Income Taxes

9 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company’s year-to-date tax provision is comprised of the most recent estimated annual effective tax rate applied to year-to-date pre-tax ordinary income. The tax impacts of unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, are recorded discretely in the interim period in which they occur. In addition, the tax provision is adjusted for the interim period impact of non-benefited pre-tax losses.

The estimated annual effective tax rate, before discrete items, applied to ordinary income was 24.3% in both the third quarter and nine months ended September 30, 2022 and 29.7% in both the third quarter and nine months ended September 30, 2021. The 2022 and 2021 rates were higher than the U.S. federal statutory rate of 21% primarily due to additional estimated U.S. tax on Global Intangible Low-Taxed Income (“GILTI”) and other foreign earnings, incremental state tax and foreign taxes on earnings also subject to U.S. federal income tax, and nondeductible expenses.

For the third quarter of 2022 and 2021, the tax rate including discrete items was 23.1% (provision on income) and 17.4% (benefit on income), respectively. For the third quarter of 2022, the Company recorded a discrete tax benefit of $2 for other small items. For the third quarter of 2021, the Company recorded a discrete tax benefit of $12 related to a net $13 benefit from prior year amended returns and audit settlements and a net $1 charge for other small items.

For the nine months ended September 30, 2022 and 2021, the tax rate including discrete items was 21.8% and 26.4%, respectively. For the nine months ended September 30, 2022, the Company recorded a discrete tax benefit of $11 attributable to a $6 benefit to release a valuation allowance related to an interest carryforward tax attribute in the U.K. and a $5 excess benefit for stock compensation. For the nine months ended September 30, 2021, the Company recorded a discrete tax benefit of $9 attributable to a net $13 benefit related to prior year amended returns and audit settlements, a $2 charge for a U.K. tax rate change, and a net $2 charge for other small items.

The tax provision (benefit) was comprised of the following:

	Third quarter ended				Nine months ended
	September 30,				September 30,
	2022		2021		2022		2021
Pre-tax income at estimated annual effective income tax rate before discrete items	$	24	$	7	$	111	$	73
Impact of change in estimated annual effective tax rate on previous quarter’s pre-tax income	2		1		—		—
Interim period treatment of operational losses in foreign jurisdictions for which no tax benefit is recognized	—		—		—		1
Other discrete items	(2)		(12)		(11)		(9)
Provision (benefit) for income taxes	$	24	$	(4)	$	100	$	65