Income Taxes

6 Months Ended

Jun. 30, 2024

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 21.7% in both the second quarter and six months ended June 30, 2024, and 23.0% in both the second quarter and six months ended June 30, 2023. The 2024 and 2023 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, nondeductible expenses, and foreign earnings subject to tax in jurisdictions with tax rates higher than the U.S. federal statutory rate of 21%. Foreign taxes on earnings also subject to U.S. federal income tax also contributed to the 2023 rate being higher than the U.S. federal statutory rate of 21%. The 2024 rate was lower than the 2023 rate primarily due to a U.S. tax benefit recognized for foreign tax credits in 2024 and lower net U.S. tax on GILTI and other foreign earnings.

For the second quarter of 2024 and 2023, the tax rate including discrete items was 20.4% and 20.6%, respectively. In the second quarter of 2024, the Company recorded a discrete tax benefit of $5 related to an excess tax benefit for stock compensation. In 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 six months ended June 30, 2024 and 2023, the tax rate including discrete items was 20.1% and 26.3%, respectively. For the six months ended June 30, 2024, the Company recorded a discrete net tax benefit of $12 attributable to a $7 excess tax benefit for stock compensation, a $6 benefit to release a valuation allowance related to a U.S. foreign tax credits, and a net tax charge of $1 for other small items. 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 Q) and a net tax charge of $2 for other small items, reduced by an $8 excess tax benefit for stock compensation.

The tax provision was comprised of the following:

	Second quarter ended				Six months ended
	June 30,				June 30,
	2024		2023		2024		2023
Pre-tax income at estimated annual effective income tax rate before discrete items	$	72	$	56	$	138	$	107
Interim period treatment of operational losses in foreign jurisdictions for which no tax benefit is recognized	1		1		2		1
Tax reserve (Q)	—		—		—		20
Other discrete items	(5)		(7)		(12)		(6)
Provision for income taxes	$	68	$	50	$	128	$	122