Income Taxes

9 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Effective Tax Rates

Our quarterly provision for income taxes is measured using an annual effective tax rate, adjusted for discrete items within the periods presented.

Our effective tax rates are as follows:

	Three Months Ended September 30,		Nine Months Ended September 30,
	2023	2022	2023	2022
Effective Tax Rate	23.5%	30.7%	22.2%	24.6%

Our effective tax rates for the three-and-nine-months ended September 30, 2023 are lower than the prior year’s comparable periods primarily due to a foreign tax credit return to provision adjustment recorded in the prior year’s comparable periods.

Our effective tax rates for the three-and-nine-months ended September 30, 2023 are higher than the statutory U.S. federal tax rate of 21% primarily due to US state income taxes.

The Tax Matters Agreement, among other things, governs our and SpinCo’s respective rights, responsibilities and obligations after the Separation with respect to tax liabilities and benefits (including any taxes imposed that are attributable to the failure of the Distribution and certain related transactions to qualify as a transaction that is tax-free for U.S. federal income tax purposes), tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and other matters regarding taxes. Although enforceable as between the parties, the Tax Matters Agreement will not be binding on the Internal Revenue Service or other tax authorities.

The change from presenting our financials on a “carve-out” basis to a stand-alone entity basis at the time of the Separation resulted in an increase in uncertain tax positions of $15.6 million and a related $8.5 million tax indemnification receivable from SpinCo adjusted in our Unaudited Consolidated and Combined Condensed Statements of Changes in Equity through “Crane Net Investment” upon the Separation.

As of September 30, 2023, we had gross unrecognized tax benefits of $23.8 million included in “Other liabilities” in our Unaudited Consolidated and Combined Condensed Balance Sheets.

The Accrued Income Tax Liability computed on a stand-alone entity basis resulted in a decrease of approximately $10.2 million adjusted in our Unaudited Consolidated and Combined Condensed Statements of Changes in Equity through “Crane Net Investment” upon the Separation.