INCOME TAXES

9 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Moody’s ETR was 19.9% and 20.5% for the three months ended September 30, 2023 and 2022, respectively; the difference was primarily driven by return-to-accrual adjustments recorded during the current period. Furthermore, Moody’s ETR for the nine months ended September 30, 2023 and 2022 was 14.6% and 21.3%, respectively. The 6.7% decrease in the ETR for the nine months ended September 30, 2023 compared to the same period in the prior year was primarily due to tax benefits recognized in the first quarter of 2023, which reflect the resolutions of UTPs in various U.S. and non-U.S. tax jurisdictions. The Company’s year-to-date provision for income taxes differs from the tax computed by applying its estimated annual effective tax rate to the pre-tax earnings primarily due to the following items recognized in 2023: i) benefits of $116 million related to the resolutions of UTPs; and ii) excess tax benefits from stock-based compensation of $13 million.

The Company classifies interest related to UTPs in interest expense, net in its consolidated statements of operations. Penalties, if incurred, would be recognized in other non-operating income (expense), net. The Company had an increase in its UTPs of $5 million ($4 million, net of federal tax) during the third quarter of 2023 and a decrease in its UTPs of $114 million ($115 million, net of federal tax) during the nine months of 2023.

Moody’s is subject to U.S. federal income tax as well as income tax in various state, local and foreign jurisdictions. The Company’s U.S. federal income tax returns for 2019 through 2020 are currently under examination and 2021 through 2022 remain open to examination. The Company’s New York City tax returns for 2015 through 2019 are currently under examination. The Company’s U.K. tax returns for 2017 through 2021 remain open to examination.

For ongoing audits, it is possible the balance of UTPs could decrease in the next twelve months as a result of the settlement of such audits, which might involve the payment of additional taxes, the adjustment of certain deferred taxes and/or the recognition of tax benefits. It is also possible that new issues will be raised by tax authorities which could necessitate increases to the balance of UTPs. As the Company is unable to predict the timing or outcome of these audits, it is unable to estimate the amount of changes to the balance of UTPs at this time. However, the Company believes that it has adequately provided for its financial exposure relating to all open tax years, by tax jurisdiction, in accordance with the applicable provisions of ASC Topic 740 regarding UTPs.

The following table shows the amount the Company paid for income taxes:

	Nine Months Ended September 30,
	2023		2022
Income taxes paid	$	213	$	394

In August 2022, the U.S. Congress passed the Inflation Reduction Act, which included a corporate minimum tax on book earnings of 15%, an excise tax on corporate share repurchases of 1%, and certain climate change and energy tax credit incentives. The adoption of a corporate minimum tax of 15% is not expected to impact Moody’s ETR. The excise tax of 1% on corporate share buybacks will not have an impact on the Company’s ETR for 2023.