Income Taxes

9 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

6.Income Taxes

Our effective tax rate was 22.7% and 13.5% for the three months ended September 30, 2022 and 2021, respectively, and 19.1% and 16.1% for the nine months ended September 30, 2022 and 2021, respectively. The increase in the effective tax rate for three months ended September 30, 2022 is due to decreases of statute of limitations expiry on tax reserves and favorable prior year provisional tax estimate true-ups. The increase in the effective tax rate for the nine months ended September 30, 2022 is due to the same decrease of statute of limitation expiry on tax reserves, decrease of favorable prior year provisional tax estimate true-ups, and income earned in higher tax jurisdictions.

We apply the provisions for income taxes related to, among other things, accounting for uncertain tax positions and disclosure requirements in accordance with Accounting Standards Classification (ASC) 740, Income Taxes. For the three months ended September 30, 2022, our uncertain tax positions increased by a net $0.3 million due to accrual of tax audit reserves and unfavorable prior year provisional tax estimate true-ups, offset by statute of limitations expiry. There has been no change to our policy that recognizes potential interest and penalties related to uncertain tax positions within our global operations in income tax expense.

We conduct business globally and, as a result, file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, Manhattan is subject to examination by taxing authorities throughout the world. We are no longer subject to U.S. federal, substantially all state and local income tax examinations and substantially all non-U.S. income tax examinations for years before 2010.

Under the Inflation Reduction Act of 2022, we will be subject to a 1% excise tax on stock repurchases, net of stock issuances, beginning in 2023. We expect to include the tax in the cost of our stock repurchases as a reduction of shareholders' equity.