Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The provision for income taxes by taxing jurisdiction and by significant components consisted of the following:

($ in millions)	2023	2022	2021
Current
U.S. federal	$102	$137	$25
U.S. state and local	16	20	13
Foreign	504	325	301
Total current income tax expense	$622	$482	$339
Deferred
U.S. federal	($153)	($79)	$12
U.S. state and local	(14)	(7)	3
Foreign	(16)	(71)	20
Total deferred income tax (benefit)/expense	($183)	($157)	$35
Total income tax expense	$439	$325	$374

A reconciliation of the statutory U.S. corporate federal income tax rate to the Company’s effective tax rate follows:

	2023		2022		2021
U.S. federal income tax rate	21.0	%	21.0	%	21.0	%
Changes in rate due to:
Taxes on non-U.S. earnings	4.2		3.6		2.7
Change in valuation allowance reserves	3.4		0.6		—
Other foreign tax effects	(2.7)		(1.6)		(0.4)
Impairment and other related charges, net	1.9		1.4		—
Uncertain tax positions	(1.7)		(0.4)		(1.4)
U.S. tax benefit on foreign operations	(0.9)		(0.4)		(1.6)
U.S. tax incentives	(0.8)		(1.0)		(0.6)
Tax benefits from equity awards	(0.2)		(0.3)		(0.3)
U.S. state and local taxes	—		0.7		0.8
Other	0.9		(0.1)		0.4
Effective income tax rate	25.1	%	23.5	%	20.6	%

(Loss)/income before income taxes of the Company’s U.S. operations for 2023, 2022 and 2021 was $(75) million, $288 million and $469 million, respectively. Income before income taxes of the Company’s foreign operations for 2023, 2022 and 2021 was $1,823 million, $1,093 million and $1,346 million, respectively.

Deferred income taxes

Deferred income taxes are provided for the effect of temporary differences that arise because there are certain items treated differently for financial accounting than for income tax reporting purposes. The deferred tax assets and liabilities are determined by applying the enacted tax rate in the year in which the temporary difference is expected to reverse.

($ in millions)	2023	2022
Deferred income tax assets related to
Employee benefits	$273	$275
Contingent and accrued liabilities	61	67
Operating loss and other carry-forwards	279	218
Operating lease liabilities	203	203
Research and development amortization	214	149
Other	201	168
Valuation allowance	(249)	(182)
Total	$982	$898
Deferred income tax liabilities related to
Property	$223	$223
Intangibles	696	720
Employee benefits	47	81
Operating lease right-of-use assets	207	206
Other	44	74
Total	$1,217	$1,304
Deferred income tax liabilities – net	($235)	($406)

Net operating loss and credit carryforwards

($ in millions)	2023	2022	Expiration
Available net operating loss carryforwards, tax effected:
Indefinite expiration	$86	$84	NA
Definite expiration	72	66	2024-2043
Total	$158	$150
Income tax credit carryforwards	$108	$89	2024-2043

A valuation allowance of $249 million and $182 million has been established as of December 31, 2023 and 2022, respectively, for carryforwards and certain other items when the ability to utilize them is not likely.

Undistributed foreign earnings

The Company had $5.8 billion of undistributed earnings of non-U.S. subsidiaries as of December 31, 2023. This amount relates to approximately 265 subsidiaries in approximately 70 taxable jurisdictions. The Company estimates repatriation of undistributed earnings of non-U.S. subsidiaries as of December 31, 2023 would result in a tax cost of $123 million.

As of December 31, 2023, the Company had not changed its intention to reinvest foreign earnings indefinitely or repatriate when it is tax effective to do so, and as such, has not established a liability for foreign withholding taxes or other costs that would be incurred if the earnings were repatriated.

Unrecognized tax benefits

The Company files federal, state and local income tax returns in numerous domestic and foreign jurisdictions. In most tax jurisdictions, returns are subject to examination by the relevant tax authorities for a number of years after the returns have been filed. The Company is no longer subject to examinations by tax authorities in any major tax jurisdiction for years before 2008. Additionally, the Company is no longer subject to examination by the Internal Revenue Service for U.S. federal income tax returns filed for years through 2018. The examinations of the Company’s U.S. federal income tax returns for 2019 and 2020 are currently underway.

A reconciliation of the total amounts of unrecognized tax benefits (excluding interest and penalties) as of December 31 follows:

($ in millions)	2023	2022	2021
January 1	$145	$158	$175
Current year tax positions - additions	16	19	12
Prior year tax positions - additions	33	2	10
Prior year tax positions - reductions	(14)	(2)	(2)
Statute of limitations expirations	(9)	(23)	(19)
Settlements	(51)	(3)	(21)
Foreign currency translation	1	(6)	3
December 31	$121	$145	$158

The Company expects that any reasonably possible change in the amount of unrecognized tax benefits in the next 12 months would not be significant. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $117 million as of December 31, 2023.

Interest and penalties

($ in millions)	2023	2022	2021
Accrued interest and penalties related to unrecognized tax benefits	$14	$17	$17
(Income)/loss recognized in income tax expense related to interest and penalties	($2)	$1	($2)

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense.