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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The geographical sources of income (loss) before income taxes were as follows (in millions):
Year Ended December 31,
 202420232022
U.S.$486 $167 $(69)
Outside U.S.149 167 613 
Total$635 $334 $544 
Income tax expense (benefit) consisted of the following (in millions):
Year Ended December 31,
 202420232022
Current:
Federal$129 $2 $141 
State27 8 22 
Foreign45 63 126 
Total current$201 $73 $289 
Deferred:
Federal(83)(5)(168)
State(10)(7)(22)
Foreign(1)(23)(18)
Total deferred$(94)$(35)$(208)
Total$107 $38 $81 

The Company’s effective tax rates were 16.9%, 11.4% and 14.9% for the years ended December 31, 2024, 2023 and 2022, respectively.

A reconciliation of the U.S. federal statutory income tax rate to our actual income tax rate is provided below:
Year Ended December 31,
202420232022
Provision computed at statutory rate21.0 %21.0 %21.0 %
Remeasurement of deferred taxes2.9 (2.4)(0.4)
Change in valuation allowance(2.9)2.3 0.1 
U.S. impact of Enterprise acquisition 0.1 0.3 0.4 
Change in contingent income tax reserves0.5 0.4 (0.3)
Foreign earnings subject to U.S. taxation(6.0)(5.3)(3.5)
Foreign rate differential0.6 (0.1)(3.4)
State income tax, net of federal tax benefit1.6 0.5 (0.5)
Tax credits(2.2)(5.5)(3.1)
Equity compensation deductions— 0.4 (0.1)
Return to provision and other true ups0.4 (1.8)1.5 
Settlements with tax authorities(0.2)0.3 2.0 
Permanent differences and other1.1 1.3 1.2 
Provision for income taxes16.9 %11.4 %14.9 %

For the year ended December 31, 2024, the Company’s effective tax rate was lower than the federal statutory rate of 21% primarily due to the tax benefit related to foreign earnings subject to U.S. taxation, and the generation of tax credits. For the year ended December 31, 2023, the Company’s effective tax rate was lower than the federal statutory rate of 21% primarily due to the tax benefit related to foreign earnings subject to U.S. taxation, remeasurements of deferred taxes, and the generation of tax credits. For the year ended December 31, 2022, the Company’s effective tax rate was lower than the federal statutory rate of 21% due to lower tax rates in foreign jurisdictions, the generation of tax credits and the favorable impacts of foreign earnings subject to U.S. taxation.

The Organization for Economic Co-Operation and Development (OECD) has implemented a global minimum tax framework of 15% for companies with annual revenues greater than €750 million, referred to as Pillar 2. Aspects of Pillar 2 are effective beginning January 1, 2024 and 2025, in various jurisdictions in which the Company operates. There is uncertainty about whether the U.S. will enact legislation to adopt Pillar 2. As a result of the Company’s operational footprint, Management has assessed the jurisdictions where legislation is enacted and applicable Transitional Safe Harbor provisions, and has determined an immaterial impact on the Company’s financial results.

The Company earns a significant amount of its operating income outside of the U.S. that is taxed at rates different than the U.S. federal statutory rate. The Company’s principal foreign jurisdictions that provide sources of operating income are the U.K. and Singapore. In Singapore, the Company previously benefited from an incentivized corporate income tax rate from the Singapore
Economic Development Board of 10.5% and a full exemption from withholding taxes. Without these benefits, the corporate tax rate in Singapore is 17% and the withholding tax rate is 10%. The Company decided to forgo a renewal of this benefit beyond 2023; therefore the 2024 tax rate is computed using the standard corporate rate of 17%. Under current U.S. Foreign Tax Credit rules, any withholding taxes paid are creditable for U.S. tax purposes, negating any impact of the increased withholding rate.

