Income Taxes

9 Months Ended

Sep. 30, 2021

Income Taxes

Income Taxes

Note 6—Income Taxes

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Provision for income taxes	$	(120.5)		$	(99.3)		$	(302.8)		$	(213.3)
Effective tax rate		22.2	%		22.1	%		21.2	%		20.0	%

For the three months ended September 30, 2021 and 2020, stock option exercise activity had the impact of decreasing our Provision for income taxes by $12.3 and $10.7, respectively, and decreasing our effective tax rate by 230 basis points and 240 basis points, respectively, due to the recognition of excess tax benefits within Provision for income taxes in the accompanying Condensed Consolidated Statements of Income. For the nine months ended September 30, 2021 and 2020, stock option exercise activity had the impact of decreasing our Provision for income taxes by $34.3 and $28.1, respectively, and decreasing our effective tax rate by 240 basis points and 260 basis points, respectively. For the nine months ended September 30, 2021, the effective tax rate includes a discrete tax benefit of $14.9 related to the settlement of uncertain tax positions in certain non-U.S. jurisdictions, which had the effect of decreasing the effective tax rate by 100 basis points, as well as the impact of acquisition-related expenses, which had the effect of increasing the effective tax rate by approximately 20 basis points. For the nine months ended September 30, 2020, the effective tax rate also included a discrete tax benefit related to the settlements of refund claims in a non-U.S. jurisdiction and the resulting adjustments to deferred taxes, which had the impact of decreasing our Provision for income taxes and effective tax rate by $19.9 and 190 basis points, respectively.

On December 22, 2017, the United States federal government enacted the Tax Cuts and Jobs Act (“Tax Act”), marking a change from a worldwide tax system to a modified territorial tax system in the United States. As part of this change, the Tax Act, among other changes, provides for a transition tax (“Transition Tax”) related to the deemed repatriation of the accumulated unremitted earnings and profits of the Company’s foreign subsidiaries. The Company paid its fourth annual installment of the Transition Tax, net of applicable tax credits and deductions, in the second quarter of 2021, and will pay the balance of the Transition Tax, net of applicable tax credits and deductions, over the remainder of the eight-year period ending 2025, as permitted under the Tax Act. The current and long-term portions of the Transition Tax are recorded in Accrued income taxes and Other long-term liabilities, respectively, on the Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020.

The Company operates in the U.S. and numerous foreign taxable jurisdictions, and at any point in time has numerous audits underway at various stages of completion. With few exceptions, the Company is subject to income tax examinations by tax authorities for the years 2017 and after. The Company is generally not able to precisely estimate the ultimate settlement amounts or timing until the close of an audit. The Company evaluates its tax positions and establishes liabilities for uncertain tax positions that may be challenged by tax authorities and may not be fully sustained, despite the Company’s belief that the underlying tax positions are fully supportable. As of September 30, 2021, the amount of unrecognized tax benefits, including penalties and interest, which if recognized would impact the effective tax rate, was approximately $157.0. Unrecognized tax benefits are reviewed on an ongoing basis and are adjusted for changing facts and circumstances, including the progress of tax audits and the closing of statutes of limitations. Based on information currently available, management anticipates that over the next twelve-month period, audit activity could be completed and statutes of limitations may close relating to existing unrecognized tax benefits of approximately $6.8.