INCOME TAXES

6 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Unrecognized Tax Benefits

The Company’s unrecognized tax benefits relate to tax years that remain subject to audit by the taxing authorities in the U.S. federal, state and local, and foreign jurisdictions. During the six months ended June 30, 2022, the Company did not have a material change to its unrecognized tax benefits. Based on the current status of its income tax audits, the Company does not believe a significant portion of its unrecognized tax benefits will be resolved in the next twelve months.

Effective Tax Rate

The effective tax rate can vary from period to period due to permanent tax adjustments, discrete items such as the settlement of income tax audits and changes in tax laws, as well as recurring factors such as changes in the overall state tax rate.

The Company’s income tax expense for the three months ended June 30, 2022 was $38 million, resulting in an effective tax rate for the period of 29.1%. The effective tax rate primarily represents the federal statutory rate of 21.0%, a state statutory tax rate, net of federal benefits, of 5.5%, and a 3.0% unfavorable impact of prior year return adjustments related to executive compensation, partially offset by a 1.6% favorable impact from the release of a capital loss valuation allowance related to disposal activities.

The Company’s income tax benefit for the three months ended June 30, 2021 was $41 million, resulting in an effective tax rate for the period of 24.6%. The effective tax rate primarily represents the federal statutory rate of 21.0%, a state statutory tax rate, net of federal benefits, of 2.8%, and a 0.6% favorable impact from prior year tax return adjustments.

The Company’s income tax expense for the six months ended June 30, 2022 was $57 million, resulting in an effective tax rate for the period of 28.5%. The effective tax rate primarily represents the federal statutory rate of 21.0%, a state statutory tax rate, net of federal benefits, of 5.9%, a 2.0% unfavorable impact of prior year return adjustments related to executive compensation, and a 1.4% unfavorable impact of permanent items, partially offset by a 1.0% favorable impact from the release of a capital loss valuation allowance related to disposal activities.

The Company’s income tax benefit for the six months ended June 30, 2021 was $56 million, resulting in an effective tax rate for the period of 24.2%. The effective tax rate primarily represents the federal statutory tax rate of 21.0%, a state statutory tax rate, net of federal benefits, of 2.8%, and a 1.0% favorable impact of share-based compensation.

COVID-19 Pandemic

In response to the COVID-19 Pandemic, the American Rescue Plan Act of 2021 and the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) were signed into law in March 2021 and March 2020, respectively, and included significant corporate income tax and payroll tax provisions intended to provide economic relief to address the impact of the COVID-19 Pandemic.

During 2020, the Company recognized favorable cash flow impacts related to the accelerated refund of previously generated alternative minimum tax credits, as well as from the deferral of remittance of certain 2020 payroll taxes, with 50% of the deferred amount due by the end of 2021, and the remainder due by the end of 2022. The Company also recognized a benefit from an increase in the interest expense limitation from 30% to 50% for tax years 2019 and 2020.

Delayed Effective Dates for Tax Law Changes under the Tax Cuts and Jobs Act

Certain changes to U.S. federal tax law included in the Tax Cuts and Jobs Act had a delayed effective date and have taken effect for tax years beginning after December 31, 2021. Under Internal Revenue Code (“IRC”) Section 163(j), the limitation on net business interest expense deductions will no longer be increased by deductions for depreciation, amortization, or depletion. Under IRC Section 174, specified research and experimentation expenditures must now be capitalized and amortized.