Income Taxes

6 Months Ended

Jun. 30, 2023

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 23.0% in both the second quarter and six months ended June 30, 2023 and 23.9% in both the second quarter and six months ended June 30, 2022. The 2023 and 2022 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, foreign earnings subject to tax in higher rate jurisdictions, and nondeductible expenses.

For the second quarter of 2023 and 2022, the tax rate including discrete items was 20.6% and 19.7%, respectively. For the second quarter of 2023, the Company recorded a discrete net tax benefit of $7 related to an $8 excess tax benefit for stock compensation and a net charge of $1 for other small items. For the second quarter of 2022, the Company recorded a discrete tax benefit of $7 attributable to a $6 benefit to release a valuation allowance related to an interest carryforward tax attribute in the U.K. and a net benefit of $1 for other small items.

For the six months ended June 30, 2023 and 2022, the tax rate including discrete items was 26.3% and 21.5%, respectively. For the six months ended June 30, 2023, the company recorded a discrete net tax charge of $14 attributable to a $20 charge for a tax reserve established in France (See Note P) and a net tax charge of $2 for other small items, reduced by an $8 excess tax benefit for stock compensation. For the six months ended June 30, 2022, the Company recorded a discrete net tax benefit of $9 attributable to a $6 benefit to release a valuation allowance related to an interest carryforward tax attribute in the U.K., a $5 excess benefit for stock compensation, and a net charge of $2 for other small items.

The tax provision was comprised of the following:

	Second quarter ended				Six months ended
	June 30,				June 30,
	2023		2022		2023		2022
Pre-tax income at estimated annual effective income tax rate before discrete items	$	56	$	44	$	107	$	85
Impact of change in estimated annual effective tax rate on previous quarter’s pre-tax income	—		(1)		—		—
Interim period treatment of operational losses in foreign jurisdictions for which no tax benefit is recognized	1		—		1		—
Tax reserve (P)	—		—		20		—
Other discrete items	(7)		(7)		(6)		(9)
Provision for income taxes	$	50	$	36	$	122	$	76