Income Taxes

3 Months Ended

Mar. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Effective Tax Rates

Our quarterly provision for income taxes is measured using an annual effective tax rate, adjusted for discrete items within the periods presented.

Our effective tax rates are as follows:

	Three Months Ended March 31,
	2024	2023
Effective Tax Rate	19.0%	20.0%

Our effective tax rate for the three months ended March 31, 2024 is lower than the prior year’s comparable period primarily due to a higher equity compensation deduction.

Our effective tax rate for the three months ended March 31, 2024 is lower than the statutory U.S. federal tax rate of 21% primarily due to a higher equity compensation deduction.

The Organization for Economic Co-operation and Development (“OECD”) has proposed a global minimum tax of 15% of reported profits (“Pillar 2”) that has been agreed upon by over 140 member jurisdictions including the United States. Pillar 2 addresses the risks associated with profit shifting to entities in low tax jurisdictions. We have adopted Pillar 2 and the impact of this adoption on our business is immaterial.

The Tax Matters Agreement, among other things, governs our and SpinCo’s respective rights, responsibilities and obligations after the Separation with respect to tax liabilities and benefits (including any taxes imposed that are attributable to the failure of the Distribution and certain related transactions to qualify as a transaction that is tax-free for U.S. federal income tax purposes), tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and other matters regarding taxes. Although enforceable as between the parties, the Tax Matters Agreement will not be binding on the Internal Revenue Service or other tax authorities.

As of March 31, 2024, we had gross unrecognized tax benefits of $19.3 million included in “Other liabilities” in our Unaudited Consolidated and Condensed Balance Sheets.