Income Tax

9 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

Income Tax

11. Income Tax

The effective tax rate for the three and nine months ended September 30, 2022 was (4.2)% and 87.8% compared to (62.9)% and (20.7)%, respectively, for the same periods in 2021. The change in the effective tax rate between the periods resulted primarily due to the change in projected earnings mix by geography and tax jurisdiction as compared to the prior period, changes in valuation allowances in the United States, changes in uncertain tax positions, foreign inclusions, changes in nondeductible compensation, and the mix of earnings in jurisdictions with differing tax rates.

We have historically considered the majority of undistributed earnings of our foreign subsidiaries and equity investees to be indefinitely reinvested, and, accordingly, no deferred taxes had been provided on the indefinitely reinvested earnings. As of June 30, 2020, the Company reversed its indefinite reinvestment assertion. As a result, we recorded a deferred foreign tax liability, which had a balance of $2.5 million as of September 30, 2022 and is primarily related to estimated foreign withholding tax associated with repatriating all non-U.S. earnings back to the United States.

The Company is subject to ongoing tax authority examinations in various jurisdictions in which it operates. The Company reviews its accrual for uncertain tax positions at each reporting period and updates positions based on available information. In October 2022, the Company completed and closed an examination. The Company expects to reflect a decrease in its accrual for unrecognized tax benefits resulting from the formal closure of the examination by the taxing authority of $6.2 million in the fourth quarter of 2022. It is still reasonably possible that the Company's existing liabilities for unrecognized tax benefits could change within the next 12 months, due to the progression of other tax authority examinations and the expiration of statutes of limitation.