Income Taxes

12 Months Ended

Dec. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

For financial reporting purposes, income before income taxes includes the following components: 

For the Years Ended December 31,
(In millions)	2024		2023		2022
Income before income taxes:
U.S.	$	1,894	$	1,823	$	1,468
Other	3,586		3,203		2,614
	$	5,480	$	5,026	$	4,082
The expense (benefit) for income taxes is comprised of:
Current –
U.S. Federal	$	247	$	273	$	262
Other national governments	836		838		653
U.S. state and local	123		142		123
	1,206		1,253		1,038
Deferred –
U.S. Federal	53		29		38
Other national governments	84		(73)		(91)
U.S. state and local	20		15		10
	157		(29)		(43)
Total income taxes	$	1,363	$	1,224	$	995

The significant components of deferred income tax assets and liabilities and their balance sheet classifications are as follows:

December 31,
(In millions)	2024		2023
Deferred tax assets:
Accrued expenses not currently deductible	$	713	$	679
Differences related to non-U.S. operations (a)	282		299
Accrued U.S. retirement benefits	149		134
Net operating losses (b)	312		297
Income currently recognized for tax	40		48
Other	40		32
	$	1,536	$	1,489

Deferred tax liabilities:
Differences related to non-U.S. operations	$	588	$	586
Depreciation and amortization	616		527
Accrued retirement & post-retirement benefits – non-U.S. operations	374		404
Capitalized expenses currently recognized for tax	133		120
Other	42		38
	$	1,753	$	1,675

(a)Net of valuation allowances of $75 million in 2024 and $53 million in 2023.

(b)Net of valuation allowances of $69 million in 2024 and 2023.

December 31,
(In millions)	2024		2023
Balance sheet classifications:
Deferred tax assets	$	237	$	357
Other liabilities	$	454	$	543

The amount of cumulative undistributed earnings that are indefinitely reinvested in non-U.S. subsidiaries is approximately $860 million at December 31, 2024. While no additional U.S. federal income tax would be required if such earnings were repatriated, additional state and withholding taxes would apply. The amount of these additional taxes is estimated to be approximately $80 million.

Future U.S. federal tax costs related to basis differences in non-U.S. subsidiaries would primarily be realized through the U.S. Global Intangible Low-Taxed Income ("GILTI") minimum tax regime. The Company elected to recognize GILTI tax costs as a period cost and has not provided deferred tax liabilities on these basis differences.

A reconciliation from the U.S. federal statutory income tax rate to the Company’s effective income tax rate is as follows:

For the Years Ended December 31,	2024		2023		2022
U.S. Federal statutory rate	21.0	%	21.0	%	21.0	%
U.S. state and local income taxes — net of U.S. Federal income tax benefit	2.1		2.6		2.7
Differences related to non-U.S. operations	2.5		2.2		0.8
Change in valuation allowance	—		(1.4)		(0.1)
Equity compensation	(0.7)		(0.7)		(0.7)
Uncertain tax positions	(0.3)		(0.1)		0.1
Other	0.3		0.7		0.6
Effective tax rate	24.9	%	24.3	%	24.4	%

The rates in all periods reflect the effects of tax planning and the ongoing impact of regulatory and other guidance as it became available. The tax rates in all periods include a valuation allowance for certain tax credits, the impact of uncertain tax positions, and certain tax planning benefits. The tax rate in 2023 includes the effect of a release of valuation allowances on deferred tax assets related to the Company’s non-U.S. operations, due to sustained profitability.

A valuation allowance was recorded to adjust deferred tax assets to the amount that the Company believes is more likely than not to be realized. Valuation allowances had a net increase of $24 million in 2024, and a net decrease of $110 million, and $1 million in 2023, and 2022, respectively. Adjustments of the beginning of the year balances of valuation allowances had no impact to the income tax expense in 2024. Adjustments of the beginning of the year balances of valuation allowances decreased income tax expense by $94 million in 2023 and $5 million in 2022. Approximately 10% of the Company’s net operating loss carryforwards expire from 2025 through 2038, and the remaining 90% are unlimited. The gross deferred tax assets of the potential tax benefit from net operating loss carryforwards at the end of 2024 is primarily comprised of non-U.S. tax benefits of $380 million.

