Income Taxes

9 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

We recognized total income tax expense from continuing operations of $117 million and $460 million for the three months and nine months ended September 30, 2022, respectively, compared to income tax expense of $195 million and $549 million for the same periods in 2021. The decreases in income tax expense for the three months and nine months ended September 30, 2022, compared to the same periods in 2021, were primarily due to the tax effects of a decrease in pretax earnings, partially offset by adjustments to the valuation allowance on foreign tax credit carryforwards.

The valuation allowance establishment during the three months and nine months ended September 30, 2022, was primarily driven by a reduction in forecasted foreign-sourced income caused by revised estimates from certain previously executed and forecasted securitization transactions. During the three months and nine months ended September 30, 2022, we lowered our income tax benefit from these securitization transactions by $27 million and $47 million, respectively, due to the recharacterization of certain income that was previously foreign-sourced income as domestically-sourced and higher interest expense assumptions. The valuation allowance release during the nine months ended September 30, 2021, was primarily driven by increases in forecasted foreign-sourced income related to our capacity to engage in certain securitization transactions and the market demand from investors related to these transactions, coupled with the anticipated timing of the forecasted expiration of foreign tax credit carryforwards, resulting in a nonrecurring tax benefit in the second quarter of 2021.

As of each reporting date, we consider existing evidence, both positive and negative, that could impact our view with regard to future realization of deferred tax assets. We continue to believe it is more likely than not that the benefit for certain foreign tax credit carryforwards and state net operating loss carryforwards will not be realized. In recognition of this risk, we continue to provide a partial valuation allowance on the deferred tax assets relating to these carryforwards and it is reasonably possible that the valuation allowance may change in the next 12 months.