Income Taxes

9 Months Ended

Sep. 30, 2022

Income Taxes

Income Taxes

10. Income Taxes

The “Provision for income taxes” in the accompanying Condensed Consolidated Statements of Income (Loss) is based on an estimate of the Company’s annualized effective income tax rate, except for the $6.9 million of restructuring charges in the nine months ended September 30, 2022 (see Note 2, Summary of Significant Accounting Policies) and the loss on settlement of the pre-existing master franchise contracts of $40.5 million in the nine months ended September 30, 2021 (see Note 5, Acquisitions and Dispositions), which were evaluated discretely. The loss on settlement had no tax provision under GAAP; hence, the year-to-date tax provision was an expense (as opposed to a benefit) for the nine months ended September 30, 2021, even though the Company had a pre-tax year-to-date loss.

Uncertain Tax Positions

Uncertain tax position liabilities represent the aggregate tax effect of differences between the tax return positions and the amounts otherwise recognized in the consolidated financial statements and are recognized in “Income taxes payable” in the Condensed Consolidated Balance Sheets. Interest and penalties are accrued on the uncertain tax positions and included in the “Provision for income taxes” in the accompanying Condensed Consolidated Statements of Income. While the Company believes the liabilities recognized for uncertain tax positions are adequate to cover reasonably expected tax risks, there can be no assurance that an issue raised by a tax authority will be resolved at a cost that does not exceed the liability recognized.

During 2021, in connection with the INTEGRA acquisition, the Company assumed an uncertain tax position related to certain U.S. tax matters and recorded a largely offsetting related indemnification asset. See Note 5, Acquisitions and Dispositions for further details.

During 2021, the Company settled uncertain tax positions related to certain foreign tax matters that were accrued in prior years.

A reconciliation of the beginning and ending uncertain tax position amounts, excluding interest and penalties is as follows:

	As of September 30,
	2022		2021
Balance, January 1	$	1,587	$	5,300
Increases related to prior period tax positions		—		96
Decrease related to prior year tax positions		—		(815)
Increase related to tax positions from acquired companies		309		1,587
Settlements		—		(3,776)
Foreign currency transaction (gains) losses		—		351
Balance, September 30	$	1,896	$	2,743

A portion of the Company’s uncertain tax positions have a reasonable possibility of being settled within the next 12 months.