INCOME TAXES

9 Months Ended

Sep. 30, 2024

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

In connection with the Separation, the Company entered into a tax matters agreement with Cummins that, among other things, formalized our agreement related to the responsibility for historical tax positions for the period prior to the IPO for jurisdictions where our business was included in the consolidated or combined tax returns of Cummins.

Atmus’ effective tax rate for the three and nine months ended September 30, 2024, was 18.4% and 20.9%, respectively. Atmus’ effective tax rate for the three and nine months ended September 30, 2023, was 23.1% and 23.8%, respectively. The decrease in the effective tax rate was driven by a change in the mix of earnings among tax jurisdictions and discrete tax items. The Company’s effective tax rate differs from the U.S. statutory rate primarily due to differences in rates applicable to foreign subsidiaries, withholding taxes and state income taxes.

The Organization for Economic Co-operation and Development introduced a framework to impose a global minimum tax rate of 15% for certain companies, referred to as Pillar 2, with certain aspects of Pillar 2 effective as of January 1, 2024. During 2023, numerous countries enacted legislation to incorporate Pillar 2 model rule concepts into their domestic laws and other countries are in the process of introducing legislation to implement Pillar 2. Based on our evaluation of the impact of this legislation, based on Atmus’ current global landscape, Pillar 2 has not yet had, nor do we expect it to have, a material impact on our effective tax rate or our business, financial condition, results of operations or cash flows. We will continue to update our analysis and monitor the ongoing legislation.