v3.22.4
Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income taxes Income taxesIncome before income taxes is comprised of the following components:
For Years Ended December 31,
202220212020
U.S.$9,122 $7,998 $5,210 
Non-U.S.910 921 807 
Total$10,032 $8,919 $6,017 
Provision for income taxes is comprised of the following components:
For Years Ended December 31,
202220212020
CurrentDeferredTotalCurrentDeferredTotalCurrentDeferredTotal
U.S. federal$1,235 $(223)$1,012 $948 $(23)$925 $357 $(122)$235 
Non-U.S.212 32 244 169 38 207 192 (15)177 
U.S. state27 — 27 18 — 18 10 — 10 
Total$1,474 $(191)$1,283 $1,135 $15 $1,150 $559 $(137)$422 
Principal reconciling items from the U.S. statutory income tax rate to the effective tax rate (provision for income taxes as a percentage of income before income taxes) are as follows:
For Years Ended December 31,
202220212020
U.S. statutory income tax rate21.0 %21.0 %21.0 %
Foreign derived intangible income(7.0)(6.1)(6.1)
R&D tax credit(0.9)(0.9)(1.3)
Stock compensation(0.7)(1.5)(2.5)
Changes in uncertain tax positions0.1 (0.2)(4.0)
Other0.3 0.6 (0.1)
Effective tax rate12.8 %12.9 %7.0 %
On August 16, 2022, the U.S. government enacted the Inflation Reduction Act, which introduces a new 15% corporate minimum tax based on adjusted financial statement income effective January 1, 2023, and provisions intended to mitigate climate change, including tax credit incentives for investments that reduce greenhouse gas emissions. Based on our current analysis of the provisions, this legislation will not have a material impact on our consolidated financial statements.
The earnings represented by non-cash operating assets, such as fixed assets and inventory, will continue to be permanently reinvested outside the United States. Provisions of the U.S. Tax Cuts and Jobs Act (the Tax Act), such as the one-time tax on indefinitely reinvested earnings and the global intangible low-taxed income (GILTI) tax for years beginning in 2018, eliminate any additional U.S. taxation resulting from repatriation of earnings of non-U.S. subsidiaries to the United States. Consequently, no U.S. tax provision has been made for the future remittance of these earnings. However, withholding or distribution taxes in certain non-U.S. jurisdictions will be incurred upon repatriation of available cash to the United States. A provision has been made for deferred taxes on these undistributed earnings to the extent that repatriation of the available cash to the United States is expected to result in a tax liability. As of December 31, 2022, we have no basis differences that would result in material unrecognized deferred tax liabilities.
We have made an allowable policy election to account for the effects of GILTI as a component of income tax expense in the period in which the tax is incurred.
The primary components of deferred tax assets and liabilities are as follows:
December 31,
20222021
Deferred tax assets:
Capitalized R&D$380 $— 
Deferred loss and tax credit carryforwards201 207 
Accrued expenses182 209 
Stock compensation132 110 
Inventories and related reserves88 74 
Retirement costs for defined benefit and retiree health care43 — 
Other36 40 
Total deferred tax assets, before valuation allowance1,062 640 
Valuation allowance(189)(188)
Total deferred tax assets, after valuation allowance873 452 
Deferred tax liabilities:
Property, plant and equipment(410)(197)
International earnings(35)(38)
Retirement costs for defined benefit and retiree health care— (15)
Acquisition-related intangibles and fair-value adjustments(13)(12)
Other(8)(14)
Total deferred tax liabilities(466)(276)
Net deferred tax asset$407 $176 
The deferred tax assets and liabilities based on tax jurisdictions are presented on our Consolidated Balance Sheets as follows:
December 31,
20222021
Deferred tax assets$473 $263 
Deferred tax liabilities(66)(87)
Net deferred tax asset$407 $176 
We make an ongoing assessment regarding the realization of U.S. and non-U.S. deferred tax assets. This assessment is based on our evaluation of relevant criteria, including the existence of deferred tax liabilities that can be used to absorb deferred tax assets, taxable income in prior carryback years and expectations for future taxable income. Valuation allowances increased $1 million in 2022, increased $9 million in 2021 and decreased $1 million in 2020. These changes had no impact to net income in 2022, 2021 or 2020.
We have no material tax loss carryforwards as of December 31, 2022.
Cash payments made for income taxes, net of refunds, were $1.48 billion, $1.20 billion and $720 million in 2022, 2021 and 2020, respectively.
Uncertain tax positions
We operate in a number of tax jurisdictions, and our income tax returns are subject to examination by tax authorities in those jurisdictions who may challenge any item on these tax returns. Because the matters challenged by authorities are typically complex, their ultimate outcome is uncertain. Before any benefit can be recorded in our financial statements, we must determine that it is “more likely than not” that a tax position will be sustained by the appropriate tax authorities. We recognize accrued interest related to uncertain tax positions and penalties as components of OI&E.
The changes in the total amounts of uncertain tax positions are as follows:
202220212020
Balance, January 1$69 $89 $303 
Additions based on tax positions related to the current year3 2 3 
Additions for tax positions of prior years10 7 35 
Reductions for tax positions of prior years— (6)(249)
Settlements with tax authorities— (23)— 
Expiration of the statute of limitations for assessing taxes— — (3)
Balance, December 31$82 $69 $89 
Interest income (expense) recognized in the year ended December 31$(1)$(5)$39 
Interest payable as of December 31$3 $13 $8 
The liability for uncertain tax positions is a component of other long-term liabilities on our Consolidated Balance Sheets.
All of the $82 million and $69 million liabilities for uncertain tax positions as of December 31, 2022 and 2021, respectively, are comprised of positions that, if recognized, would lower the effective tax rate. If these liabilities are ultimately realized, no existing deferred tax assets in 2022 or 2021 would also be realized. Reductions for tax positions of prior years in 2020 include a $249 million tax benefit for the effective settlement of a depreciation-related uncertain tax position. Accrued interest of $46 million related to this uncertain tax position was reversed and included in OI&E.
As of December 31, 2022, the statute of limitations remains open for U.S. federal tax returns for 2017 and following years. Certain tax treaty procedures for relief from double taxation remain pending for U.S. federal tax returns for the years 2015 through 2021.
In non-U.S. jurisdictions, the years open to audit represent the years still open under the statute of limitations. With respect to major jurisdictions outside the United States, our subsidiaries are no longer subject to income tax audits for years before 2012.