Income Taxes

9 Months Ended

Sep. 30, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

We recognized total income tax benefit from continuing operations of $124 million and $147 million for the three months and nine months ended September 30, 2024, respectively, compared to income tax benefit of $68 million and income tax expense of $74 million for the same periods in 2023. The decreases in income tax expense for the three months and nine months ended September 30, 2024, compared to the same periods in 2023, were primarily due to an increase in qualified clean vehicle tax credits partially offset by an adjustment to the valuation allowance related to foreign tax credit carryforwards during the three months ended September 30, 2023. The increase in qualified clean vehicle tax credits was primarily driven by a new automotive manufacturer relationship added during the nine months ended September 30, 2024, which increased our purchased battery-electric vehicle lease origination volume. The adjustment to the valuation allowance related to foreign tax credit carryforwards during the three months ended September 30, 2023, was a nonrecurring tax benefit, primarily driven by a tax planning strategy.

The income tax benefit for qualified clean vehicle tax credits, along with other tax credits, resulted in a significant variation in the customary relationship between pretax income and income tax expense for the three months and nine months ended September 30, 2024. We record qualified clean vehicle tax credits as part of our investment tax credit category. All our investment tax credits are accounted for using the flow-through method and are recognized as a reduction to current income tax expense.

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.