INCOME TAXES

6 Months Ended

Jun. 30, 2021

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES During the three months ended June 30, 2021, we recorded income tax expense of $61 million in continuing operations on pre-tax income of $319 million compared to income tax expense of $45 million on pre-tax income of $214 million during the three months ended June 30, 2020. During the six months ended June 30, 2021, we recorded income tax expense of $106 million in continuing operations on pre-tax income of $586 million compared to an income tax benefit of $30 million on pre-tax income of $299 million during the six months ended June 30, 2020. For the six months ended June 30, 2021, the provision for income taxes was calculated by applying an estimate of the annual effective tax rate for the full year to “ordinary” income or loss (pre-tax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period. In calculating “ordinary” income, non‑taxable income or loss attributable to noncontrolling interests was deducted from pre-tax income or loss in the determination of the annualized effective tax rate used to calculate income taxes for the quarter. For the six months ended June 30, 2020, we utilized the discrete effective tax rate method, as allowed by the Financial Accounting Standards Board Accounting Standards Codification 740-270-30-18, “Income Taxes–Interim Reporting,” to calculate the interim income tax provision. The discrete method is applied when application of the estimated annual effective tax rate is impractical because it is not possible to reliably estimate the annual effective tax rate. The discrete method treats the year‑to‑date period as if it were the annual period and determines the income tax expense or benefit on that basis. We believe that the use of this discrete method in 2020 was more appropriate than the annual effective tax rate method as the estimated annual effective tax rate method was not reliable due to the high degree of uncertainty in estimating annual pre-tax income due to the impact of the COVID-19 pandemic and the evolving guidance by the government on utilization of grant funds.

The reconciliation between the amount of recorded income tax expense (benefit) and the amount calculated at the statutory federal tax rate is shown in the following table:

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Tax expense at statutory federal rate of 21%	$	67	$	45	$	123	$	63
State income taxes, net of federal income tax benefit	14		10		26		15
Tax benefit attributable to noncontrolling interests	(28)		(16)		(53)		(30)
Nondeductible goodwill	7		—		7		—
Nontaxable gains	—		—		—		3
Stock-based compensation	(2)		—		(3)		—
Change in valuation allowance	—		2		—		(88)
Other items	3		4		6		7
Income tax expense (benefit)	$	61	$	45	$	106	$	(30)

As a result of the change in the business interest expense disallowance rules under the COVID Acts, we recorded an income tax benefit of $88 million during the six months ended June 30, 2020 to decrease the valuation allowance for interest expense carryforwards due to the additional deduction of interest expense.

During the six months ended June 30, 2021, there were no adjustments to our estimated liabilities for uncertain tax positions. The total amount of unrecognized tax benefits at June 30, 2021 was $31 million, of which $29 million, if recognized, would impact our effective tax rate and income tax expense (benefit) from continuing operations. 

Our practice is to recognize interest and penalties related to income tax matters in income tax expense in our statement of operations. There were no accrued interest and penalties on unrecognized tax benefits at June 30, 2021.

At June 30, 2021, no significant changes in unrecognized federal and state tax benefits were expected in the next 12 months as a result of the settlement of audits, the filing of amended tax returns or the expiration of statutes of limitations.