Income Taxes

9 Months Ended

Sep. 30, 2021

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

Uncertain Tax Positions

As of September 30, 2021, the Company had $137 million of unrecognized tax benefits recorded in Other liabilities and an amount less than $1 million recorded to Other current liabilities. The balance includes $38 million associated with N&B uncertain tax positions recorded in the purchase accounting measurement period. If these unrecognized tax benefits were recognized, the effective tax rate would be affected.

As of September 30, 2021, the Company had accrued interest and penalties of $36 million classified in Other liabilities and an amount less than $1 million classified in Other current liabilities. The balance includes $21 million associated with N&B uncertain tax positions recorded in the purchase accounting measurement period.

As of September 30, 2021, the Company’s aggregate provisions for uncertain tax positions, including interest and penalties, was $174 million associated with tax positions asserted in various jurisdictions. The balance includes $59 million associated with N&B uncertain tax positions recorded in the purchase accounting measurement period.

The Company regularly repatriates earnings from non-U.S. subsidiaries. As the Company repatriates these funds to the U.S., they will be required to pay income taxes in certain U.S. states and applicable foreign withholding taxes during the period when such repatriation occurs. Accordingly, as of September 30, 2021, the Company had a deferred tax liability of $65 million for the effect of repatriating the funds to the U.S., attributable to various non-U.S. subsidiaries. There is no deferred tax liability associated with non-U.S. subsidiaries where we intend to indefinitely reinvest the earnings to fund local operations and/or capital projects.

The Company has ongoing income tax audits and legal proceedings which are at various stages of administrative or judicial review. In addition, the Company has open tax years with various taxing jurisdictions that range primarily from 2011 to 2020. Based on currently available information, the Company does not believe the outcome of any of these tax audits and other tax positions related to open tax years, when finalized, will have a material impact on its results of operations.

The Company also has other ongoing tax audits and legal proceedings that relate to indirect taxes, such as value-added taxes, sales and use taxes and property taxes, which are discussed in Note 15.

Effective Tax Rate

The effective tax rate for the three months ended September 30, 2021 was 21.2% compared to 18.1% for the three months ended September 30, 2020. The quarter-over-quarter increase was primarily due to an unfavorable mix of earnings and higher repatriation costs.

The effective tax rate for the nine months ended September 30, 2021 was 22.1% compared to 16.9% for the nine months ended September 30, 2020. The year-over-year increase was primarily due to an unfavorable mix of earnings and higher repatriation costs, partially offset by a higher level of reversals of loss provisions.