Income Taxes

9 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 17. Income Taxes

The effective tax rate was 17.4% for the three months ended September 30, 2022 and 23.4% for the nine months ended September 30, 2022. The effective tax rate was 21.4% for the three months ended September 30, 2021 and a negative 0.2% for the nine months ended September 30, 2021.

The income tax provision for 2022 was computed based on our estimated Annualized Effective Tax Rate (“AETR”) and the full-year forecasted income or loss plus the tax impact of unusual, infrequent, or nonrecurring significant items during the period. The amount and change of pre-tax income and loss recognized between jurisdictions impacted the reported effective tax rate for the three months and nine months ended September 30, 2022 as we do not recognize the tax benefit on losses or the tax expense on income earned in the United States, United Kingdom, and other European countries where we have a valuation allowance. The rate was lower than the 21% federal rate for the three months ended 2022 and was higher than 21% for the nine months ended September 30, 2022 due to the mix of income in jurisdictions without a valuation allowance.

During the three and nine months ended September 30, 2021, we did not use the AETR to compute the income tax benefit or expense. Instead, the income tax benefit or expense was computed using the actual year-to-date tax rate as the AETR became highly sensitive due to the amount of aggregate projected tax benefit on the projected losses in Canada, the United Arab Emirates, the Netherlands, and immaterial European operations were marginally positive. As the full year projected tax benefit was expected to be marginally positive in these operations, the actual effective tax rate was a better estimate of the quarter and year-to-date tax benefit than the amount computed using the AETR.

The effective rate of 21.4% for the three months ended September 30, 2021 was the result of the taxes on the pre-tax income earned in jurisdictions with no valuation allowance during the quarter with no benefit on the losses recognized in jurisdictions where we had a valuation allowance. The negative 0.2% effective rate for the nine months ended September 30, 2021 was due to the minimal pre-tax income earned in jurisdictions with no valuation allowance.

We received net cash refunds of $2.1 million during the three months ended September 30, 2022 and $1.3 million during the nine months ended September 30, 2022. We received cash refunds of $3.6 million during the three months ended September 30, 2021 and $3.2 million during the nine months ended September 30, 2021.