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Provision for Income Taxes
9 Months Ended
Sep. 30, 2024
Income Tax Disclosure [Abstract]  
Provision for Income Taxes
12.
Provision for Income Taxes

The income tax provision for the three months ended September 30, 2024, and 2023 was $14.8 million and $30.8 million, respectively, representing effective tax rates of 26.8% and 25.8%, respectively. The income tax provision for the nine months ended September 30, 2024, and 2023 was $50.7 million and $80.6 million, respectively, representing effective tax rates of 33.6% and 26.6%, respectively. The increase in the Company's effective tax rate was primarily due to changes in jurisdictional mix and net unfavorable discrete activities.

The Organization for Economic Co-operation and Development introduced its Pillar Two Framework Model Rules (“Pillar 2”), provides guidance for a global minimum tax. Certain aspects of Pillar 2 took effect on January 1, 2024, while other aspects go into effect on January 1, 2025. The Company is evaluating the potential impact of Pillar 2 on its business, as the countries in which it operates are enacting legislation implementing Pillar 2. While many aspects of the application of Pillar 2 remain to be clarified, the Company does not expect Pillar 2 to materially impact its tax liability. The Company will continue to monitor developments in implementation as more countries enact the legislation.

As of September 30, 2024, and December 31, 2023, the Company had gross unrecognized tax benefits, excluding penalties and interest, of approximately $71.7 million and $58.5 million, respectively, which, if recognized, would result in a reduction of the Company’s effective tax rate. The Company recognizes penalties and interest related to unrecognized tax benefits in the provision for income taxes. As of September 30, 2024, and December 31, 2023, approximately $3.9 million and $5.8 million, respectively, of accrued interest and penalties related to uncertain tax positions were included in other long-term liabilities on the Company’s unaudited condensed consolidated balance sheets. Penalties and interest adjustments of $0.4 million and $0.2 million were recorded in the provision for income taxes for unrecognized tax benefits during the three months ended September 30, 2024, and 2023 respectively. Penalties and interest adjustments of $(1.8) million and $0.8 million were recorded in the provision for income taxes for unrecognized tax benefits during the nine months ended September 30, 2024, and 2023, respectively.

 

The Company files tax returns in the United States, which include federal, state and local jurisdictions, and many foreign jurisdictions with varying statutes of limitations. The Company considers Germany, the United States and Switzerland to be its significant tax jurisdictions. The majority of the Company’s earnings are derived in Germany and Switzerland. Accounting for the various federal and local taxing authorities, the statutory rates for 2024 are approximately 30.0% and 20.0% for Germany and Switzerland, respectively. The mix of earnings in those two jurisdictions resulted in an increase of approximately 5.8% from the U.S. statutory rate of 21.0% in the nine months ended September 30, 2024.