Income Taxes

9 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

Our effective tax rate decreased to 23.9 percent for the 2023 third quarter compared to 27.5 percent for the 2022 third quarter, primarily due to the prior year expense from the completion of tax audits and the increase in tax deductions from stock-based compensation, partially offset by the shift in earnings to jurisdictions with higher tax rates.

Our effective tax rate decreased to 20.1 percent for the 2023 first three quarters compared to 24.2 percent for the 2022 first three quarters, primarily due to the current year release of tax reserves and the prior year expense from the completion of tax audits, partially offset by the shift in earnings to jurisdictions with higher tax rates.

Our unrecognized tax benefit balance decreased by $101 million to $154 million at September 30, 2023 from $255 million at December 31, 2022, primarily due to the completion of a prior year tax audit. Our unrecognized tax benefit balance included $143 million at September 30, 2023 and $241 million at December 31, 2022 of tax positions that, if recognized, would impact our effective tax rate. It is reasonably possible that within the next 12 months we will reach resolution of income tax examinations in one or more jurisdictions. The actual amount of any change to our unrecognized tax benefits could vary depending on the timing and nature of the settlement. Therefore, an estimate of the change cannot be provided.

We file income tax returns, including returns for our subsidiaries, in various jurisdictions around the world. The U.S. Internal Revenue Service (“IRS”) has examined our federal income tax returns, and as of September 30, 2023, we have settled all issues for tax years through 2019. Our 2020 through 2023 tax year audits are currently ongoing. Various foreign, state, and local income tax returns are also under examination by the applicable taxing authorities.

We paid cash for income taxes, net of refunds, of $669 million in the 2023 first three quarters and $341 million in the 2022 first three quarters.