Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes Effective Tax Rate The following table shows our effective tax rate for the three and nine months ended September 30, 2023 and September 30, 2022:
Our effective tax rate in the third quarter and first nine months of 2023 was 29.9% and 21.8%, respectively. For the first nine months of 2023, our effective tax rate is 9.1% lower than the prior-year period. This decrease is primarily attributable to the recognition of $13.7 million of tax benefits related to a retroactive tax election with respect to our 2021 and 2022 tax periods. We received confirmation of the approval of the tax election in the second quarter of 2023, which allowed us to recognize the tax benefits in that period. Unrecognized Tax Benefits The table below provides information concerning our gross unrecognized tax benefits as of September 30, 2023 and December 31, 2022, as well as the effect these gross unrecognized tax benefits would have on our income tax expense, if they were recognized.
Our gross unrecognized tax benefits decreased from $26.5 million as of December 31, 2022 to $13.0 million as of September 30, 2023. The decrease is primarily related to a retroactive tax election for which we received approval during the second quarter of 2023, which resulted in the recognition of $13.7 million of current and deferred tax benefits with respect to our 2021 and 2022 tax periods. Our Unaudited Condensed Consolidated Balance Sheets include the following liabilities for unrecognized tax benefits. These amounts include interest and penalties, less any associated tax benefits.
Our liability for unrecognized tax benefits decreased from $24.3 million as of December 31, 2022, to $14.5 million as of September 30, 2023. The decrease is primarily related to a retroactive tax election for which we received approval during the second quarter of 2023, which resulted in the recognition of $10.6 million of current tax benefits with respect to our 2021 and 2022 tax periods. Because we conduct business globally, we file income tax returns in U.S. federal, state, local, and foreign jurisdictions. We are currently under audit by federal, state, and local tax authorities in the U.S. as well as tax authorities in certain non-U.S. jurisdictions. It is likely that the examination phase of some of these federal, state, local, and non-U.S. audits will conclude in 2023. It is not possible to estimate the effect of current audits on previously recorded unrecognized tax benefits. Approximately 76% of our cash, cash equivalents, and investments balance as of September 30, 2023 was held by our operations outside of the United States. We generally consider our U.S. directly-owned foreign subsidiary earnings to be permanently reinvested. We believe that our cash balances and investments in the United States, along with cash generated from our U.S. operations, will be sufficient to meet our U.S. operating and cash needs for the foreseeable future, without requiring us to repatriate earnings from these foreign subsidiaries. Certain of our non-U.S. operations have incurred net operating losses (NOLs), which may become deductible to the extent these operations become profitable. For each of our operations, we evaluate whether it is more likely than not that the tax benefits related to NOLs will be realized. As part of this evaluation, we consider evidence such as tax planning strategies, historical operating results, forecasted taxable income, and recent financial performance. In the year that certain non-U.S. operations record a loss, we do not recognize a corresponding tax benefit, which increases our effective tax rate. Upon determining that it is more likely than not that the NOLs will be realized, we reduce the tax valuation allowances related to these NOLs, which results in a reduction to our income tax expense and our effective tax rate in that period.
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