Income Taxes

6 Months Ended

Jun. 30, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

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

	Three Months Ended June 30,						Six Months Ended June 30,
(In millions)	2021			2020			2021			2020
Income tax (provision) benefit	$	(228)		$	27		$	(246)		$	(52)
Effective income tax rate	48.5		%	337.5		%	31.1		%	11.5		%

The income tax (provision) benefit as a percentage of income (loss) before income taxes and income (loss) from investments in unconsolidated affiliates was 48.5% and 337.5% for the three months ended June 30, 2021 and 2020, respectively, and was 31.1% and 11.5% for the six months ended June 30, 2021 and 2020, respectively.

The effective income tax rate for the three months ended June 30, 2021 includes $134 million of income tax expense attributed to the revaluation of certain net deferred tax liabilities, primarily related to intangible assets and investments in joint ventures recognized at fair value in connection with the acquisition of First Data, reflecting the effect of enacted corporate income tax rate changes in the United Kingdom (tax rate increase from 19% to 25% starting in 2023) and Argentina (tax rate increase from 25% to 35%), partially offset by decreases in uncertain tax positions. For the three months ended June 30, 2020, the income tax benefit of $27 million on an $8 million loss before income taxes and loss from investments in unconsolidated affiliates included equity compensation related tax benefits, changes in uncertain tax positions and other discrete tax items.

The effective income tax rate for the six months ended June 30, 2021 includes $134 million of income tax expense noted above, partially offset by discrete tax benefits from subsidiary restructurings and equity compensation related tax benefits. The effective income tax rate for the six months ended June 30, 2020 included $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), partially offset by the impact of equity compensation related tax benefits on a lower level of pre-tax income and changes in uncertain tax positions.

The Company’s potential liability for unrecognized tax benefits before interest and penalties was approximately $160 million at June 30, 2021. The Company believes it is reasonably possible that the liability for unrecognized tax benefits may decrease by up to $35 million over the next twelve months as a result of possible closure of federal tax audits, potential settlements with certain states, and the lapse of the statutes of limitation in various jurisdictions.

As of June 30, 2021, the Company’s U.S. federal income tax returns for 2017, 2019 and 2020, and tax returns in certain states and foreign jurisdictions for 2005 through 2020, remain subject to examination by taxing authorities. 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 2010 forward in relation to First Data’s foreign tax filings, none of which are considered significant jurisdictions.