 2021, we recorded a total income tax benefit of $216 million on pre-tax income of $1.3 billion, resulting in an effective tax rate of -17.2%. The effective tax rate for 2021 was primarily impacted by our geographic mix of earnings, tax adjustments related to the reassessment of prior year tax accruals, and valuation allowances on some of our deferred tax assets.

The primary components of our deferred tax assets and liabilities were as follows:

	December 31
Millions of dollars	2023		2022
Gross deferred tax assets:
Foreign tax credit carryforwards	$	902	$	961
Intangible assets	789		856
Net operating loss carryforwards	663		694
Accrued liabilities	293		259
Research and development tax credit carryforwards	173		219
Employee compensation and benefits	193		170
Other	579		515
Total gross deferred tax assets	3,592		3,674
Gross deferred tax liabilities:
Operating lease right-of-use assets	189		153
Depreciation and amortization	115		61
Other	51		39
Total gross deferred tax liabilities	355		253
Valuation allowances	761		821
Net deferred income tax asset	$	2,476	$	2,600

At December 31, 2023, we had $686 million of domestic and foreign tax-effected net operating loss carryforwards, with approximately $23 million estimated to be utilized against our unrecognized tax benefits. In addition, we had approximately $924 million of foreign tax credit carryforwards which are offset by $22 million of foreign branch deferred activity and unrecognized tax benefits reflected in the table above. The ultimate realization of these deferred tax assets depends on our ability to generate sufficient taxable income in the appropriate taxing jurisdiction.

 Our deferred tax assets from net operating losses, foreign tax credits, and research and development credits will expire as follows:

Millions of dollars	U.S. Net Operating Loss		Foreign Net Operating Loss		Foreign Tax Credits		Research and Development Credit		Total Deferred Tax Assets
2024-2028	$	3	$	129	$	450	$	—	$	582
2029-2033	8		13		474		—		495
2034-2043	25		88		—		173		286
Non-Expiring	17		403		—		—		420
	$	53	$	633	$	924	$	173	$	1,783

We have not provided incremental United States income taxes or foreign withholding taxes on undistributed foreign subsidiaries' earnings after December 31, 2017. We generally do not provide for taxes related to undistributed earnings because such earnings either would not be taxable when remitted or they are considered to be indefinitely reinvested.

The following table presents a rollforward of our unrecognized tax benefits and associated interest and penalties.

Millions of dollars		Unrecognized Tax Benefits			Interest and Penalties
Balance at January 1, 2021		$	355		$	71
Change in prior year tax positions		14			4
Change in current year tax positions		14			2
Cash settlements with taxing authorities		(10)			—
Lapse of statute of limitations		(21)			(5)
Balance at December 31, 2021		$	352	(a)	$	72
Change in prior year tax positions		(36)			(5)
Change in current year tax positions		13			2
Cash settlements with taxing authorities		(6)			(2)
Lapse of statute of limitations		(12)			(3)
Balance at December 31, 2022		$	311	(a)	$	64
Change in prior year tax positions		(38)			(10)
Change in current year tax positions		8			1
Cash settlements with taxing authorities		(4)			(3)
Lapse of statute of limitations		(9)			(3)
Balance at December 31, 2023		$	268	(a)(b)	$	49
(a)	Includes $43 million as of December 31, 2023, $51 million as of December 31, 2022, and $20 million as of December 31, 2021 in foreign unrecognized tax benefits that would give rise to a United States tax credit. As of December 31, 2023, December 31, 2022, and December 31, 2021 a net $192 million, $208 million and $272 million after a net operating loss carryforward offset, respectively, of unrecognized tax benefits would positively impact the effective tax rate and be recognized as additional tax benefits in our statement of operations if resolved in our favor.
(b)	Includes $85 million as of December 31, 2023 that we believe could be resolved within the next 12 months.

Our tax returns are subject to review by the taxing authorities in the jurisdictions where we file tax returns. In most cases we are no longer subject to examination by tax authorities for years before 2012. The only significant operating jurisdiction that has tax filings under review or subject to examination by the tax authorities is the United States. The United States federal income tax filings for tax years 2016 through 2022 are currently under review or remain open for review by the IRS.

As of December 31, 2023, the primary unresolved issue for the IRS audit for 2016 relates to the classification of the $3.5 billion ordinary deduction that we claimed for the termination fee we paid to Baker Hughes in the second quarter of 2016 for which we received a NOPA from the IRS on September 28, 2023. We regularly assess the likelihood of adverse outcomes resulting from tax examinations to determine the adequacy of our tax reserves, and we believe our income tax reserves are appropriately provided for all open tax years. We do not expect a final resolution of this issue in the next 12 months.

Based on the information currently available, we do not anticipate a significant increase or decrease to our tax contingencies within the next 12 months.