ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾

19. INCOME TAXESÌý

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The following is a summary of U.S. and non-U.S. provisions for current and deferred income taxes from continuing operations (dollars in millions):

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ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ Corporation

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ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ International

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The following schedule reconciles the differences between the U.S. federal income taxes at the U.S. statutory rate to our provision for income taxes from continuing operations (dollars in millions):

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ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ Corporation

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ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ International

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During 2023, the weighted average statutory rate for countries with pre-tax income (primarily our operations in ChinaÌý(25% statutory rate),ÌýGermany (30% statutory rate) and Luxembourg (25% statutory rate)) was offset by the weighted average statutory rate for countries with pre-tax losses (primarily our operations in the Netherlands (25.8% statutory rate)), resulting with no difference as compared to the 21% U.S. statutory rate reflected in the reconciliation above. During 2022Ìýand 2021, the weighted average statutory rate for countries with pre-tax income (in 2022 and 2021, primarily our operations in China (25% statutory rate), Germany (30% statutory rate)Ìýand Luxembourg (25% statutory rate))Ìýwas higher than the weighted average statutory rate for countries with pre-tax losses, resulting in a net expense of $8 millionÌýand $16 million, respectively, as compared to the 21% U.S. statutory rate reflected in the reconciliation above.

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During 2021, Albemarle agreed to waive any appeal in connection with an arbitration award we won and pay us $665 millionÌý(approximately $465 million, net of related legalÌýfees). Of the $465 million income recorded, $237 million was capital gain for tax purposes. The realization of capital gains allowed us to release the valuation allowance of $237 million ($57 million tax-effected) related to the capital loss carryover and tax basis in our Venator investment, as further discussed below.

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Under the U.S. Tax Reform Act’s global intangible low-taxed income (“GILTIâ€�) provision, our non-U.S. operations are generally subject to U.S. tax. We have elected to treat the GILTI as a current-period expense when incurred. The stated purpose of the GILTI rules is to generate additional U.S. tax related to income in non-U.S. jurisdictions which incur less than a blended 13.125% non-U.S. tax rate. Our non-U.S. income is subject to a blended rate greater than 13.125%; however, in practice, the GILTI regulations result in additional tax liability as a result of expense allocations which limit our ability to utilize foreign tax credits against the GILTI inclusion. For 2023, 2022 and 2021, we have incurred a tax expense of $3 million, tax expense of $3Ìýmillion and tax benefit of $4Ìýmillion, respectively, resulting from these expense allocations, net of other U.S. taxation on foreign operations.ÌýOur results for 2021 included a $15 million benefit from the Foreign Derived Intangible Income (“FDIIâ€�) provisions of the U.S. Tax Reform Act.

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The components of income from continuing operations before income taxes were as follows (dollars in millions):

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ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ Corporation

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ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ International

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Components of deferred income tax assets and liabilities were as follows (dollars in millions):

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ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ Corporation

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ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ International

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We evaluate deferred tax assets to determine whether it is more likely than not that they will be realized. Valuation allowances are reviewed each period on a tax jurisdiction basis to analyze whether there is sufficient positive or negative evidence to support a change in judgment about the realizability of the related deferred tax assets. These conclusions require significant judgment. In evaluating the objective evidence that historical results provide, we consider cumulative income or losses during the applicable three-year period. Cumulative losses incurred over the three-year period limits our ability to consider other evidence such as our projections for the future. Our judgments regarding valuation allowances are also influenced by factors outside of business results, including the costs and risks associated with any tax planning associated with utilizing a deferred tax asset.

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As a result of income tax accounting guidance to use a three-year cumulative loss and with the negative economic impacts of recent events, including economic challenges in Europe, we established a $14 million valuation allowance against the entire net deferred tax asset in the United Kingdom as of December 31, 2023Ìýand a $49 million valuation allowance against the entire net deferred tax asset in the Netherlands as of December 31, 2022.

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We have gross net operating losses (“NOLsâ€�) of $884Ìýmillion ($223Ìýmillion tax-effected) in various non-U.S. jurisdictions. While the majority of the non-U.S. NOLs have no expiration date, $42Ìýmillion ($7Ìýmillion tax-effected) have a limited life (of which $2ÌýmillionÌýare subject to a valuation allowance), of which none are scheduled to expire in 2024. We had noÌýNOLs expire unused in 2023.Ìý

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We have gross U.S. federal NOLs of $31Ìýmillion ($6 million tax-effected), which were primarily acquired through acquisitions subject to tax change of control limitations. We expect to be able to utilize all of these NOLs, and therefore they are not subject to a valuation allowance.

