INCOME TAXES

9 Months Ended

Sep. 30, 2024

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

In determining its interim provision for income taxes, the Company uses an estimated annual effective tax rate, which is based on expected annual profit before tax, statutory tax rates and tax planning opportunities available in the various jurisdictions in which the Company operates. Certain significant or unusual items are separately recognized in the quarter in which they occur and can be a source of variability in the effective tax rates from quarter to quarter.

The Company’s worldwide effective tax rate for the three months ended September 30, 2024 and 2023 was 28.1% and 26.3%, respectively, and 21.4% and 21.9% during the nine months ended September 30, 2024 and 2023, respectively. The Company recorded a tax shortfall upon vesting or exercise of stock awards of $0.3 million during the three months ended September 30, 2024 and excess tax benefits upon vesting or exercise of stock awards of $20.5 million during the nine months ended September 30, 2024, compared to excess tax benefits of $1.7 million and $15.1 million during the three and nine months ended September 30, 2023, respectively. The effective tax rate during the three and nine months ended September 30, 2024 was negatively impacted by the accounting treatment of the receipt of government incentives related to conducting R&D activities in Poland, which resulted in a 2.3% and 1.0% increase in the effective tax rate, respectively, and the non-deductibility of certain acquisition costs for tax purposes which resulted in a 1.4% and 0.6% increase in the effective tax rate, respectively. During the three and nine months ended September 30, 2023, the Company’s effective tax rate increased due to a $3.6 million charge in the third quarter associated with the completion of EPAM’s exit from Russia.