Income Taxes

6 Months Ended

Jun. 30, 2024

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

For interim periods, we recognize income tax expense by applying the estimated annual effective income tax rate to year-to-date results unless this method does not result in a reliable estimate of year-to-date income tax expense. Each period, the income tax accrual is adjusted to the latest estimate and the difference from the previously accrued year-to-date balance is adjusted in the current quarter. Changes in profitability estimates in various jurisdictions will impact our quarterly effective income tax rates.

The provision for income taxes for the six months ended June 30, 2024 and 2023 reflected an estimated annual effective tax rate of 25% and 34%, respectively, excluding discrete items discussed below. The total tax provision for the three and six months ended June 30, 2024 was $53 million and $94 million, respectively, compared to $21 million and $22 million for the comparable periods in 2023, respectively. The total effective tax rate for the six

months ended June 30, 2024 was 26%, compared to 95% for the comparable period in 2023. The year-over-year decrease in the effective tax rate was primarily a result of a discrete tax expense of $22 million recorded in the quarter ended June 30, 2023 relating to the change in indefinite reinvestment assertion on Chile and Brazil earnings.

We recognized net discrete tax expenses of $4 million and $15 million in the six months ended June 30, 2024 and 2023, respectively. The net discrete tax expense in the current year primarily relates to inflationary tax adjustments in certain South American entities while the net discrete tax expense in the prior year primarily relates to the change in management’s indefinite reinvestment assertion in the second quarter described in "Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

In 2021 the Organization for Economic Cooperation and Development (OECD) announced an Inclusive Framework on Base Erosion and Profit Shifting including Pillar Two Model Rules defining the global minimum tax, which establishes a global minimum effective tax rate of 15% for multinational enterprise groups with annual global revenue exceeding 750 million Euros. On June 20, 2024, the Canadian government enacted legislation implementing aspects of the OECD’s minimum tax rules under the Pillar Two Framework, effective in 2024; however, proposed legislation related to other aspects of the framework has not yet been released by the Canadian government, but is expected in the future. We considered the new Canadian legislation as part of our second quarter 2024 tax provision and concluded that (i) it had no impact on our consolidated financial statements for the six months ended June 30, 2024, and (ii) we expect there to be no impact on our Consolidated Financial Statements for the year ending December 31, 2024. No other jurisdictions in which LP operates have enacted Pillar Two legislation at this time. The Company is continuously monitoring the expanding adoptions of Pillar Two legislation and assessing its potential impact on our future tax liability.