Income Tax

6 Months Ended

Jun. 30, 2021

Income Tax Disclosure [Abstract]

Income Tax

Income Tax

	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Effective tax rate	25	%	51	%	27	%	66	%

The decrease in the effective tax rate during the three and six months ended June 30, 2021 compared to the prior year was primarily due to a decrease in net discrete tax expense, partially offset by the effect of proportionally higher pretax income in jurisdictions with a higher tax rate. We recognized $38.5 million of net discrete tax expense through the second quarter of 2021 versus $121.7 million net discrete tax expense through the second quarter of 2020. The difference is primarily due to the $135 million discrete tax expense recognized in the second quarter of 2020, which was related to the enactment of the hybrid regulations as further discussed below.

During the second quarter of 2021, the U.K. government enacted, and royal assent was received for, legislation to increase the corporate income tax rate from 19% to 25%. Remeasurement of our deferred tax liabilities under the higher income tax rate resulted in the recognition of additional discrete tax expense of approximately $18 million in the second quarter of 2021.

Our tax rate is volatile and may increase or decrease with changes in, among other things, the amount and source of income or loss, our ability to utilize foreign tax credits, excess tax benefits or deficiencies from share-based compensation, changes in tax laws, and the movement of liabilities established pursuant to accounting guidance for uncertain tax positions as statutes of limitations expire, positions are effectively settled, or when additional information becomes available. There are

proposed or pending tax law changes in various jurisdictions and other changes to regulatory environments in countries in which we do business that, if enacted, may have an impact on our effective tax rate.

Due to anticipated settlements and expected expiration of statutes of limitations, it is reasonably possible that the amount of unrecognized tax benefits may decrease by approximately $250 million within the next 12 months.

Since 2018, the U.S. Department of Treasury has continued to issue proposed, temporary and final regulations to implement provisions of the 2017 Tax Act. We will continue to monitor these regulations. The final hybrid regulations issued in April 2020 resulted in recognition of approximately $135 million of tax expense in the six months ended June 30, 2020. We currently estimate the impact of the final regulations to be cash tax outflows of approximately $100 million in 2021. We continue to analyze the potential cash impacts of the final regulations to minimize cash outflows over time.