XML 34 R20.htm IDEA: XBRL DOCUMENT v3.24.3
Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The following table sets forth the geographic split of earnings before income taxes:

 Year Ended
(In millions)December 31
 202320222021
  
United States$1,844 $2,725 $2,140 
Foreign2,450 2,508 1,173 
 $4,294 $5,233 $3,313 

Significant components of income taxes are as follows:
(In millions)Year Ended December 31
 202320222021
Current 
Federal$291 $379 $404 
State47 97 79 
Foreign513 481 224 
Deferred 
Federal(52)23 (59)
State(10)7 (12)
Foreign39 (119)(58)
 $828 $868 $578 
Significant components of deferred tax liabilities and assets are as follows:
December 31, 2023December 31, 2022
 (In millions)
Deferred tax liabilities 
Property, plant, and equipment$827 $811 
Intangibles358 417 
Right of use assets263 237 
Equity in earnings of affiliates214 191 
Inventory reserves— 11 
Debt exchange50 52 
Reserves and other accruals49 86 
Other137 108 
 $1,898 $1,913 
Deferred tax assets 
Pension and postretirement benefits$111 $104 
Inventories20 — 
Lease liabilities268 244 
Stock compensation42 51 
Foreign tax loss carryforwards494 496 
Capital loss carryforwards42 42 
State tax attributes25 21 
Reserves and other accruals5 22 
Other93 77 
Gross deferred tax assets1,100 1,057 
Valuation allowances(216)(209)
Net deferred tax assets$884 $848 
Net deferred tax liabilities$1,014 $1,065 
The net deferred tax liabilities are classified as follows: 
Noncurrent assets (foreign)$295 $337 
Noncurrent liabilities(1,106)(1,183)
Noncurrent liabilities (foreign)(203)(219)
 $(1,014)$(1,065)

During 2023, the Company increased valuation allowances primarily related to net operating loss carryforwards.
Reconciliation of the statutory federal income tax rate to the Company’s effective income tax rate on earnings is as follows:
Year Ended
December 31
 202320222021
Statutory rate21.0 %21.0 %21.0 %
State income taxes, net of federal tax benefit0.9 1.4 1.5 
Foreign earnings taxed at rates other than the U.S. statutory rate(0.2)(3.8)(2.8)
Foreign currency effects/remeasurement0.5 0.6 — 
Income tax adjustment to filed returns(0.4)(0.1)0.7 
Tax benefit on U.S. biodiesel credits(1.7)(1.2)(1.9)
Tax benefit on U.S. railroad credits(1.5)(1.2)(2.0)
U.S. tax on foreign earnings1.2 0.2 — 
Valuation allowances(0.2)— 0.7 
Other(0.3)(0.3)0.2 
Effective income tax rate19.3 %16.6 %17.4 %

The effective tax rates for 2023 and 2022 were impacted by the geographic mix of earnings. The effective tax rate for 2022 was also impacted by discrete tax items. The effective tax rate for 2021 was impacted by the geographic mix of earnings and U.S. tax credits, including the biodiesel tax credit and the railroad maintenance tax credit.
ADM’s operations in foreign jurisdictions accounted for 57%, 48%, and 35% of the Company’s total pre-tax earnings in fiscal years 2023, 2022, and 2021, respectively. The foreign rate differential was primarily due to various tax rates applicable to the income earned from the Company’s operations in Switzerland, Asia, South America and the Caribbean.
On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 (“Inflation Act”), which includes, among other provisions, changes to the U.S. corporate income tax system, including a 15% minimum tax based on “adjusted financial statement income,” and a one percent excise tax on net repurchases of stock for tax years beginning after December 31, 2022. While the Inflation Act has no immediate impact and is not expected to have a material adverse effect on ADM’s results of operations going forward, the Company will continue to evaluate its impact as further information becomes available.
Undistributed earnings of the Company’s foreign subsidiaries and corporate joint ventures were approximately $17.9 billion at December 31, 2023. Because these undistributed earnings continue to be indefinitely reinvested in foreign operations, no income taxes, other than the transition tax, the U.S. tax on undistributed Subpart F, and the minimum tax on Global Intangible Low Taxed Income (GILTI), have been provided after the Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. It is not practicable to determine the amount of unrecognized deferred tax liability related to any remaining undistributed earnings of foreign subsidiaries and corporate joint ventures not subject to the transition tax.
The Company has elected to pay the one-time transition tax on accumulated foreign earnings over eight years. As of December 31, 2023, the Company’s remaining transition tax liability was $85 million, which will be paid in installments through 2025.
The Company incurred U.S. taxable income of $425 million, $684 million, and $244 million related to GILTI and deducted $77 million, $67 million, and $87 million related to Foreign Derived Intangible Income Deduction in fiscal years 2023, 2022, and 2021 respectively. The Company made an accounting policy election to treat GILTI as a period cost. The Company has recorded and will continue to record the impact of tax reform items as U.S. tax authorities issue Treasury Regulations and other guidance addressing tax reform-related changes. The additional guidance, along with the potential for additional global tax legislation changes, may affect significant deductions and income inclusions and could have a material adverse effect on the Company’s net income or cash flow.
The Company had $494 million and $496 million of tax assets related to net operating loss carryforwards of certain international subsidiaries at December 31, 2023 and 2022, respectively.  As of December 31, 2023, approximately $412 million of these assets have no expiration date, and the remaining $82 million expire at various times through fiscal 2033.  The annual usage of certain of these assets is limited to a percentage of taxable income of the respective foreign subsidiary for the year. The Company has recorded a valuation allowance of $160 million and $142 million against these tax assets at December 31, 2023 and 2022, respectively, due to the uncertainty of their realization.

