Income Taxes

9 Months Ended

Sep. 30, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The effective tax rates on Net income (loss) were (2.6)% and 51.4% for the three and nine months ended September 30, 2021, respectively. The effective tax rates on Net income were 22.5% and 19.3% for the three and nine months ended September 30, 2020, respectively. Refer to Note 1 “Basis of Presentation” for a discussion of certain amounts in the prior year's Condensed Consolidated Financial Statements which have been reclassified to conform to the current year’s presentation.

For the three months ended September 30, 2021, the Company reported tax expense of $23 million on a pretax loss of $(868) million, which resulted in an effective tax rate of (2.6)%. The primary driver of the quarter to date tax rate was the impact of the Termination Fee.

For the nine months ended September 30, 2021, the Company reported tax expense of $460 million on pretax income of $895 million, which resulted in an effective tax rate of 51.4%. The primary drivers of the year-to-date tax rate were the impact of the Termination Fee, the U.K. tax rate increase, and the tax benefit of share-based payments. The U.K. enacted legislation in the second quarter of 2021 which increases the corporate income tax rate from 19% to 25% with effect from April 1, 2023 and the Company remeasured its U.K. deferred tax assets and liabilities accordingly.

For the three months ended September, 2020, the tax rate was primarily driven by the geographical distribution of income and certain discrete items, including the tax rate increase in the U.K. In third quarter of 2020, the U.K. enacted legislation retroactively reinstating the 19% corporate income tax rate as of April 1, 2020 (the tax rate had dropped to 17% on April 1, 2020 under previously enacted legislation).

For the nine months ended September 30, 2020, the tax rate was primarily driven by the geographical distribution of income as well as certain discrete items, primarily the favorable impacts of share-based payments and the release of a valuation allowance offset by the tax rate increase in the U.K.