Income Taxes

9 Months Ended

Sep. 30, 2020

The Company’s income tax provision and effective income tax rate were as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)	2020			2019			2020			2019
Income tax provision	$	124		$	53		$	176		$	144
Effective income tax rate	32.5		%	20.7		%	21.1		%	17.9		%

The income tax provision as a percentage of income before income taxes and income from investments in unconsolidated affiliates was 32.5% and 20.7% for the three months ended September 30, 2020 and 2019, respectively, and was 21.1% and 17.9% for the nine months ended September 30, 2020 and 2019, respectively. The effective tax rate for the three months ended September 30, 2020 includes $32 million of income tax expense related to the revaluation of certain net deferred tax liabilities as a result of an increase in the United Kingdom corporate income tax rate from 17% to 19% in the quarter.

The effective income tax rate for the nine months ended September 30, 2020 also includes $112 million of income tax expense associated with the $428 million gain on the sale of a 60% interest of the Company’s Investment Services business (see Note 4). The effective income tax rate in the nine months ended September 30, 2019 included discrete tax benefits due to a loss from subsidiary restructuring.

The Company’s potential liability for unrecognized tax benefits before interest and penalties was approximately $185 million at September 30, 2020. The Company believes it is reasonably possible that the liability for unrecognized tax benefits may decrease by up to $66 million over the next twelve months as a result of possible closure of federal tax audits, potential settlements with certain states and foreign countries, and the lapse of the statutes of limitations in various state and foreign jurisdictions.

As of September 30, 2020, the Company’s U.S. federal income tax returns for 2016 through 2019, and tax returns in certain states and foreign jurisdictions for 2005 through 2019, remain subject to examination by taxing authorities. In connection with the acquisition of First Data, the Company is subject to income tax examination from 2008 forward in relation to First Data’s U.S. federal income tax return. State and local examinations are substantially complete through 2010 in relation to First Data’s state and local tax filings. Foreign jurisdictions generally remain subject to examination by their respective authorities from 2007 forward, none of which are considered significant jurisdictions.

During the three months ended September 30, 2020, the U.S. Department of Treasury released certain proposed and final regulations relating to provisions that were enacted under the Tax Cuts and Jobs Act of 2017. The new regulations did not have a material impact on the Company’s consolidated financial statements.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References + Details