Tax effects of temporary differences that resulted in deferred tax assets and liabilities are as follows (in millions):
 December 31,
 20242023
Deferred tax assets:
Capitalized research expenditures$292 $225 
Deferred revenue102 76 
Tax credits45 43 
Net operating loss carryforwards400 435 
Other accruals34 38 
Inventory items24 23 
Sales return/rebate reserve53 42 
Share-based compensation expense16 15 
Legal accrual1 13 
Lease liabilities24 23 
Valuation allowance(404)(422)
Total deferred tax assets$587 $511 
Deferred tax liabilities:
Depreciation and amortization83 103 
Unrealized gains and losses on securities and investments22 11 
Undistributed earnings3 2 
Right of use lease assets19 19 
Other5 5 
Total deferred tax liabilities$132 $140 
Net deferred tax assets$455 $371 

For tax years beginning in 2022, the Tax Cuts and Jobs Act of 2017 imposed a requirement that all R&D expenses be capitalized and amortized for U.S. tax purposes. The effect of this new provision is an increase of approximately $74 million and $100 million to deferred tax assets for the years ended December 31, 2024 and 2023, respectively, with corresponding increases to the current tax liabilities.

The Company’s valuation allowance consists of certain net operating loss (“NOL”) and credit carryforwards for which the Company believes it is more likely than not that a tax benefit will not be realized. With respect to all other deferred tax assets, the Company believes it is more likely than not that the results of future operations will generate sufficient taxable income to realize a tax benefit. The Company’s valuation allowance decreased by $18 million from 2023, primarily due to the impact of remeasuring deferred taxes resulting from a reduction in a statutory tax rate which becomes effective in 2025.

As of December 31, 2024, the Company had approximately $400 million (tax effected) of “NOLs” and $45 million of credit carryforwards. Approximately $160 million of NOLs will expire beginning in 2025 through 2043, and $34 million of credits will expire beginning in 2025 through 2042, with the remaining amounts of NOLs and credit carryforwards having no expiration dates.

The Company is subject to the GILTI, BEAT and FDII provisions, for which we recorded an income tax benefit of $38 million, $16 million and $19 million for the years ended December 31, 2024, 2023 and 2022, respectively. These impacts are included in the calculation of the Company’s effective tax rate.

The Company is not permanently reinvested with respect to its U.S. directly-owned foreign subsidiaries. The Company is subject to U.S. income tax on substantially all foreign earnings under GILTI, while any remaining foreign earnings are eligible for a dividends received deduction. As a result, future repatriation of earnings will not be subject to additional U.S. federal income tax but may be subject to currency translation gains or losses. Where required, the Company has recorded a deferred tax liability for foreign withholding taxes on current earnings. Additionally, gains and losses on any future taxable dispositions of U.S.-owned foreign affiliates continue to be subject to U.S. income tax.
The Company has not recognized deferred tax liabilities in the U.S. with respect to its outside basis differences in its directly-owned foreign affiliates. It is not practicable to determine the amount of unrecognized deferred tax liabilities on these indefinitely reinvested earnings.

Unrecognized tax benefits
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in millions):
Year ended December 31,
20242023
Balance at beginning of year$17 $7 
Additions for tax positions related to the current year14 11 
Additions for tax positions related to prior years— — 
Settlements for tax positions— — 
Lapse of statutes(1)(1)
Balance at end of year$30 $17 

As of December 31, 2024 and December 31, 2023, there were $13 million and $9 million of unrecognized tax benefits that, if recognized, would affect the annual effective tax rate. Additionally, fiscal years 2009 through 2024 remain open to examination by multiple foreign and U.S. state taxing jurisdictions.

Amounts associated with positions the Company expects to be settled within the next twelve months are classified as current assets or current liabilities on the Consolidated Balance Sheets. Due to uncertainties in any tax audit or litigation outcome, the Company’s estimates of the ultimate settlements of uncertain tax positions may change and the actual tax benefits may differ significantly from estimates.
The Company did not recognize any net tax benefits associated with interest and penalties related to income tax matters during the year ended December 31, 2024. The Company recognized a net tax benefit of less than $1 million associated with interest and penalties related to income tax matters during the years ended December 31, 2023 and 2022. The expense or benefit associated with interest and penalties is reflected within Income tax expense on the Consolidated Statements of Operations. The Company has included $4 million of estimated interest and penalty obligations within Other long-term liabilities on the Consolidated Balance Sheets each as of December 31, 2024 and 2023, respectively.