Income Taxes

9 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

4. Income Taxes

At the end of each interim period, we make our best estimate of the effective tax rate and the impact of discrete items, if any, and adjust the rate as necessary.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
	(Dollars in millions)
Income before income tax (benefit) expense	$	39.6		$	33.5		$	106.4		$	46.8
Income tax (benefit) expense	(2.9)			9.4			14.3			12.0
Effective tax rate	(7.3)		%	28.1		%	13.4		%	25.6		%

Income taxes recorded reflect discrete items recorded during the periods. Income taxes recorded during the nine months ended September 30, 2022 included the revaluation of certain deferred tax liabilities due to changes in apportioned state tax rates, which resulted in an income tax benefit of $1.0 million recorded during the first quarter of 2022. During the three months ended September 30, 2022, the Company released a valuation allowance established on the deferred tax assets attributable to existing foreign tax credit carryforwards, resulting in a deferred tax benefit of $11.3 million. The release of the aforementioned valuation allowance was a result of new regulations impacting foreign tax credit utilization, published by the U.S. Treasury in 2022. These regulations make foreign taxes paid in future years to certain countries, including Brazil, no longer creditable in the U.S. After completing tax planning, the Company now expects to be able to utilize the foreign tax credits carried forward from prior years. The Company also recognized deferred tax benefits of $4.6 million from research and development tax credits during the three and nine months ended September 30, 2022. Income taxes recorded during the nine months ended September 30, 2021 included the impact changes in state tax laws, which resulted in a state tax benefit of $1.3 million recorded during the second quarter of 2021.

Before the impact of the discrete items described above, the Company’s effective tax rate was 32.3 percent and 29.1 percent for the three and nine months ended September 30 2022, respectively, and 28.1 percent and 28.4 percent for the three and nine months ended September 30, 2021, respectively. The difference between the Company's effective tax rates and the federal statutory rate of 21.0 percent during all periods presented reflect the impact of state taxes as well as compensation deduction limitations under Section 162(m) of the Internal Revenue Code. The three and nine months ended September 30, 2022 also reflect the impact of foreign taxes as a result of the new regulations noted above.