Income Taxes

9 Months Ended

Sep. 30, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income tax provisions for interim periods are based on estimated annual income tax rates, adjusted to reflect the effects of any significant infrequent or unusual items which are required to be discretely recognized within the current interim period. The Company expects that a majority of its foreign earnings will be repatriated back to the United States ("U.S."). As a result, the effective tax rates in the periods presented are largely based upon the forecasted pre-tax earnings mix and allocation of certain expenses in various taxing jurisdictions where the Company conducts its business.

The effective tax rate is as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2024		2023		2024		2023
Effective tax rate	31.9	%	7.7	%	33.6	%	27.4	%

For the three months ended September 30, 2024, the Company had no material discrete tax adjustments.

For the three months ended September 30, 2023, the Company recorded $4 million of net discrete tax benefits, a majority of which related to adjustments to the Company's accrual for unrecognized tax benefits in accordance with FIN 48 for the lapse of statute of limitations.

For the nine months ended September 30, 2024, the Company recorded $3 million of net discrete tax expense, a majority of which related to additional tax expense from stock-based compensation vesting.

For the nine months ended September 30, 2023, the Company recorded $6 million of net discrete tax benefits, $3 million of which related to adjustments to the Company's accrual for unrecognized tax benefits in accordance with FIN 48 and $3 million related to the excess tax benefit derived from stock-based compensation vesting.

Effective January 1, 2024, many jurisdictions where the Company conducts business, including several European Union members and G20 countries, have enacted a 15% global minimum tax on the income generated in each of the jurisdictions in which the Company operates, referred to as "Pillar Two" of the Global Anti-Base Erosion rules framework that was undertaken by the Organization for Economic Co-operation and Development ("OECD"). The Company continues to monitor developments and evaluate the impacts of the Pillar Two rules, however, as of the date of this Report on Form 10-Q, the Company does not expect the Pillar Two rules to have a material impact to its annual effective tax rate.

The Company estimates its annual effective tax rate for 2024 to be approximately 34.0%, which takes into consideration, among other things, the forecasted earnings mix by jurisdiction and the impact of discrete tax items to be recognized in 2024. Under U.S. tax law, U.S. shareholders are subject to a tax on global intangible low-taxed income ("GILTI") earned by certain foreign subsidiaries. The Company has elected to provide for the tax expense related to GILTI in the year in which the tax is incurred. Effective on January 1, 2022, the U.S. tax law changed and now requires R&D expenses to be capitalized and amortized for tax purposes under Internal Revenue Code Section 174, which increases the Company's GILTI tax liability. The Company is currently forecasting approximately $4 million of tax expense related to GILTI in our marginal effective tax rate for 2024.