PRUDENTIAL FINANCIAL INC
For the period ended Dec 31, 2023. Filed Feb 21, 2024.
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FY2023 · Filed Feb 21, 2024
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Income Taxes
The differences between income taxes expected at the U.S. federal statutory income tax rate of 21% applicable for 2023, 2022 and 2021, and the reported income tax expense (benefit) are provided in the following table:
| Year Ended December 31, | |||||
|---|---|---|---|---|---|
| 2023 | 2022(1) | 2021(1) | |||
| (in millions) | |||||
| Expected federal income tax expense (benefit) at federal statutory rate | $645 | $(397) | $2,275 | ||
| Non-taxable investment income | (162) | (86) | (292) | ||
| Foreign taxes at other than U.S. rate | 191 | 122 | 163 | ||
| Low-income housing and other tax credits | (106) | (128) | (126) | ||
| Changes in tax law | (99) | (11) | 10 | ||
| GILTI | 5 | 101 | (1) | ||
| Sale of subsidiary | 0 | 86 | (25) | ||
| Noncontrolling interest | (4) | 5 | (14) | ||
| Non-deductible expenses | 29 | 21 | 11 | ||
| Change in valuation allowance | 111 | 16 | 13 | ||
| State taxes (net of federal benefit) | 20 | 13 | 18 | ||
| Other | (17) | (21) | (37) | ||
| Reported income tax expense (benefit) | $613 | $(279) | $1,995 | ||
| Effective tax rate | 20.0% | 14.7% | 18.4% | ||
Effective Tax Rate
The effective tax rate is the ratio of “Total income tax expense (benefit)” divided by “Income before income taxes and equity in earnings of operating joint ventures.” Our effective tax rate for fiscal years 2023, 2022 and 2021 was 20.0%, 14.7%, and 18.4%, respectively. For a detailed description of the nature of each significant reconciling item, see Note 17 to the Consolidated Financial Statements.
Unrecognized Tax Benefits
The Company’s liability for income taxes includes the liability for unrecognized tax benefits and interest that relate to tax years still subject to review by the Internal Revenue Service or other taxing authorities. The completion of review or the expiration of the Federal statute of limitations for a given audit period could result in an adjustment to the liability for income taxes. The total unrecognized benefit as of December 31, 2023, 2022 and 2021 was $133 million, $84 million and $12 million, respectively. It is possible the Company will pay the unrecognized tax benefit attributable to the Section 952 election described in Note 17 within the next 12 months as it pursues resolution of the matter. The Company cannot predict with reasonable accuracy whether there will be any significant changes within the next twelve months to our total unrecognized tax benefits related to tax years for which the statute of limitations has not expired.
Income Tax Expense vs. Income Tax Paid in Cash
Income tax expense recorded under U.S. GAAP routinely differs from the income taxes paid in cash in any given year. Income tax expense recorded under U.S. GAAP is based on income reported in our Consolidated Statements of Operations for the current period and it includes both current and deferred taxes. Income taxes paid during the year include tax installments made for the current year as well as tax payments and refunds related to prior periods.
For additional information regarding income tax related items, see “Business—Regulation” and Note 17 to the Consolidated Financial Statements.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.