The Company had $42 million of tax assets related to foreign capital loss carryforwards at December 31, 2023 and 2022.  The Company has recorded a valuation allowance of $42 million against these tax assets at December 31, 2023 and 2022 due to the uncertainty of their realization.

The Company had $25 million and $21 million of tax assets related to state income tax attributes (incentive credits and net operating loss carryforwards), net of federal tax benefit, at December 31, 2023 and 2022, respectively, a majority of which will expire between 2024 and 2028. Due to the uncertainty of realization, the Company recorded a valuation allowance of $14 million and $15 million related to state income tax assets net of federal tax benefit as of December 31, 2023 and 2022, respectively. The change in the valuation allowance was related to the expiration of certain state income tax attributes which were fully reserved in prior years. 
 
The Company remains subject to federal examination in the U.S. for the calendar tax years 2018 through 2023.

The following table sets forth a rollforward of activity of unrecognized tax benefits for the year ended December 31, 2023 and 2022 as follows:
 Unrecognized Tax Benefits
 December 31, 2023December 31, 2022
 (In millions)
Beginning balance$151 $157 
Additions related to current year’s tax positions2 6 
Additions related to prior years’ tax positions28 26 
Additions (adjustments) related to acquisitions— 11 
Reductions related to lapse of statute of limitations(6)(6)
Settlements with tax authorities(7)(43)
Ending balance$168 $151 

The additions and reductions in unrecognized tax benefits shown in the table included effects related to net income and shareholders’ equity.  The changes in unrecognized tax benefits did not have a material effect on the Company’s net income or cash flow. At December 31, 2023 and 2022, the Company had accrued interest and penalties on unrecognized tax benefits of $52 million and $39 million, respectively.

The Company is subject to income taxation and routine examinations in many jurisdictions around the world and frequently faces challenges regarding the amount of taxes due.  These challenges include positions taken by the Company related to the timing, nature, and amount of deductions and the allocation of income among various jurisdictions. In its routine evaluations of the exposure associated with various tax filing positions, the Company recognizes a liability, when necessary, for estimated potential tax owed by the Company in accordance with applicable accounting standards. Resolution of the related tax positions, through negotiations with relevant tax authorities or through litigation, may take years to complete.  Therefore, it is difficult to predict the timing for resolution of tax positions and the Company cannot predict or provide assurance as to the ultimate outcome of these ongoing or future examinations. However, the Company does not anticipate that the total amount of unrecognized tax benefits will increase or decrease significantly in the next twelve months.  Given the long periods of time involved in resolving tax positions, the Company does not expect that the recognition of unrecognized tax benefits will have a material impact on the Company’s effective income tax rate in any given period.  If the total amount of unrecognized tax
benefits were recognized by the Company at one time, there would be a reduction of $165 million on the tax expense for that period.

In 2014, the Company’s wholly-owned subsidiary in the Netherlands, ADM Europe B.V., received a tax assessment from the Netherlands tax authority challenging the transfer pricing aspects of a 2009 business reorganization, which involved two of its subsidiary companies in the Netherlands. As of December 31, 2023, this assessment was $90 million in tax and $34 million in interest (adjusted for variation in currency exchange rates). On April 23, 2020, the court issued an unfavorable ruling and in October 2020, assigned a third party expert to establish a valuation. During the second quarter of 2021, the third party expert issued a final valuation. On September 30, 2022, the court issued a ruling consistent with the valuation report, and the Dutch tax authorities have filed an appeal. During the quarter ended March 31, 2023, ADM filed a cross-appeal. As of December 31, 2023, the Company has accrued its best estimate of what it believes will be the likely outcome of the litigation.