Income Tax

9 Months Ended

Sep. 30, 2020


	Three Months Ended				Nine Months Ended
	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Effective tax rate	23	%	(29)	%	38	%	71	%

The change in the effective tax rate for the three and nine months ended September 30, 2020 was primarily driven by the impact of the $668.3 million goodwill impairment loss within our North America segment recognized in the third quarter of 2019. Specifically, this impairment loss, which resulted in a pretax loss during the three months ended September 30, 2019 and a significant reduction to our pretax income during the nine months ended September 30, 2019, was nondeductible for income tax purposes, resulting in a negative effective tax rate during the three months ended September 30, 2019, and a significant increase to our effective tax rate during the nine months ended September 30, 2019. Separately, our effective tax rate during the nine months ended September 30, 2020 was impacted by the recognition of approximately $135 million of discrete tax expense in the second quarter of 2020 related to the hybrid regulations enacted in the second quarter of 2020 as further discussed below.

Since 2018, the U.S. Department of Treasury has continued to issue proposed, temporary and final regulations to implement provisions of the 2017 Tax Act. We have continued to monitor these regulations, and on April 7, 2020, the U.S. Department of Treasury enacted final hybrid regulations with full retroactive application to January 1, 2018, with a few exceptions. We have reviewed the final regulations and their impact on our tax positions and financial statements. The final regulations, associated with the taxability of certain interest, impact tax positions we took in 2018 and 2019 and have resulted in additional income tax expense of approximately $135 million, which was recognized upon enactment in the second quarter of 2020. The impact of the finalized regulations could result in cash tax outflows up to this amount in 2021. We continue to analyze the potential cash impacts of the final regulations to minimize any cash outflows.

During the third quarter of 2020, the U.K. government enacted, and royal assent was received, legislation to repeal the previously enacted reduction to the corporate income tax rate that was due to take effect April 1, 2020, that changed the previously anticipated corporate income tax rate from 17% to 19%. As a result, we remeasured our deferred tax liabilities resulting in the recognition of discrete tax expense of approximately $6 million during the three months ended September 30, 2020.

Our tax rate is volatile and may increase or decrease with changes in, among other things, the amount and source of income or loss, our ability to utilize foreign tax credits, excess tax benefits or deficiencies from share-based compensation, changes in tax laws, and the movement of liabilities established pursuant to accounting guidance for uncertain tax positions as statutes of limitations expire, positions are effectively settled, or when additional information becomes available. There are proposed or pending tax law changes in various jurisdictions and other changes to regulatory environments in countries in which we do business that, if enacted, may have an impact on our effective tax rate.