Income Taxes

6 Months Ended

Jun. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company's effective tax rate for the first half of 2023 was 21.8% compared with (267.2)% in the first half of 2022 and 64.7% for the full year 2022. The decrease in the effective tax rate in the first half of 2023 as compared with the rate for the full year 2022 is primarily due to the absence of a goodwill impairment charge of $68,194, which was not tax deductible for book purposes. Additional drivers causing the decrease in the effective tax rate in the first half of 2023, as compared with the full year 2022 rate, include a reduction of disallowed expenses related to Section 162(m) for covered employee’s compensation, a lower impact of GILTI tax and a favorable mix of non-U.S. earnings.

The Aerospace and Industrial segments have a number of multi-year tax holidays in China, Malaysia and Singapore. The China holiday was granted in 2021 and provides for a corporate income tax of 15% for the approved businesses. The China holiday runs for a three-year period ending December 31, 2023. It is anticipated that the company will re-apply for the China holiday in 2024. Aerospace was granted an income tax holiday for operations recently established in Malaysia. The Malaysia holiday commenced effective November 2020 (retroactively) and remains effective for a period of ten years. The Aerospace segment was granted additional tax holidays in Singapore under the Pioneer program in the fourth quarter of 2022. The Singapore holiday provides reduced tax rates for certain Aerospace programs manufactured at the Singapore location and will run through December 2025. All of the holidays are subject to the Company meeting certain commitments in the respective jurisdictions.

In October 2021, the Organization for Economic Co-operation and Development ("OECD") introduced an inclusive framework to address tax challenges arising from the digitalization of the economy through a two-pillar solution. One of the components of the solution is the implementation of a global minimum corporate tax rate of 15% for large multinational corporations (“Pillar Two”). The Company is currently evaluating the potential impact of Pillar Two on our Consolidated Financial Statements and related disclosures.

In August 2022, the U.S. government enacted tax legislation commonly referred to as the Inflation Reduction Act of 2022 (“IRA”). The IRA will impose a 1% excise tax on the fair market value of certain stock repurchased by a public traded company after December 31, 2022 and restored and modified certain tax-related energy incentives. The Company does not anticipate a material impact on our business, financial condition, results of operations or cash flow as a result of this change.