Income Tax

3 Months Ended

Mar. 31, 2023

Income Tax Disclosure [Abstract]

Income Tax

Income Tax

	Three Months Ended
	March 31, 2023		March 31, 2022
Effective tax rate	28	%	21	%

The higher effective tax rate for the three months ended March 31, 2023, compared to the prior year was primarily due to an increase in net discrete tax expense. We recognized $7.5 million discrete tax expense in the three months ended March 31, 2023 compared to a $0.9 million discrete tax benefit in the three months ended March 31, 2022.

Our tax rate can be volatile and may change with, among other things, the amount and source of pre-tax 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, could have an impact on our effective tax rate.

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into U.S. law. The IRA includes a new corporate alternative minimum tax of 15% on the adjusted financial statement income (“AFSI”) of corporations with average AFSI exceeding $1.0 billion over a three-year period, effective for tax years beginning after December 31, 2022. The alternative minimum tax is not expected to impact our financial or cash tax position in 2023. Additionally, the IRA imposes an excise tax of 1% on stock repurchases, effective January 1, 2023. The excise tax is recorded as an incremental cost in treasury stock on our unaudited condensed consolidated balance sheets and was immaterial for the three months ended March 31, 2023.

Based on our current analysis, we do not expect these provisions to have a material impact on our financial statements in the near future. We will continue to evaluate their impact as additional information becomes available.