Changes in tax laws, rulings, policies, or related legal and regulatory interpretations occur frequently and may have significant favorable or adverse impacts on our effective tax rate. In 2021, the Organization for Economic Cooperation and Development's ("OECD") released model rules for a 15% global minimum tax, known as Pillar Two. Pillar Two has now been enacted by most key non-U.S. jurisdictions where the Company operates, including the U.K. and Ireland. This minimum tax is treated as a period cost beginning in 2024 and does not have a material impact on the Company's financial results of operations for the current period. The Company continues to monitor legislative developments, as well as additional guidance from countries that have enacted legislation, and will ensure it is compliant with any new developments.

Following is a reconciliation of the Company’s total gross unrecognized tax benefits for the years ended December 31, 2024, 2023 and 2022:

(In millions)	2024		2023		2022
Balance at January 1,	$	124	$	97	$	94
Additions, based on tax positions related to current year	5		6		1
Additions for tax positions of prior years	8		44		15
Reductions for tax positions of prior years	—		(8)		(2)
Settlements	(10)		(8)		(2)
Lapses in statutes of limitations	(15)		(7)		(9)
Balance at December 31,	$	112	$	124	$	97

Of the total unrecognized tax benefits at December 31, 2024, 2023, and 2022, $111 million, $122 million and $94 million, respectively, represent the amount that, if recognized, would favorably affect the effective tax rate in any future periods. The total gross amount of accrued interest and penalties, before any applicable federal benefit, was $45 million at December 31, 2024, and $48 million at December 31, 2023 and 2022.

The Company is routinely examined by the jurisdictions in which it has significant operations. In the U.S. federal jurisdiction, the Company participates in the Internal Revenue Service’s ("IRS") Compliance Assurance Process ("CAP"), which is structured to be, in effect, a real-time audit. In 2024, the IRS concluded its examination of the Company’s 2022 tax return. The IRS CAP Maintenance Audits for tax years 2023 and 2024 are ongoing.

New York is a significant tax jurisdiction for the Company. New York State and New York City have continuing examinations underway in 2024 for various entities covering the years 2015 through 2020. In 2023, the New York State audits for 2013-2014 and the New York City audits for 2010-2014 were finalized. The New York State audits for 2010-2012 were finalized in 2022.

We conduct business through multiple legal entities in significant jurisdictions outside the U.S. Separate audits for individual entities within a jurisdiction may open or close within a particular year. The status of audits for significant jurisdictions outside the U.S. are summarized in the table below:

Tax Audit (Years)
Jurisdiction:	Initiated in 2024	Ongoing	Concluded in 2024
Germany		2017 - 2020	2013 - 2016
Italy		2015 - 2017
Singapore	2022	2018 - 2021	2017
United Kingdom	2022	2016 - 2021
Mexico			2017
Australia		2019 - 2020
Canada		2019 - 2021
India	2022	2007 - 2021

In the third quarter of 2024, the Company received closure notices and assessments from the U.K. tax authority in relation to its 2016-2020 examinations which disallowed certain interest expense deductions. The Company has appealed the assessments and resolving this matter through litigation or alternative dispute resolution may take several years.

The Company has established liabilities for uncertain tax positions in relation to potential assessments in the jurisdictions in which it operates. The Company believes the resolution of tax matters will not have a material effect on the consolidated financial position of the Company. However, an adverse resolution of tax matters from current or future audits or tax litigation could have a material impact on the Company's net income or cash flows and on its effective tax rate in a particular future period.

It is reasonably possible that the total amount of unrecognized tax benefits could decrease up to approximately $65 million within the next 12 months due to settlement of audits and expiration of statutes of limitations.