Decrease in Unrecognized Tax Benefits is Reasonably Possible

[Table of Contents](#i5ec3aabfaa534f9c8fa2d2a5b7677d19_7)  
Cumulative Undistributed Foreign EarningsNo income taxes have been provided on indefinitely reinvested earnings of certain foreign subsidiaries at December 31, 2021.Withholding taxes of $65 million have been accrued on undistributed earnings that are not indefinitely reinvested and are primarily related to China, Honduras, Morocco and Germany. There are no other material liabilities for income taxes on the undistributed earnings of foreign subsidiaries, as the Company has concluded that such earnings are either indefinitely reinvested or should not give rise to additional income tax liabilities as a result of the distribution of such earnings.Uncertain Tax PositionsThe Company recognizes tax benefits only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Unrecognized tax benefits are tax benefits claimed in the Company’s tax returns that do not meet these recognition and measurement standards.A reconciliation of the gross change in the unrecognized tax benefits balance, excluding interest and penalties is as follows:

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Year Ended December 31, |
|  | 2021 |  | 2020 |  | 2019 |
|   | (in millions) |
| Balance at beginning of year | $ | 231  |  |  | $ | 217  |  |  | $ | 209  |  |
|  |  |  |  |  |  |
| Additions related to current year | 12  |  |  | 35  |  |  | 20  |  |
| Additions related to prior years | 20  |  |  | 31  |  |  | 51  |  |
| Reductions related to prior years | (36) |  |  | (20) |  |  | (46) |  |
| Reductions due to expirations of statute of limitations | (3) |  |  | (28) |  |  | (11) |  |
| Settlements | —  |  |  | (4) |  |  | (6) |  |
|  |  |  |  |  |  |
| Balance at end of year | $ | 224  |  |  | $ | 231  |  |  | $ | 217  |  |

A portion of the Company’s unrecognized tax benefits would, if recognized, reduce its effective tax rate. The remaining unrecognized tax benefits relate to tax positions that, if recognized, would result in an offsetting change in valuation allowance and for which only the timing of the benefit is uncertain. Recognition of these tax benefits would reduce the Company’s effective tax rate only through a reduction of accrued interest and penalties. As of December 31, 2021 and 2020, the amounts of unrecognized tax benefit that would reduce the Company’s effective tax rate were $207 million and $213 million, respectively. For the year ended December 31, 2019, the Company recorded approximately $26 million of additional reserves for uncertain tax positions, primarily related to prior year net operating loss and other carryforwards on which full valuation allowances have been recorded. For 2021 and 2020, respectively, $105 million and $103 million of reserves for uncertain tax positions would be offset by the write-off of a related deferred tax asset, if recognized.The Company recognizes interest and penalties relating to unrecognized tax benefits as part of income tax expense. Total accrued liabilities for interest and penalties were $28 million and $25 million at December 31, 2021 and 2020, respectively. Total interest and penalties recognized as part of income tax expense were expenses of $4 million, $13 million and $7 million for the years ended December 31, 2021, 2020 and 2019, respectively.The Company files tax returns in multiple jurisdictions and is subject to examination by taxing authorities throughout the world. Taxing jurisdictions significant to Aptiv include Barbados, China, Germany, Ireland, Luxembourg, Mexico, South Korea, the U.K. and the U.S. Open tax years related to these taxing jurisdictions remain subject to examination and could result in additional tax liabilities. In general, the Company’s affiliates are no longer subject to income tax examinations by foreign tax authorities for years before 2002. It is reasonably possible that audit settlements, the conclusion of current examinations or the expiration of the statute of limitations in several jurisdictions could impact the Company’s unrecognized tax benefits. A reversal of approximately $5 million is reasonably possible in the next 12 months, due to the running of statutes of limitations in various taxing jurisdictions.  
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