Income Taxes

12 Months Ended

Dec. 31, 2024

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)	2024	2023	2022
Current
U.S. federal	$67	$95	$136
U.S. state and local	15	14	20
Foreign	490	506	315
Total current income tax expense	$572	$615	$471
Deferred
U.S. federal	($2)	($156)	($77)
U.S. state and local	(8)	(15)	(7)
Foreign	(87)	(16)	(67)
Total deferred income tax benefit	($97)	($187)	($151)
Total income tax expense	$475	$428	$320

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

	2024		2023		2022
U.S. federal income tax rate	21.0	%	21.0	%	21.0	%
Changes in rate due to:
Taxes on non-U.S. earnings	4.8		4.3		3.6
Change in valuation allowance reserves	3.5		3.6		0.6
Other foreign tax effects	(4.7)		(2.8)		(1.7)
Pillar 2 global minimum tax	0.8		—		—
Impairment and other related charges, net	(0.2)		2.0		1.4
Uncertain tax positions	1.2		(1.8)		(0.3)
U.S. tax cost/(benefit) on foreign operations	0.9		(0.9)		(0.2)
U.S. tax incentives	(0.8)		(0.8)		(1.1)
Tax benefits from equity awards	—		(0.2)		(0.3)
U.S. state and local taxes	0.3		—		0.7
Other	(1.2)		0.9		(0.1)
Effective income tax rate	25.6	%	25.3	%	23.6	%

Income/(loss) before income taxes of the Company’s U.S. operations for 2024, 2023 and 2022 was $210 million, $(129) million and $290 million, respectively. Income before income taxes of the Company’s foreign operations for 2024, 2023 and 2022 was $1,642 million, $1,819 million and $1,065 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)	2024	2023
Deferred income tax assets related to
Employee benefits	$215	$266
Contingent and accrued liabilities	105	61
Operating loss and other carry-forwards	389	270
Operating lease liabilities	144	187
Research and development amortization	259	213
Other	280	198
Valuation allowance	(327)	(240)
Total	$1,065	$955
Deferred income tax liabilities related to
Property	$268	$220
Intangibles	607	679
Employee benefits	39	47
Operating lease right-of-use assets	148	194
Other	105	43
Total	$1,167	$1,183
Deferred income tax liabilities – net	($102)	($228)

Net operating loss and credit carryforwards

($ in millions)	2024	2023	Expiration
Available net operating loss carryforwards, tax effected:
Indefinite expiration	$85	$86	NA
Definite expiration	150	72	2025-2044
Total	$235	$158
Income tax credit carryforwards	$112	$108	2025-2034

A valuation allowance of $327 million and $240 million has been established as of December 31, 2024 and 2023, respectively, for carryforwards and certain other items when the ability to utilize them is not likely.

Undistributed foreign earnings

The Company had $6.1 billion of undistributed earnings of non-U.S. subsidiaries as of December 31, 2024. This amount relates to approximately 245 subsidiaries in approximately 65 taxable jurisdictions. The Company estimates repatriation of undistributed earnings of non-U.S. subsidiaries as of December 31, 2024 would result in a tax cost of $142 million.

As of December 31, 2024, 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)	2024	2023	2022
January 1	$121	$145	$158
Current year tax positions - additions	8	16	19
Prior year tax positions - additions	43	33	2
Prior year tax positions - reductions	(1)	(14)	(2)
Statute of limitations expirations	(20)	(9)	(23)
Settlements	(6)	(51)	(3)
Foreign currency translation	(4)	1	(6)
December 31	$141	$121	$145

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 $138 million as of December 31, 2024.

Interest and penalties

($ in millions)	2024	2023	2022
Accrued interest and penalties related to unrecognized tax benefits	$11	$14	$17
(Income)/loss recognized in income tax expense related to interest and penalties	($2)	($2)	$1

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