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Included in the $884Ìýmillion of gross non-U.S. NOLs is $256Ìýmillion ($64Ìýmillion tax-effected) attributable to our Luxembourg entities. As of DecemberÌý31, 2023, due to the uncertainty surrounding the realization of the benefits of these losses, there is a valuation allowance of $22Ìýmillion against these net tax-effected NOLs of $64 million.

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We have $14Ìýmillion tax effected federal andÌýstate capital loss carryovers, all of which are subject to a valuation allowance. Capital loss carryovers may only be utilized against capital gains and have a 5-year carryforward period, generally expiring at the end of 2028.Ìý

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During 2021, we recognized $237 million ($57 million tax-effected) of capital gain from the Albemarle Settlement, of which we utilized $28 million tax-effected of U.S. capital loss carryovers (which were subject to a valuation allowance) and released $29 million tax-effected valuation allowance against the tax basis greater than book basis in our Venator investment that will now be realizable. During 2023, our remaining interest in Venator became worthless as a result ofÌýits bankruptcy and we realized a tax capital loss from our tax basis in our Venator investment. The related $29 million tax-effected capital losses are carried back to 2021, since now realized. All of our excess capital losses remain subject to a full valuation allowance.

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Uncertainties regarding expected future income in certain jurisdictions could affect the realization of deferred tax assets in those jurisdictions and result in additional valuation allowances in future periods, or, in the case of unexpected pre-tax earnings, the release of valuation allowances in future periods.

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The following is a summary of changes in the valuation allowance (dollars in millions):

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ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ Corporation

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ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ International

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The following is a reconciliation of our unrecognized tax benefits (dollars in millions):

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As of December 31, 2023 and 2022, the amount of unrecognized tax benefits (not including interest and penalties) which, if recognized, would affect the effective tax rate is $5Ìýmillion and $7Ìýmillion, respectively. During 2023, we recorded a $32Ìýmillion decrease to our unrecognized tax benefits related to the timing of tax losses on our Venator investment. This decrease was offset by a decrease in net deferred tax assets and, therefore, did not affect income tax expense.Ìý

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On February 28, 2023, we completed the sale of our Textile Effects Business to Archroma. Due to the sale of these legal entities, our unrecognized tax benefits (and associated interest and penalties) transferred to Archroma with no corresponding income tax benefit for the reduction since we have provided indemnification for pre-acquisition income taxes.Ìý

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During 2023, we concluded and settled tax examinations in the U.S. (federal and various states), Germany, Indonesia, SingaporeÌýand Thailand. During 2022, we concluded and settled tax examinations in the U.S. (federal and various states), China and Japan. During 2021, we concluded and settled tax examinations in the U.S. (federal and various states), Germany, Taiwan and Thailand.Ìý

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During 2023, for unrecognized tax benefits that impact tax expense, we recorded a net decrease in unrecognized tax benefits with a corresponding income tax benefit (not including interest and penalties) of $1Ìýmillion. During 2022, for unrecognized tax benefits that impact tax expense, we recorded a net increase in unrecognized tax benefits with a corresponding income tax expense (not including interest and penalties) of $3Ìýmillion. During 2021, for unrecognized tax benefits that impact tax expense, we recorded a net increase in unrecognized tax benefits with a corresponding income tax expense (not including interest and penalties) of $3Ìýmillion.Ìý

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WeÌýrecognized accrued interest related to unrecognized tax benefits in income tax expense as provided below (dollars in millions):

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We conduct business globally, andÌýas a result, we file income tax returns in U.S. federal, various U.S. state and various non-U.S. jurisdictions. The following table summarizes the tax years that remain subject to examination by major tax jurisdictions:

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Certain of our U.S. and non-U.S. income tax returns are currently under various stages of audit by applicable tax authorities and the amounts ultimately agreed upon in resolution of the issues raised may differ materially from the amounts accrued.

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We estimate that it is reasonably possible that certain of ourÌýunrecognized tax benefits could change within 12 months of the reporting date with a resulting decrease in the unrecognized tax benefits within a reasonably possible range of $1Ìýmillion to $2Ìýmillion. For the 12-month period from the reporting date, we would expect that aÌýdecrease in our unrecognized tax benefits would result in a $1 million benefit to our income tax expense.

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In connection with the provisions of U.S. Tax Reform, all non-U.S. earnings have generally been subject to U.S. tax and may be repatriated without incurring additional U.S. tax liability. Such repatriation may potentially be subject to limited foreign withholding taxes.ÌýWe intend to continue to invest most of these earnings indefinitely within the local countries and do not expect to incur any significant additional taxes. There are certain countries where we do intend to repatriate some of our earnings, and we have accrued all withholding taxes for such amounts.

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