Income Taxes

6 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 13. Income Taxes

The Company’s quarterly income tax provision (benefit) is measured using an estimate of its consolidated annual effective tax rate, adjusted in the current period for discrete income tax items, within the periods presented. The comparison of the Company’s income tax provision (benefit) between periods may be impacted by the level and mix of earnings and losses by tax jurisdiction, foreign income tax rate differentials and discrete items. The Company’s effective tax rate was 31.8% and 28.9% for the three months ended June 30, 2022 and 2021, respectively, and (11.3%) and 17.0% for the six months ended June 30, 2022 and 2021, respectively. The difference between the effective tax rate and the statutory U.S. Federal income tax rate of 21.0% for the six months ended June 30, 2022 and 2021 is due to nondeductible permanent items, state taxes, and the reversal of the Company’s indefinite reinvestment assertion.

As of June 30, 2022, the Company’s deferred tax assets included a valuation allowance of $101 primarily related to certain deferred tax assets of the Company’s foreign subsidiaries and a capital loss carryforward in the U.S. The factors used to assess the likelihood of realization were the past performance of the related entities, forecasts of future taxable income, future reversals of existing taxable temporary differences, and available tax planning strategies that could be implemented to realize the deferred tax assets. The ability or failure to achieve the forecasted taxable income in these entities could affect the ultimate realization of deferred tax assets.

As of June 30, 2022, the Company had gross federal, state, and foreign net operating loss carryforwards of approximately $0, $32 and $86, respectively. The state net operating losses have carryforward periods of five to twenty years and begin to expire in 2027. The foreign net operating losses generally have carryback periods of three years, carryforward periods of twenty years, or are indefinite, and begin to expire in 2036.

The Company’s liability for unrecognized tax benefits is recorded within other non-current liabilities in the condensed consolidated balance sheets and recognizes interest and penalties accrued related to unrecognized tax benefits in the provision for income taxes in the condensed consolidated statements of operations. As of June 30, 2022 and December 31, 2021, the total gross unrecognized tax benefits were $2 and $2, respectively. The Company had accrued gross interest and penalties as of June 30, 2022 and December 31, 2021 of $0 and $1, respectively. During the three and six months ended June 30, 2022 and 2021, the Company recognized net interest expense of less than $1 for all periods.

If all of the Company’s unrecognized tax benefits as of June 30, 2022 were recognized, $2 would impact the Company’s effective tax rate. The Company expects $1 of unrecognized tax benefits to expire in the next twelve months due to lapses in the statute of limitations.

As of June 30, 2022, with few exceptions, neither the Company nor its subsidiaries are subject to examination prior to tax year 2014. There are various other audits in state and foreign jurisdictions. No adjustments have been proposed and the Company does not expect the results of the audits to have a material impact on the consolidated financial statements.

On December 27, 2020, the Consolidated Appropriations Act was signed into law, which included a temporary provision that allows for a 100 percent deduction for business meals expenses purchased from a restaurant between December 31, 2020 and January 1, 2023. The tax law changes in the Consolidated Appropriations Act did not have a material impact on the Company’s quarterly income tax provision.