Income Taxes

6 Months Ended

Jun. 30, 2020

Effective Tax Rate

The effective income tax rate is influenced by a variety of factors including the geographic and functional sources of income and the relative magnitude of these sources of income. The difference between the total provision and the sum of the amounts allocated to segments is reported in the “Not Allocated to Segments” column of the tables in Note 6.

For the three and six months ended June 30, 2020 and 2019, our effective income tax rates were as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Effective income tax rate^(a)	2	%	17	%	2	%	(52)	%

^(a)In all periods presented, we maintained our valuation allowance on our net federal deferred tax assets in the U.S.

The following items caused the effective income tax rates to be different from our U.S. statutory tax rate of 21% for 2020 and 2019:

•For the three and six months ended June 30, 2020, the income tax rate was reduced below the statutory rate due to the valuation allowance on our net federal deferred tax assets in the U.S., which resulted in no federal tax benefit on the U.S. loss.

•For the three and six months ended June 30, 2019, the mix of pre-tax income in our international operations reduced the annual effective tax rate below the statutory tax rate. Income tax rates for the six months ended June 30, 2019 were also impacted by the settlement of the 2010-2011 U.S. Federal Tax Audit (“IRS Audit”) in the first quarter of 2019, resulting in a tax benefit of $126 million. Additionally, in the first quarter of 2019, we recorded a non-cash deferred tax benefit of $18 million in the U.K. related to an internal restructuring. These two items are discrete to the first six months of 2019. Excluding these discrete adjustments, the effective income tax rate for the first six months of 2019 was an expense of 13%.

In the first quarter of 2020, the U.S. enacted the Coronavirus Aid, Relief, and Economic Security Act, commonly referred to as the CARES Act. This legislation included certain provisions which accelerate income tax refunds, and as a result, in the first quarter of 2020, long term receivable balances related to alternative minimum tax credits were classified as short term. Subsequent to June 30, 2020, we received an $89 million cash refund related to these alternative minimum tax credits and interest.