Income Taxes

9 Months Ended

Sep. 30, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The effective income tax rate was 22.2% and 20.4% for the three months ended September 30, 2019 and September 30, 2018, respectively. The increase was primarily due to a favorable adjustment recorded during the three months ended September 30, 2018 to the provisional tax expense originally recorded upon enactment of the Tax Cuts and Jobs Act in December of 2017. The effective tax rate was 21.9% for both the nine months ended September 30, 2019 and September 30, 2018.

At the end of each interim period, we estimate the annual effective tax rate and apply that rate to our ordinary quarterly earnings. The tax expense or benefit related to significant unusual or infrequently occurring items that will be separately reported or reported net of their related tax effect, and are individually computed, is recognized in the interim period in which those items occur. In addition, the effect of changes in enacted tax laws or rates or tax status is recognized in the interim period in which the change occurs.

The Company is continuously subject to tax examinations in various jurisdictions. As of September 30, 2019 and December 31, 2018, the total amount of federal, state and local, and foreign unrecognized tax benefits was $114 million and $147 million, respectively, exclusive of interest and penalties. We recognize accrued interest and penalties related to unrecognized tax benefits in interest expense and operating-related expense, respectively. As of September 30, 2019 and December 31, 2018, we had $19 million and $35 million, respectively, of accrued interest and penalties associated with unrecognized tax benefits. The reduction in uncertain tax positions and associated accrued interest relates primarily to settlements of tax audits with New York City. Based on the current status of income tax audits, we believe that the total amount of unrecognized tax benefits may decrease by approximately $3 million in the next twelve months as a result of the resolution of tax examinations.