Income Taxes

3 Months Ended

Mar. 31, 2025

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 20.8% in the first quarter of 2025 and 21.7% in the first quarter of 2024. The 2025 rate was lower than the 2024 rate and the U.S. federal statutory rate of 21% primarily due to a U.S. deduction on Foreign Derived Intangible Income (“FDII”), a net benefit related to U.S. federal and state research and development credits, and a U.S. tax benefit recognized for foreign tax credits, partially offset by incremental state income tax, additional U.S. tax on Global Intangible Low-Taxed Income (“GILTI”) and other foreign earnings, nondeductible expenses, and foreign earnings subject to tax in jurisdictions with tax rates higher than the U.S. federal statutory rate of 21%. The 2024 rate was higher than the U.S. federal statutory rate of 21% primarily due to additional U.S. tax on GILTI and other foreign earnings, incremental state income tax, nondeductible expenses, and foreign earnings subject to tax in jurisdictions with tax rates higher than the U.S. federal statutory rate of 21%.

For the first quarter of 2025 and 2024, the tax rate including discrete items was 22.9% and 19.8%, respectively. In the first quarter of 2025, the Company recorded a discrete net tax charge of $9 attributable to a $6 net charge related to the expiration of a tax holiday in China, a $2 charge for a tax reserve established in Germany, and a net tax charge of $1 for other small items. In the first quarter of 2024, the Company recorded a discrete net tax benefit of $7 attributable to a $6 benefit to release a valuation allowance related to U.S. foreign tax credits and a net tax benefit of $1 for other small items.

The tax provision was comprised of the following:

	First quarter ended
	March 31,
	2025		2024
Pre-tax income at estimated annual effective income tax rate before discrete items	$	93	$	66
Interim period treatment of operational losses in foreign jurisdictions for which no tax benefit is recognized	—		1
Other discrete items	9		(7)
Provision for income taxes	$	102	$	60