Income Taxes

9 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company determines the tax provision for interim periods using an estimate of its annual effective tax rate. Each quarter, the Company updates its estimate of annual effective tax rate, and if its estimated tax rate changes, the Company makes a cumulative adjustment. The continued impact of COVID-19 on the economic environment is uncertain and may change the annual effective tax rate, which could impact tax expense.

The Company’s effective tax rate increased from 13.7% during the three months ended September 30, 2021 to 24.2% during the three months ended September 30, 2022. The Company recorded income tax expense of $12,447 and $4,196 for the three months ended September 30, 2022 and 2021, respectively. The increase in income tax expense was primarily as a result of higher profit during the three months ended September 30, 2022, compared to the three months ended September 30, 2021, the recording of a one-time deferred tax benefit of $2,400 on settlement of the Notes during the three months ended September 30, 2021, and higher excess tax benefits during the three months ended September 30, 2021.

The Company’s effective tax rate increased from 20.3% during the nine months ended September 30, 2021 to 23.9% during the nine months ended September 30, 2022. The Company recorded income tax expense of $34,774 and $22,019 for the nine months ended September 30, 2022 and 2021, respectively. The increase in income tax expense was primarily as a result of higher profit during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, the recording of a one-time deferred tax benefit of $2,400 on settlement of the Notes during the nine months ended September 30, 2021, and an increase in non-deductible expenses, partially offset by higher excess tax benefits during the nine months ended September 30, 2022.

Effective for taxable years beginning after December 31, 2021, Internal Revenue Code Section 174, Amortization of Research and Experimental Expenditures, provides that research and experimentation expenses can no longer be currently deducted, instead such expenses are required to be capitalized. Such capitalized expenses are to be amortized over a period of five and fifteen years for the U.S. and foreign research, respectively. Although this change has no impact on the income statement due to offsetting current tax expense with corresponding deferred tax benefit, the change has resulted in an aggregate increase of $17,640 in the current tax liability and deferred tax asset balances, presented under “Income taxes payable, net” and “Deferred tax assets, net,” respectively, in the unaudited consolidated balance sheets as of September 30, 2022.

Income tax (deferred) recognized in AOCI were as follows:

	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Deferred taxes benefit / (expense) recognized on:
Unrealized gain/(loss) on cash flow hedges	$	2,348	$	(980)	$	5,146	$	(1,201)
Reclassification adjustment for cash flow hedges	(133)		370		802		1,186
Reclassification adjustment for retirement benefits	(44)		(32)		(136)		(154)
Foreign currency translation loss	7,919		630		8,898		1,859
Total income tax benefit / (expense) recognized in AOCI	$	10,090	$	(12)	$	14,710	$	1,690