Income Taxes

9 Months Ended

Sep. 30, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The effective income tax rate was 19.9% and 22.8% for the three and nine months ended September 30, 2021, respectively, and 21.7% and 21.6% for the three and nine months ended September 30, 2020, respectively. The decrease in the three months ended September 30, 2021 was primarily due to a refinement in tax accruals on foreign operations related to both a prior and current period, partially offset by the deductible pre-tax loss on extinguishment of debt in the prior year. The increase in the nine months ended September 30, 2021 was primarily due to the decrease in the recognition of excess tax benefits associated with share-based payments in the statement of income, certain non-deductible IHS Markit merger costs and the deductible pre-tax loss on extinguishment of debt in the prior year.

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, 2021 and December 31, 2020, the total amount of federal, state and local, and foreign unrecognized tax benefits was $143 million and $121 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, 2021 and December 31, 2020, we had $27 million and $24 million, respectively, of accrued interest and penalties associated with unrecognized tax benefits. Based on the current status of income tax audits, we believe that the total amount of unrecognized tax benefits may decrease by approximately $18 million in the next twelve months as a result of the resolution of local tax examinations.