Dividend deduction percentage

  
Effective Tax Rate ReconciliationReconciliation between the U.S. federal statutory income tax rate to the actual effective tax rate was as follows:

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|   | December 31, |
|  | 2021 |  | 2020 |  | 2019 |
| Statutory tax rate | 21.0  | % |  | 21.0  | % |  | 21.0  | % |
| Difference in effective tax rate on foreign earnings and remittances(1) | 8.0  |  |  | (6.9) |  |  | (6.8) |  |
| Tax benefit from supply chain optimization | (5.8) |  |  | (5.0) |  |  | (1.0) |  |
| Unrecognized tax benefit, net of reversals | 0.7  |  |  | 5.7  |  |  | 3.4  |  |
|  |  |  |  |  |  |
| Tax impact on gains on business disposal | 4.0  |  |  | —  |  |  | —  |  |
| Deferred taxes on deemed repatriation | 2.7  |  |  | (0.2) |  |  | 0.8  |  |
| Global intangible low-taxed income | 4.1  |  |  | 5.3  |  |  | —  |  |
| Foreign-derived intangible income | (1.6) |  |  | (0.3) |  |  | (0.3) |  |
| U.S. foreign tax credit - general limitation | (3.1) |  |  | (1.9) |  |  | (1.2) |  |
| Research and development credit | (1.4) |  |  | (1.0) |  |  | (0.9) |  |
| Acquisition costs | 2.4  |  |  | 1.0  |  |  | 0.5  |  |
| Establishment (release) of valuation allowance on state deferred | (3.0) |  |  | (0.4) |  |  | 1.7  |  |
| State and local taxes | (4.8) |  |  | (0.6) |  |  | (0.8) |  |
| Other, net | (2.0) |  |  | 0.1  |  |  | 1.0  |  |
| Effective tax rate | 21.2  | % |  | 16.8  | % |  | 17.4  | % |

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ (1)For 2021, the rate includes rate change impacts related to the Netherlands and United Kingdom.The effective tax rate reflects the impact of an unfavorable mix of earnings, higher repatriation costs and the cost of global intangible low-taxed income ("GILTI"), partially offset by tax benefits related to supply chain optimization and credits. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”) that significantly revised the U.S. tax code effective January 1, 2018. The Tax Act created significant international tax provisions, including GILTI. The Company has elected to treat GILTI as a current period cost if and when incurred. This tax position resulted in a net $15 million income tax expense for the year ended December 31, 2021, which includes a provision to return adjustment.The U.S. consolidated group has historically generated taxable income after the inclusion of foreign dividends which has allowed the Company to realize its federal deferred tax assets. Foreign dividends are subject to a 100% dividends received deduction under the Tax Act and do not serve as a source of federal taxable income. However, as of December 31, 2021 the U.S. consolidated group is in a cumulative income position, and is expected to continue to be in a cumulative income position primarily due to the inclusion of GILTI and expects to realize tax benefits for the reversal of temporary differences, including the significant deferred tax liabilities associated with the Merger with N&B.Further, as of December 31, 2021 the Company has maintained a valuation allowance of approximately $2 million on certain state tax attributes based on a state taxable income forecast. The main inputs into the forecast are the 2021 taxable income projections. Changes in the performance of the North American business, the Company’s transfer pricing policies and adjustments to the Company’s U.S. tax profile could impact the estimate. 79
