v3.25.0.1
Income Taxes (Notes)
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
We recognize income tax-related penalties in Provision for/(Benefit from) income taxes on our consolidated income statements. We recognize income tax-related interest income and interest expense in Other income/(loss), net on our consolidated income statements.

We account for U.S. tax on global intangible low-taxed income in the period incurred, and we account for investment tax credits using the deferral method.

Valuation of Deferred Tax Assets and Liabilities

Deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences that exist between the financial statement carrying value of assets and liabilities and their respective tax bases, and net operating loss carryforwards and tax credit carryforwards on a taxing jurisdiction basis. We measure deferred tax assets and liabilities using enacted tax rates that will apply in the years in which we expect the temporary differences to be recovered or paid.
NOTE 7. INCOME TAXES (Continued)

Our accounting for deferred tax consequences represents our best estimate of the likely future tax consequences of events that have been recognized on our consolidated financial statements or tax returns and their future probability.  In assessing the need for a valuation allowance, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets.  If, based on the weight of available evidence, it is more likely than not that the deferred tax assets will not be realized, we record a valuation allowance.

Components of Income Taxes

Components of income taxes excluding cumulative effects of changes in accounting principles, other comprehensive income/(loss), and equity in net results of affiliated companies accounted for after-tax for the years ended December 31 were as follows:
 202220232024
Income/(Loss) before income taxes (in millions)
   
U.S.$(6,548)$3,395 $3,424 
Non-U.S.3,532 572 3,809 
Total$(3,016)$3,967 $7,233 
Provision for/(Benefit from) income taxes (in millions) 
Current 
Federal$68 $62 $78 
Non-U.S.781 948 791 
State and local123 229 107 
Total current972 1,239 976 
Deferred 
Federal(2,292)(413)25 
Non-U.S.688 (1,149)303 
State and local(232)(39)35 
Total deferred(1,836)(1,601)363 
Total$(864)$(362)$1,339 
Reconciliation of effective tax rate 
U.S. statutory tax rate21.0 %21.0 %21.0 %
Non-U.S. tax rate differential(8.7)(3.4)2.9 
State and local income taxes2.3 1.9 1.7 
General business credits13.0 (15.9)(5.9)
Nontaxable foreign currency gains and losses(4.2)— — 
Dispositions and restructurings (a)(7.0)(14.7)— 
U.S. tax on non-U.S. earnings2.8 7.7 (0.2)
Prior year settlements and claims1.5 1.2 0.1 
Tax incentives2.0 (3.9)(2.2)
Enacted change in tax laws(2.0)0.1 0.4 
Valuation allowances6.2 (0.7)(1.0)
Other1.7 (2.4)1.7 
Effective tax rate28.6 %(9.1)%18.5 %
__________
(a)2023 includes benefits of $610 million associated with legal entity restructuring within our leasing operations and China.

In 2022, we reversed $405 million of previously established U.S. valuation allowances, primarily as a result of planning actions.

At December 31, 2024, $14.7 billion of non-U.S. earnings are considered indefinitely reinvested in operations outside the United States, for which deferred taxes have not been provided. Quantification of the deferred tax liability, if any, associated with indefinitely reinvested basis differences is not practicable.
NOTE 7. INCOME TAXES (Continued)

Components of Deferred Tax Assets and Liabilities

The components of deferred tax assets and liabilities at December 31 were as follows (in millions):
 20232024
Deferred tax assets  
Net operating loss carryforwards$7,262 $7,458 
Tax credit carryforwards8,944 7,993 
Research expenditures3,799 4,873 
Dealer and dealers’ customer allowances and claims2,752 3,498 
Employee benefit plans2,470 2,010 
Other foreign deferred tax assets3,456 2,691 
All other2,299 1,995 
Total gross deferred tax assets30,982 30,518 
Less: Valuation allowances(4,187)(3,856)
Total net deferred tax assets26,795 26,662 
Deferred tax liabilities 
Leasing transactions3,253 3,523 
Depreciation and amortization (excluding leasing transactions)3,389 3,590 
Finance receivables699 524 
Other foreign deferred tax liabilities1,255 1,381 
All other2,219 2,343 
Total deferred tax liabilities10,815 11,361 
Net deferred tax assets/(liabilities)$15,980 $15,301 

Net operating loss carryforwards for tax purposes were $23.7 billion at December 31, 2024. This resulted in a deferred tax asset of $7.5 billion, of which $6.1 billion have no expiration date. A substantial portion of the remaining losses will expire beyond 2030. Tax credits available to offset future tax liabilities are $8.0 billion. The majority of these credits have a remaining carryforward period of twelve years or more. Tax benefits from net operating loss carryforwards and tax credit carryforwards are evaluated on an ongoing basis, including a review of historical and projected future operating results, the eligible carryforward period, and available tax planning strategies. In our evaluation, we anticipate making tax elections that change the order of tax credit carryforward utilization on U.S. tax returns.
NOTE 7. INCOME TAXES (Continued)

Other

A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31 were as follows (in millions):
 20232024
Beginning balance$2,939 $2,913 
Increase – tax positions in prior periods103 512 
Increase – tax positions in current period45 11 
Decrease – tax positions in prior periods(79)(775)
Settlements(115)(13)
Lapse of statute of limitations(33)(5)
Foreign currency translation adjustment53 (103)
Ending balance$2,913 $2,540 

The amount of unrecognized tax benefits that would affect the effective tax rate if recognized was $2.9 billion and $2.5 billion as of December 31, 2023 and 2024, respectively.

Examinations by tax authorities have been completed through 2008 in Germany; 2014 in the United States; 2015 in Mexico; 2018 in Canada, Spain, and the United Kingdom; and 2019 in China and India.  

Net tax-related interest expense was $23 million, $16 million, and $21 million for the years ended December 31, 2022, 2023, and 2024, respectively. These were reported in Other income/(loss), net on our consolidated income statements. At December 31, 2023 and 2024, we recognized a net tax-related interest receivable of $25 million and $37 million, respectively.

Cash paid for income taxes was $801 million, $1,027 million, and $1,218 million in 2022, 2023, and 2024, respectively.