INCOME TAXES

9 Months Ended

Sep. 30, 2023

INCOME TAXES

INCOME TAXES

12. INCOME TAXES

The Company’s tax rate was 19.1% and 14.6% for the third quarter of 2023 and 2022, respectively, and 19.4% and 17.9% for the first nine months of 2023 and 2022, respectively. The change in the Company’s tax rate for the third quarter and first nine months of 2023 compared to the third quarter and first nine months of 2022 was driven primarily by the impact of discrete tax items and special (gains) and charges. Further information related to special (gains) and charges is included in Note 2.

The Company recognized net tax expense related to discrete tax items of $3.5 million and $2.3 million in the third quarter and first nine months of 2023, respectively. This included share-based compensation excess tax benefits of $0.8 million and $2.7 million in the third quarter and first nine months of 2023, respectively. Additionally, the Company recognized discrete tax expense of $4.3 million and $5.0 million during the third quarter and first nine months of 2023, respectively, primarily due to prior year adjustments, changes in estimates, audit settlements, uncertain tax positions, and repricing of deferred tax balances.

The Company recognized net tax benefit related to discrete tax items of $14.2 million and $9.5 million in the third quarter and first nine months of 2022, respectively. This included a deferred tax benefit of $14.6 million associated with utilization of tax attributes as a result of legal entity rationalization and share-based compensation excess tax benefits of $0.7 million and $4.3 million in the third quarter and first nine months of 2022, respectively. Additionally, the Company recognized discrete tax expense of $1.1 million and $9.4 million during the third quarter and first nine months of 2022, respectively, primarily due to audit settlements, uncertain tax positions, prior year return adjustments, repricing of deferred tax balances and other changes in estimates.

The Inflation Reduction Act (IRA), which became effective January 1, 2023, includes a corporate alternative minimum tax on certain large corporations and climate change mitigation incentives. In addition, there are other non-income tax provisions, including an excise tax on the repurchase of corporate stock. The Company continues to assess the impact of the IRA but does not anticipate any material impacts on the Company’s financial statements.