Income Taxes

6 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company’s year-to-date tax provision is comprised of the most recent estimated annual effective tax rate applied to year-to-date pre-tax ordinary income. The tax impacts of unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, are recorded discretely in the interim period in which they occur. In addition, the tax provision is adjusted for the interim period impact of non-benefited pre-tax losses.

The estimated annual effective tax rate, before discrete items, applied to ordinary income was 23.9% in both the second quarter and six months ended June 30, 2022 and 29.1% in both the second quarter and six months ended June 30, 2021. The 2022 and 2021 rates were higher than the U.S. federal statutory rate of 21% primarily due to additional estimated U.S. tax on Global Intangible Low-Taxed Income (“GILTI”) and other foreign earnings, incremental state tax and foreign taxes on earnings also subject to U.S. federal income tax, and nondeductible expenses.

For the second quarter of 2022 and 2021, the tax rate including discrete items was 19.7% and 32.7%, respectively. For the second quarter of 2022, the Company recorded a discrete tax benefit of $7 attributable to a $6 benefit to release a valuation allowance related to an interest carryforward tax attribute in the U.K. and a net benefit of $1 for other small items. For the second quarter of 2021, the Company recorded a discrete tax charge of $4 attributable to a $2 charge for a U.K. tax rate change and a net charge of $2 for other small items.

For the six months ended June 30, 2022 and 2021, the tax rate including discrete items was 21.5% and 30.9%, respectively. For the six months ended June 30, 2022, the Company recorded a discrete net tax benefit of $9 attributable to a $6 benefit to release a valuation allowance related to an interest carryforward tax attribute in the U.K., a $5 excess benefit for stock compensation and a net charge of $2 for other small items. For the six months ended June 30, 2021, the Company recorded a discrete tax charge of $3 attributable to a $2 charge for a U.K. tax rate change and a net charge of $1 for other small items.

The tax provision was comprised of the following:

	Second quarter ended				Six months ended
	June 30,				June 30,
	2022		2021		2022		2021
Pre-tax income at estimated annual effective income tax rate before discrete items	$	44	$	32	$	85	$	65
Impact of change in estimated annual effective tax rate on previous quarter’s pre-tax income	(1)		(1)		—		—
Interim period treatment of operational losses in foreign jurisdictions for which no tax benefit is recognized	—		1		—		1
Other discrete items	(7)		4		(9)		3
Provision for income taxes	$	36	$	36	$	76	$	69