Income Taxes

9 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

NOTE N. INCOME TAXES

For the three and nine months ended September 30, 2023, the Company recorded total income tax expense of $35 million and $118 million, respectively. The effective tax rate for the three and nine months ended September 30, 2023 was 18% and 19%, respectively. For the three and nine months ended September 30, 2022, the Company recorded total income tax expense of $20 million and $86 million, respectively. The effective tax rate for the three and nine months ended September 30, 2022 was 13% and 18%, respectively. The lower effective tax rate for the three months ended September 30, 2022 was due to enacted state tax rate legislation that resulted in a non-recurring deferred tax benefit in 2022.

The need to establish a valuation allowance against the deferred tax assets is assessed periodically based on a more-likely-than-not realization threshold, in accordance with authoritative accounting guidance. Appropriate consideration is given to all positive and negative evidence related to that realization. This assessment considers, among other matters, the nature, frequency and severity of recent losses, forecasts of future profitability, the duration of statutory carry-forward periods, experience with tax attributes expiring unused, and tax planning alternatives. The weight given to these considerations depends upon the degree to which they can be objectively verified.

The Company continues to provide for a valuation allowance on certain of its foreign deferred tax assets. The Company has determined, based on the evaluation of both objective and subjective evidence available, that this valuation allowance is necessary and that it is more likely than not that the deferred tax assets are not fully realizable.