INCOME TAXES

6 Months Ended

Jun. 30, 2024

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The effective tax rate was 24.2% and 23.1% for the second quarter and first six months of 2024, respectively, compared to 21.6% and 21.9% for the second quarter and first six months of 2023, respectively. The increase in the effective tax rate for the second quarter was primarily due to a favorable adjustment in the second quarter of 2023 related to the divestiture of the China architectural business and a less favorable impact from tax benefits related to employee share-based payments. For the first six months, the increase in the effective tax rate was primarily related to a favorable adjustment related to the divestiture of the China architectural business in the second quarter of 2023, partially offset by a more favorable impact from tax benefits related to employee share-based payments during the first six months of 2024. The other significant components of the Company’s effective tax rate were consistent year-over-year.

At December 31, 2023, the Company had $121.8 million in unrecognized tax benefits, the recognition of which would have an effect of $109.4 million on the effective tax rate. Included in the balance of unrecognized tax benefits at December 31, 2023 was $8.4 million related to tax positions for which it is reasonably possible that the total amounts could significantly change during the next twelve months.

The Company classifies all income tax related interest and penalties as income tax expense. At December 31, 2023, the Company had accrued $20.4 million for the potential payment of income tax interest and penalties.

In the second quarter of 2024, the Company agreed to a Notice of Proposed Adjustment by the IRS for $28.7 million related to certain adjustments for 2017 through 2019, and is adequately reserved. There were no significant changes to any of the balances of unrecognized tax benefits at December 31, 2023 during the six months ended June 30, 2024.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company finalized the IRS audit for the 2013 through 2016 income tax returns in 2023 and paid the related assessments in the fourth quarter of 2023 and first quarter of 2024. The Company finalized the IRS audit for the 2011 income tax return in 2023 and paid the tax assessment in the second quarter of 2024. The Company expects to pay the remaining portion related to interest in 2024. The IRS is currently auditing the Company’s 2017 through 2019 income tax returns. As of June 30, 2024, the federal statute of limitations has not expired for the 2017 through 2023 tax years.

At June 30, 2024, the Company is subject to non-U.S. income tax examinations for the tax years of 2014 through 2023. In addition, the Company is subject to state and local income tax examinations for the tax years 2015 through 2023.