Income Taxes

9 Months Ended

Sep. 30, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Note 6 — Income Taxes

We believe that our recorded deferred tax assets and liabilities are reasonable. However, tax laws and regulations are subject to interpretation, and the outcomes of tax disputes are inherently uncertain; therefore, our assessments can involve a series of complex judgments about future events and rely heavily on estimates and assumptions.

The U.S. Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was signed into law on March 27, 2020, is an economic stimulus package designed to aid in offsetting the economic damage caused by the ongoing COVID-19 pandemic and includes various changes to U.S. income tax regulations. The CARES Act permits the carryback of certain net operating losses, which previously had been required to be carried forward, at the tax rates applicable in the relevant carryback year. As a result of these changes, in the nine-month period ended September 30, 2020 we recognized an estimated $7.6 million net tax benefit ($18.9 million current tax benefit and $11.3 million deferred tax expense). This net tax benefit was generated as our deferred tax assets related to U.S. net operating losses were realized at higher prior year income tax rates.

During the nine-month period ended September 30, 2020, we migrated two of our foreign subsidiaries into our U.S. consolidated tax group. As a result, these subsidiaries are not subject to future U.S. branch profits tax and a net deferred tax benefit of $8.3 million was recognized.

The effective tax rates for the three-month periods ended September 30, 2021 and 2020 were 5.3% and 17.6%, respectively. The variance was primarily attributable to the earnings mix between our higher and lower tax rate jurisdictions as well as the impact of the CARES Act in 2020. The effective tax rates for the nine-month periods ended September 30, 2021 and 2020 were 7.5% and 9,777.0%, respectively. The effective tax rate for the nine-month period ended September 30, 2021 was lower than the U.S. statutory rate primarily driven by losses in jurisdictions with low tax rates as well as non-U.S. withholding and deemed profits taxes paid. The effective tax rate for the nine-month period ended September 30, 2020 was significantly higher than the U.S. statutory rate primarily due to the recognition of benefits from our foreign subsidiary restructuring and the CARES Act, as discussed above, in relation to nominal pre-tax losses.

The primary differences between the income tax provision (benefit) at the U.S. statutory rate and our actual income tax provision (benefit) are as follows (dollars in thousands):

	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2021				2020				2021				2020
Taxes at U.S. statutory rate	$	(4,221)	21.0	%	$	6,232	21.0	%	$	(8,124)	21.0	%	$	(35)	21.0	%
Foreign tax provision		5,134	(25.5)			1,088	3.7			3,669	(9.5)			(28)	17.0
CARES Act		—	—			(2,362)	(8.0)			—	—			(7,596)	4,603.6
Subsidiary restructuring		—	—			—	—			—	—			(8,333)	5,050.3
Other (1)		(1,971)	9.8			274	0.9			1,545	(4.0)			(140)	85.1
Income tax provision (benefit)	$	(1,058)	5.3	%	$	5,232	17.6	%	$	(2,910)	7.5	%	$	(16,132)	9,777.0	%

(1) Includes interim period allocations of $(1.7) million and $1.1 million, respectively, for the three- and nine-month periods ended September 30, 2021 and $2.3 million for both the three- and nine-month periods ended September 30, 2020.