Income Taxes

9 Months Ended

Sep. 30, 2021

The Company determines its effective tax rate each quarter based upon its estimated annual effective tax rate. The Company records the tax impact of certain unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, in the interim period in which they occur. In addition, jurisdictions with a projected loss for the year where no tax benefit can be recognized are excluded from the estimated annual effective tax rate.

Income tax expense (benefit), (loss) income before income taxes and the corresponding effective tax rate for the three and nine months ended September 30, 2021 and 2020 were as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Income tax expense (benefit)	$	32,121		$	(2,386)		$	15,598		$	(55,485)
(Loss) income before income taxes	(92,743)			4,323			(208,508)			(297,199)
Effective tax rate	(35)		%	(55)		%	(7)		%	19		%

The effective tax rate for the three and nine months ended September 30, 2021 varied compared to the effective tax rate for the three and nine months ended September 30, 2020 primarily due to the negative impacts of the COVID-19 pandemic and other supply chain issues driving the initial recognition of valuation allowances in the U.S., resulting in tax expense of $31,740 recorded in the three months and $13,278 recorded in the nine months ended September 30, 2021, the geographic mix of pre-tax losses, and the inability to record a benefit for pre-tax losses in certain foreign jurisdictions and U.S. states. The three and nine months ended September 30, 2020 were impacted by discrete items related to the benefit for net operating losses carried back up to five years at tax rates in effect during those periods under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), rather than carried forward at current federal tax rates of 21%. Additionally, an incremental loss was recorded for impairment charges on held for sale entities for which no tax benefit was recognized, and a discrete expense of $13,414 for the initial recognition of valuation allowances against net deferred tax assets in certain foreign jurisdictions was recorded in the nine months ended September 30, 2020.

The income tax rate for the three and nine months ended September 30, 2021 and 2020 varied from the U.S. statutory rate primarily due to the initial recognition of valuation allowances in the U.S., the inability to record a tax benefit for pre-tax losses in certain foreign jurisdictions and U.S. states, tax credits, the impact of income taxes on foreign earnings taxed at rates varying from the U.S. statutory rate, and other permanent items. Additionally, the income tax rate for the three and nine months ended September 30, 2020 varied from the U.S. statutory rate as a result of benefits from net operating loss carry backs under the CARES Act.

The Company’s current and future provision for income taxes is impacted by the initial recognition of and changes in valuation allowances in certain countries. The Company’s future provision for income taxes will include no tax benefit with respect to losses incurred and, except for certain jurisdictions, no tax expense with respect to income generated in these countries until the respective valuation allowances are eliminated. Accordingly, income taxes are impacted by changes in valuation allowances and the mix of earnings among jurisdictions. The Company evaluates the realizability of its deferred tax assets on a quarterly basis. In completing this evaluation, the Company considers all available evidence in order to determine, based on the weight of the evidence, if a valuation allowance for its deferred tax assets is necessary. Such evidence includes historical results, future reversals of existing taxable temporary differences and expectations for future taxable income

(exclusive of the reversal of temporary differences and carryforwards), as well as the implementation of feasible and prudent tax planning strategies. If, based on the weight of the evidence, it is more likely than not that all or a portion of the Company’s deferred tax assets will not be realized, a valuation allowance is recorded. If operating results improve or decline on a continual basis in a particular jurisdiction, the Company’s decision regarding the need for a valuation allowance could change, resulting in either the initial recognition or reversal of a valuation allowance in that jurisdiction, which could have a significant impact on income tax expense in the period recognized and subsequent periods. In determining the provision for income taxes for financial statement purposes, the Company makes certain estimates and judgments, which affect its evaluation of the carrying value of its deferred tax assets, as well as its calculation of certain tax liabilities.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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