Income Taxes

3 Months Ended

Mar. 31, 2020

Income Tax Disclosure [Abstract]

INCOME TAXES

5. INCOME TAXES

Income tax provisions for interim (quarterly) periods are based on an estimated annual effective income tax rate calculated separately from the effect of significant, infrequent or unusual items. Income tax expense was $1 million for the three months ended March 31, 2020 compared to income tax expense of $9 million for the three months ended March 31, 2019. The change was primarily driven by lower income before taxes and an increase in discrete tax benefits in the three months ended March 31, 2020.

In connection with preparing the financial statements for the quarter ended March 31, 2020, the Company identified and recorded income tax benefits of $2 million related to an error in the calculation of the permanent differences on executive stock compensation and $3 million for the write-off of income tax payables incorrectly recorded in prior periods. The Company determined the impact of these errors were not material to the annual or interim financial statements of previous periods and the effect of correcting these errors was not material to the Condensed Consolidated Financial Statements for the three months ended  March 31, 2020 and is not expected to be material to the 2020 annual financial statements.

The Company engages in continuous discussions and negotiations with taxing authorities regarding tax matters, and the Company has determined that over the next 12 months it expects to resolve certain tax matters related to U.S. and foreign jurisdictions. As a result, as of March 31, 2020, we estimate that it is reasonably possible that gross unrecognized tax benefits may decrease by $30 million to $37 million in the next 12 months.