INCOME TAXES

6 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXESIncome tax expense for the three months ended June 30, 2022, was $93.3 million, or 22.9% of income before taxes, compared to $3.2 million, or 0.6% of income before taxes, for the three months ended June 30, 2021. Income tax expense for the six months ended June 30, 2022, was $126.3 million, or 15.6% of income before taxes, compared to $16.8 million, or 1.7% of income before taxes, for the six months ended June 30, 2021.

The effective tax rate for the three months ended June 30, 2022, differed from the U.S. federal statutory tax rate of 21% mainly due to U.S. tax on foreign earnings and state income taxes (net of federal benefit), partially offset by excess tax benefits associated with employee equity plans, the effect of income earned by certain overseas entities being taxed at rates lower than the federal statutory rate, and the federal research and development (“R&D”) credit benefit.

The effective tax rates for the six months ended June 30, 2022, and for the three and six months ended June 30, 2021, differed from the U.S. federal statutory rate of 21% mainly due to excess tax benefits associated with employee equity plans, the effect of income earned by certain overseas entities being taxed at rates lower than the federal statutory rate, and the federal R&D credit benefit, partially offset by U.S. tax on foreign earnings and state income taxes (net of federal benefit).

The effective tax rate for the three and six months ended June 30, 2021, included a one-time benefit of $66.4 million from re-measurement of the Company’s Swiss deferred tax assets resulting from the extension of the economic useful life of certain intangible assets.

The provision for income taxes for the three and six months ended June 30, 2022, reflected the impact of a change in U.S. tax law effective January 1, 2022, which requires the capitalization and amortization of research and experimental (“R&E”) expenditures incurred after December 31, 2021.The provision for income taxes for the three and six months ended June 30, 2022, included excess tax benefits associated with employee equity plans of $9.3 million and $62.3 million, which reduced the Company’s effective tax rate by 2.3 and 7.7 percentage points, respectively. The provision for income taxes for the three and six months ended June 30, 2021, included excess tax benefits associated with employee equity plans of $43.6 million and $117.0 million, which reduced the Company’s effective tax rate by 8.3 and 12.0 percentage points, respectively.

The Company files federal, state, and foreign income tax returns in many U.S. and OUS jurisdictions. Years before 2016 are closed for the significant jurisdictions. Certain of the Company’s unrecognized tax benefits could change due to activities of various tax authorities, including potential assessment of additional tax, possible settlement of audits, or through normal expiration of various statutes of limitations, which could affect the Company’s effective tax rate in the period in which they change. Due to the uncertainty related to the timing and potential outcome of audits, the Company cannot estimate the range of reasonably possible change in unrecognized tax benefits that may occur in the next 12 months.

The Company is subject to the examination of its income tax returns by the Internal Revenue Service (“IRS”) and other tax authorities. The outcome of these audits cannot be predicted with certainty. The Company’s management regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of the Company’s provision for income taxes. If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs.