Income Taxes

9 Months Ended

Sep. 30, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Note 12 – Income Taxes

	Quarter Ended						Year to Date Ended
	9/30/2021			9/30/2020			9/30/2021			9/30/2020
Income tax provision	$	44		$	155		$	210		$	232
Effective tax rate		28.3	%		25.6	%		27.7	%		26.3	%

The higher effective tax rate for the quarter ended September 30, 2021 was primarily due to the impact from our investment in equity securities of Meituan, higher planned repatriation of earnings outside of China subject to foreign withholding tax, and increased valuation allowance for certain underperforming subsidiaries.

The higher effective tax rate for the year to date ended September 30, 2021 was primarily due to higher planned repatriation of earnings outside of China subject to foreign withholding tax, increased valuation allowance for certain underperforming subsidiaries and less tax benefit on equity income from investments in unconsolidated affiliates, partially offset by lower residual U.S. tax.

In December 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Tax Act”), which included a broad range of tax reforms.  The Tax Act requires a U.S. shareholder to be subject to tax on Global Intangible Low Taxed Income (“GILTI”) earned by certain foreign subsidiaries. We have elected the option to account for current year GILTI tax as a period cost as incurred, and therefore included it in estimating the annual effective tax rate.

We are subject to reviews, examinations and audits by Chinese tax authorities, the Internal Revenue Service and other tax authorities with respect to income and non-income based taxes. Since 2016, we have been under a national audit on transfer pricing by the Chinese State Taxation Administration (“STA”) in China regarding our related party transactions for the period from 2006 to 2015. The information and views currently exchanged with the tax authorities focus on our franchise arrangement with YUM. We continue to provide information requested by the tax authorities to the extent it is available to the Company. It is reasonably possible that there could be significant developments, including expert review and assessment by the STA, within the next 12 months. The ultimate assessment and decision of the STA will depend upon further review of the information provided, as well as ongoing technical and other discussions with the STA and in-charge local tax authorities, and therefore, it is not possible to reasonably estimate the potential impact at this time. We will continue to defend our transfer pricing position. However, if the STA prevails in the assessment of additional tax due based on its ruling, the assessed tax, interest and penalties, if any, could have a material adverse impact on our financial position, results of operations and cash flows.