Income Taxes (Tables)

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Reconciliation of the U.S. federal statutory rate to effective rate

A reconciliation of the U.S. federal statutory rate to the effective rate for the years ended December 31, was as follows: 

(Millions of dollars)	2023				2022				2021
Taxes computed at U.S. statutory rates	$	160	21.0	%	$	154	21.0	%	$	146	21.0	%
(Decreases) increases in taxes resulting from:
State income tax, net of federal tax	5		0.5	%	4		0.5	%	3		0.4	%
Non-U.S. subsidiaries taxed at other than the U.S. rate	21		2.8	%	19		2.6	%	22		3.2	%
Valuation allowances	(14)		(1.8)	%	15		2.1	%	5		0.7	%
Dividend withholding tax & indefinite reinvestment change	30		4.0	%	—		—	%	—		—	%
Foreign currency translation taxed at non- U.S. subsidiaries	(10)		(1.3)	%	(4)		(0.5)	%	3		0.4	%
Other, net	—		—	%	1		0.1	%	(1)		(0.1)	%
Provision for income taxes	$	192	25.2	%	$	189	25.8	%	$	178	25.6	%

Components of Profit before income taxes

The components of Profit before income taxes for the years ended December 31, were as follows: 

(Millions of dollars)	2023		2022		2021
U.S.	$	384	$	439	$	288
Non-U.S.	376		292		407
Total	$	760	$	731	$	695

Components of the Provision for income taxes

The components of the Provision for income taxes for the years ended December 31, were as follows: 

(Millions of dollars)
Current income tax provision:	2023		2022		2021
U.S.	$	36	$	116	$	101
Non-U.S.	150		95		162
State (U.S.)	3		5		5
	189		216		268
Deferred income tax provision (benefit):
U.S.	33		(36)		(56)
Non-U.S.	(31)		8		(33)
State (U.S.)	1		1		(1)
	3		(27)		(90)
Total Provision for income taxes	$	192	$	189	$	178

Deferred income tax assets and liabilities

The amounts of deferred income taxes at December 31, included in the following lines in our Consolidated Statements of Financial Position were: 

(Millions of dollars)	2023		2022
Assets:
Other assets	$	144	$	115
Liabilities:
Other liabilities	(617)		(610)
Deferred income taxes, net	$	(473)	$	(495)

Our consolidated deferred income taxes consisted of the following components as of December 31: 

(Millions of dollars)
Deferred income tax assets:	2023		2022
Allowance for credit losses	$	95	$	97
Tax carryforwards	103		93
Revenue timing differences	16		20
	214		210
Deferred income tax liabilities:
Capital assets, including lease basis differences	(430)		(461)
Deferred income tax on translation adjustment	(200)		(219)
Undistributed profits of non-U.S. subsidiaries	(16)		—
	(646)		(680)
Valuation allowance for deferred income tax assets	(39)		(53)
Other, net	(2)		28
Deferred income taxes, net	$	(473)	$	(495)

Summary of net operating loss carryforwards

At December 31, 2023, deferred tax assets for U.S. state losses of $6 million expire on or before 2040. Of these U.S. state deferred tax assets, $1 million were reduced by valuation allowances.

In some U.S. state income tax jurisdictions, we join with other Caterpillar entities in filing combined income tax returns. In other U.S. state income tax jurisdictions, we file on a separate, stand-alone basis.

Deferred tax assets for U.S. federal loss carryforwards of $1 million expire before 2027 and were reduced by a full valuation allowance. Deferred tax assets for losses and credit carryforwards of non-U.S. entities of $11 million expire on or before 2034, while the remaining $85 million may be carried over indefinitely. Non-U.S. entities that have not yet demonstrated consistent and/or sustainable profitability to support the recognition of net deferred income tax assets have recorded valuation allowances of $37 million against tax carryforwards and other deferred tax assets.

Due to the uncertainty of inflation and foreign exchange rate impacts on taxable income for one of our non-U.S. entities, we believe there is a reasonable possibility that we will need to record a valuation allowance in 2024 against some or all of the $48 million deferred tax asset at December 31, 2023. The potential amounts of the valuation allowance changes are dependent on the entity’s future taxable income.

Schedule of unrecognized tax benefits

A reconciliation of the beginning and ending amounts of gross unrecognized income tax benefits for uncertain income tax positions, including positions impacting only the timing of income tax benefits was as follows: 

(Millions of dollars)	2023		2022		2021
Reconciliation of unrecognized income tax benefits(1):
Balance at beginning of year	$	127	$	131	$	119
Additions for income tax positions related to current year	—		—		2
Additions for income tax positions related to prior year	—		—		10
Reductions for income tax positions related to prior year	(2)		—		—
Reductions for income tax positions related to settlements	(6)		(4)		—
Balance at end of year	$	119	$	127	$	131
Amount that, if recognized, would impact the effective tax rate	$	119	$	127	$	131

(1) Foreign currency translation amounts are included within each line as applicable.