Income Taxes

9 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

7. 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 $43 million for the three months ended September 30, 2022 compared to income tax expense of $29 million for the three months ended September 30, 2021. The change was primarily driven by higher income before taxes in the three months ended September 30, 2022, compared to the prior year. The Company did not recognize any material discrete tax expenses or benefits in either period.

Income tax expense was $56 million for the nine months ended September 30, 2022 compared to income tax expense of $77 million for the nine months ended September 30, 2021. The change was primarily driven by discrete tax expenses and benefits. In the nine months ended September 30, 2022, the Company recognized a $7 million benefit from provision to return adjustments and a $7 million benefit related to uncertain tax position settlements and statute of limitation lapses. In the nine months ended September 30, 2021, the Company recognized a $34 million expense from recording a valuation allowance against interest limitation carryforwards in the U.S. and a $14 million benefit from the deferred tax impact of a tax law change in the U.K.

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 September 30, 2022, we estimate that it is reasonably possible that gross unrecognized tax benefits may decrease by $8 million to $10 million in the next 12 months.