Income Taxes (Notes)

9 Months Ended

Sep. 30, 2019

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

INCOME TAXES

The Company’s provision for income taxes is based on the estimated annual effective tax rate, plus discrete items. The effective tax rates for the three and nine month periods ended September 30, 2019 were 31% and 34%, respectively. The effective tax rates for the three and nine month periods ended September 30, 2018 were 44% and 30%, respectively. The difference between the Company’s effective tax rates for the 2019 and 2018 periods and the U.S. statutory tax rate of 21% related primarily to U.S. taxes on foreign earnings, foreign tax rate differentials, the impacts of foreign currency fluctuations at certain foreign subsidiaries, and nondeductible expenses.

In the first quarter of 2019, the U.S. Treasury issued final regulations related to the TCJA one-time transition tax which further amended the guidance of the proposed regulations. As a result, we recorded $3 million of discrete tax expense in the first quarter. In the third quarter of 2018, we recorded discrete tax expense for a $33 million provisional adjustment to the one-time transition tax.

In the first quarter of 2018, the Company completed the sale of its entire 51% equity interest in Masinloc, resulting in pre-tax gain of approximately $773 million. The sale resulted in approximately $155 million of discrete tax expense in the U.S. under the new GILTI provision, which subjects the earnings of foreign subsidiaries to current U.S. taxation to the extent those earnings exceed an allowable return. See Note 19—Held-for-Sale and Dispositions for details of the sale.

In the second quarter of 2018, the Company completed the sale of Electrica Santiago for total proceeds of $287 million, resulting in a pre-tax gain on sale of $70 million after post-closing adjustments. The sale resulted in approximately $25 million of discrete tax expense. See Note 19—Held-for-Sale and Dispositions for details of the sale.

The impact of foreign currency devaluation in Argentina was approximately $11 million and $17 million of discrete tax expense for the three and nine month periods ended September 30, 2019, respectively. The same amounts for the three and nine month periods ended September 30, 2018 are $16 million and $38 million, respectively.