Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The following table summarizes income before income taxes and equity income:

	Years Ended December 31,
	2023		2022		2021
U.S. income	$	2,417	$	3,499	$	4,263
Non-U.S. income	430		404		572
Income before income taxes and equity income	$	2,847	$	3,903	$	4,835

Income Tax Expense	Years Ended December 31,
	2023		2022		2021
Current income tax expense
U.S. federal	$	341	$	342	$	669
U.S. state and local	144		85		233
Non-U.S.	91		80		136
Total current	576		507		1,038
Deferred income tax expense
U.S. federal	112		322		136
U.S. state and local	24		85		7
Non-U.S.	28		77		66
Total deferred	165		484		209
Total income tax provision	$	741	$	992	$	1,247

We have foreign subsidiaries with cumulative undistributed earnings that are indefinitely reinvested. Accordingly, no provision for U.S. income tax has been provided, and the unrecognized deferred tax liability is insignificant. An estimate of the undistributed earnings is $454 million and $390 million at December 31, 2023 and 2022.

A reconciliation between the U.S. federal statutory tax rate and the effective tax rate is as follows:

	Years Ended December 31,
	2023		2022		2021
U.S. federal statutory tax rate	21.0	%	21.0	%	21.0	%
Non-U.S. income taxed at other than the U.S. federal statutory rate	1.1		0.9		1.1
State and local income taxes	3.6		3.2		3.7
U.S. tax on non-U.S. earnings	3.8		0.3		(0.3)
Valuation allowance	(2.9)		0.3		0.4
Other	(0.6)		(0.3)		(0.1)
Effective tax rate	26.0	%	25.4	%	25.8	%

Deferred Income Tax Assets and Liabilities Deferred income tax assets and liabilities at December 31, 2023 and 2022 reflect the effect of temporary differences between amounts of assets, liabilities and equity for financial reporting purposes and the basis of such assets, liabilities and equity as measured by tax laws, as well as tax loss and tax credit carryforwards. The following table summarizes the components of temporary differences and carryforwards that give rise to deferred tax assets and liabilities:

	December 31, 2023		December 31, 2022
Deferred tax assets
Net operating loss carryforward - U.S.(a)	$	2	$	2
Net operating loss carryforward - non-U.S.(b)	115		128
Market value difference of loan portfolio	322		—
Accruals	186		147
Tax credits(c)	352		383
Other	164		171
Total deferred tax assets before valuation allowance	1,141		830
Less: valuation allowance	(236)		(318)
Total deferred tax assets	905		513
Deferred tax liabilities
Depreciable assets	2,354		1,827
Deferred acquisition costs	159		97
Market value difference of loan portfolio	—		32
Other	125		141
Total deferred tax liabilities	2,638		2,098
Net deferred tax liability	$	(1,733)	$	(1,585)

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(a)At December 31, 2023, U.S. operating loss deferred tax assets were $2 million, expiring through 2037, if not utilized.

(b)At December 31, 2023, non-U.S. operating loss deferred tax assets were $115 million, of which $28 million can be carried forward indefinitely and $87 million will expire by 2043, if not utilized.

(c)At December 31, 2023, U.S. tax credit carryforwards were $352 million, expiring through 2043, if not utilized.

As of December 31, 2023, we have $236 million in valuation allowances against deferred tax assets in U.S. jurisdictions. The decrease in valuation allowance of $82 million is primarily due to foreign tax credit expiration of $42 million and federal capital loss expiration of $37 million.

Unrecognized Tax Benefits	Years Ended December 31,
	2023		2022		2021
Beginning balance	$	63	$	70	$	62
Additions to prior years' tax positions	22		—		2
Reductions to prior years' tax positions	—		(6)		—
Additions to current year tax positions	9		—		12
Changes in tax positions due to lapse of statutory limitations	(8)		(2)		(6)
Foreign currency translation	—		1		—
Ending balance	$	86	$	63	$	70

At December 31, 2023, 2022 and 2021, there were $67 million, $51 million and $49 million of net unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate.

We recognize accrued interest and penalties associated with uncertain tax positions as a component of the income tax provision. Accrued interest and penalties are included within other liabilities on the consolidated balance sheets.

At December 31, 2023 and 2022, we had liabilities of $62 million and $58 million for income tax-related interest and penalties.

At December 31, 2023, it is not possible to reasonably estimate the expected change to the total amount of unrecognized tax benefits in the next twelve months.

Other Matters We are included in GM's consolidated U.S. federal income tax returns and certain U.S. state returns, and we are obligated to pay GM for our share of these tax liabilities. Amounts owed to GM for income taxes are recorded as a related party payable. At December 31, 2023 and 2022, we had $384 million and $8 million in related party taxes payable for federal and state tax liabilities.

Income tax returns are filed in multiple jurisdictions and are subject to examination by taxing authorities throughout the world. We have open tax years from 2010 to 2023 with various tax jurisdictions. These open years contain matters that could be subject to differing interpretations of applicable tax laws and regulations as they relate to the amount, character, timing or inclusion of revenue and/or recognition of expenses, or the sustainability of income tax credits. Certain of our state and foreign tax returns are currently under examination in various jurisdictions.