Income Taxes

9 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

10 – Income Taxes

During the first quarter of 2023, the Company changed to calculating the income tax provision using the estimated annual effective tax rate method in accordance with Accounting Standards Codification “ASC” 740 - Income Taxes and is no longer applying the exception, which allowed the use of the year-to-date effective tax rate method. We believed the change was appropriate as we are more reliably able to calculate the estimated annual effective tax rate due to sustained profitability and confidence in future earnings. This method is applied for the three and nine months ended September 30, 2023.

For the three and nine months ended September 30, 2022, we determined our quarterly tax provision using the year-to-date effective tax rate method because the estimated annual approach was not reliable given that small changes in estimated ordinary annual income resulted in significant changes in our estimated annual effective tax rate.

We recognized a tax expense of $33 million and $55 million for the three and nine months ended September 30, 2023, respectively, compared to the three and nine months ended September 30, 2022 where we recognized tax expense of $26 million and $66 million, respectively.

The relationship between our pre-tax income or loss and our income tax provision or benefit varies from period to period due to various factors which include changes in total pre-tax income or loss, the jurisdictions in which our income is earned, the tax laws in those jurisdictions and in our operating structure. We provide for income taxes based on the laws and rates in effect in the countries in which operations are conducted, or in which we or our subsidiaries are considered residents for income tax purposes. Our income tax provisions are primarily driven by income in certain jurisdictions, deemed profit countries and withholding taxes on intercompany and third-party transactions that do not directly correlate to ordinary income or loss. Certain charges and impairments recognized do not result in significant tax benefit as a result of being attributed to a non-income tax jurisdiction or our inability to forecast realization of the tax benefit of such losses. This is partially offset by the utilization of previously unbenefited deferred tax assets, such as net operating loss carryforwards.

During the nine months ended September 30, 2023, income tax expense was lower by $67 million due to the release of valuation allowances and the recognition of a benefit from previously uncertain tax positions in the second quarter. Those benefits were offset by the establishment of a valuation allowance of approximately $20 million related to the $57 million loss on the sale of Blue Chip Swap securities in Argentina, further described in the following footnote. During the nine months ended September 30, 2022, income tax expense was lower by $27 million, due the recognition of a benefit from previously uncertain tax positions.

We routinely undergo tax examination in various jurisdictions. We cannot predict the timing or outcome regarding resolution of these tax examinations or if they will have a material impact on our financial statements. As of September 30, 2023, we anticipate that it is reasonably possible that our uncertain tax positions of $262 million, including interest and penalties, may decrease by up to $12 million in the next twelve months due to expiration of statutes of limitations, settlements and/or conclusions of tax examinations.