INCOME TAXES

9 Months Ended

Sep. 30, 2021

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 6 – INCOME TAXES

The Company reported an income tax benefit of $3.0 million compared to an income tax expense of $6.5 million for the three months ended September 30, 2021 and 2020, respectively. The effective tax rates for the three months ended September 30, 2021 and 2020 were 4.4% and (8.7)%, respectively. The effective tax rate for the three months ended September 30, 2021 reflects (i) a non-deductible legal matter and (ii) losses in jurisdictions that are not eligible for tax benefits on account of valuation allowances, partially offset by (iii) the net tax benefit from divestitures. The effective tax rate for the three months ended September 30, 2020 reflects the impact of non-deductible divestiture charges.

The Company reported an income tax expense of $19.9 million for the nine months ended September 30, 2021 compared to an income tax benefit of $23.2 million for the nine months ended September 30, 2020. The effective tax rates for the nine months ended September 30, 2021 and 2020 were 209.5% and 18.1%, respectively. The effective tax rate for the nine months ended September 30, 2021 reflects (i) a non-deductible legal matter, (ii) losses in jurisdictions that are not eligible for tax benefits on account of valuation allowances, and (iii) equity-based compensation awards expiring without a tax benefit, partially offset by (iv) a $5.5 million tax benefit associated with a tax matter that was subject to a PFA with the IRS (see further description below) and (v) the net tax benefit from divestitures. The effective tax rate for the nine months ended September 30, 2020 reflects (i) a $39.4 million tax benefit related to the CARES Act (see further description below), (ii) the impact of non-deductible divestiture charges, and (iii) equity-based compensation awards expiring without a tax benefit.

In response to the COVID-19 pandemic the government took the following tax-related government actions:

•On March 11, 2021, the President signed into law the ARP Act, a legislative package which is generally not significant to the Company's current business; however, the Company will continue to assess the ARP Act on an ongoing basis.

•On December 27, 2020, the President signed the CAA 2021, which provides several business tax relief provisions, which are generally not significant to the Company's current business; however, the Company will continue to assess the CAA 2021 on an ongoing basis.

•On March 27, 2020, the President signed into law the CARES Act, which was a substantial tax-and-spending package. As a result of the CARES Act tax law changes, for the year ended December 31, 2020, we recognized a $44.4 million tax benefit related to our ability to carryback net operating losses to prior years that had higher tax rates. Note that in the first quarter of 2020, the Company recognized an initial $39.4 million tax benefit; in the fourth quarter of 2020, upon finalizing the 2019 federal income tax return which impacted the carryback to prior years, the Company recognized an incremental $5.0 million tax benefit. In July 2020, the Company received a cash refund of $48.0 million, and in December 2020, the Company received $64.2 million (of which $62.0 million was the cash refund claim, and $2.2 million was interest income). A remaining carryback claim of less than $1.0 million associated with the finalization of the 2019 U.S. federal income tax return was filed with the IRS and the refund was received in June of 2021.

Similar tax provisions and other stimulus measures have been granted either before or after September 30, 2021 by certain foreign and U.S. state jurisdictions, which the Company continues to evaluate and apply, if applicable. 

The Company filed a PFA with the IRS related to a claim under Internal Revenue Code Section 1341 concerning the tax rate to be applied to the SQ Settlement on the Company’s 2018 tax return. As a result of the enactment of the CARES Act, the Company was able to realize a benefit at the higher tax rate in prior years on a portion of the SQ Settlement. In 2020, in consideration of the CARES Act, the Company revised the PFA, a portion of the long-term receivable previously established for the Section 1341 claim was reclassified to a current income tax receivable and the related uncertain tax position was released as part of the tax benefit recognized in 2020 (a balance sheet reclassification in part as described above).

Subsequently in late 2020 the Company amended the 2018 tax return to reduce the Section 1341 benefit as a result of discussions with the IRS as part of the PFA program. Consequently, the remaining long-term receivable established for the Section 1341 claim and the corresponding uncertain tax position was reclassified to a current income tax receivable and current income tax liability, respectively, as both are expected to settle in cash in 2021. In April 2021, the Company was advised that the IRS completed its review of the 2018 tax return and took no exception to the Section 1341 benefit. Consequently, the Company recorded a tax benefit of approximately $5.5 million in the second quarter of 2021 associated with the Section 1341 claim.