Income Taxes

6 Months Ended

Jun. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The effective tax rate was 20.5 percent and 22.8 percent for the three months ended June 30, 2023 and 2022, respectively, and 18.6 percent and 22.7 percent for the six months ended June 30, 2023 and 2022, respectively. The lower effective tax rate for the three-month period primarily reflected discrete tax benefits related to a legal entity restructuring in the current period. The lower effective tax rate for the six-month period primarily reflected discrete tax benefits related to the resolution of certain prior-year tax items and a legal entity restructuring in the current period.

We are under continuous examination by the Internal Revenue Service (IRS) and tax authorities in other countries and states in which we have significant business operations. The tax years under examination and open for examination vary by jurisdiction. We are currently under examination by the IRS for the 2017 and 2018 tax years.

We believe it is reasonably possible that our unrecognized tax benefits could decrease within the next twelve months by as much as $123 million, principally as a result of potential resolutions of prior years’ tax items with various taxing authorities. The prior years’ tax items include unrecognized tax benefits relating to the deductibility of certain expenses or losses and the attribution of taxable income to a particular jurisdiction or jurisdictions. Of the $123 million of unrecognized tax benefits, approximately $97 million relates to amounts that, if recognized, would impact the effective tax rate in a future period.