Income Taxes

6 Months Ended

Jun. 30, 2021

Income Tax Disclosure [Abstract]

Income Taxes

11. Income Taxes

 On January 5, 2021, the Treasury Department and Internal Revenue Service issued final regulations which provide guidance on applying the limitations on the deductibility of business interest expense under IRC Section 163(j). On January 6, 2021, the government published final regulations under IRC Section 451. The final regulations include guidance related to (1) timing of income inclusion for taxpayers with an applicable financial statement using an accrual method of accounting under IRC Section 451(b), and (2) advance payments for goods, services, and certain other items under IRC Section 451(c). The Company is currently assessing the impact of the new regulations but does not expect any material impact to its consolidated financial statements.

The Company’s effective tax rate was 24.2% and 27.6% for the three months ended June 30, 2021 and 2020, respectively. The change in the effective tax rate was due primarily to an increase in untaxed income attributable to noncontrolling interests and a change in jurisdictional earnings.  The Company’s effective tax rate for the six months ended June 30, 2021 and June 30, 2020 was 26.1% and 27.2%. The change in effective tax rate was due primarily to an increase in untaxed income attributed to noncontrolling interests and a change in jurisdictional earnings and partially offset by an increase of foreign tax losses which will not provide any tax benefit and a settlement of a state tax audit. The difference between the effective tax rate and the statutory U.S. Federal income tax rate of 21.0% for the three and six months ended June 30, 2021 primarily relates to state income taxes and a recorded valuation allowance on foreign tax credits, partially offset by benefits related to untaxed income attributable to noncontrolling interests and federal research tax credits.  

As of June 30, 2021, the Company’s deferred tax assets were subject to a valuation allowance of $31.3 million primarily related to foreign net operating loss carryforwards, foreign tax credit carryforwards, and capital losses that the Company has determined are not more-likely-than-not to be realized. The factors used to assess the likelihood of realization include:  the past performance of the 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, 2021 and December 31, 2020, the liability for income taxes associated with uncertain tax positions was $18.0 million and $16.4 million, respectively.  It is reasonably possible that the Company may realize a decrease in our uncertain tax positions of approximately $0.2 million during the next 12 months as a result of various tax audits and closing tax years.

Although the Company believes its reserves for its tax positions are reasonable, the final outcome of tax audits could be materially different, both favorably and unfavorably.  It is reasonably possible that certain audits may conclude in the next 12 months and that the unrecognized tax benefits the Company has recorded in relation to these tax years may change compared to the liabilities recorded for these periods. However, it is not currently possible to estimate the amount, if any, of such change.