Income Taxes

6 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 7 — Income Taxes

Provision for income taxes for the three and six months ended June 30, 2022 was $19 million and $62 million, respectively, compared to $75 million and $119 million for the three and six months ended June 30, 2021, respectively. The effective tax rates were 10.5% and 18.4% for the three and six months ended June 30, 2022, respectively, and 38.9% and 15.2% for the three and six months ended June 30, 2021, respectively. These effective tax rates are calculated using extended values from the Company’s condensed consolidated statements of comprehensive income and are, therefore, more precise tax rates than can be calculated from rounded values. The prior-year quarter effective tax rate was higher due to the discrete tax effect of the U.K. tax-rate increase enacted in the second quarter of 2021. Accordingly, the Company remeasured its U.K. deferred tax assets and liabilities, which resulted in a $40 million deferred tax expense in the prior-year period. Additionally, the current quarter effective tax rate includes certain discrete tax benefits primarily related to return-to-provision true ups.

The Company recognizes deferred tax balances related to the undistributed earnings of subsidiaries when it expects that it will recover those undistributed earnings in a taxable manner, such as through receipt of dividends or sale of the investments. Historically, the Company has not provided taxes on cumulative earnings of its subsidiaries that have been reinvested indefinitely. As a result of its plans to restructure or distribute accumulated earnings of certain foreign operations, the Company has recorded an estimate of non-US withholding and state income taxes. However, the Company asserts that the historical cumulative earnings of its other subsidiaries are reinvested indefinitely and therefore does not provide deferred tax liabilities on these amounts.

The Company records valuation allowances against net deferred tax assets based on whether it is more likely than not that the deferred tax assets will be realized. It has liabilities for uncertain tax positions under ASC 740, Income Taxes, of $37 million, excluding interest and penalties. The Company believes the outcomes that are reasonably possible within the next 12 months may result in a reduction in the liability for uncertain tax positions of approximately $3 million to $6 million, excluding interest and penalties.