INCOME TAXES

6 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The Company is required to estimate its income taxes in each of the jurisdictions in which it operates as part of the process of preparing its condensed consolidated financial statements. The Company maintains certain strategic management and operational activities in overseas subsidiaries and its foreign earnings are taxed at rates that are generally lower than in the United States.

The Company’s effective tax rate generally differs from the U.S. federal statutory rate primarily due to tax credits and lower tax rates on earnings generated by the Company’s foreign operations that are taxed primarily in Switzerland.

The Company’s effective tax rate was 21.2% and 8.6% for the three months ended June 30, 2022 and 2021, respectively. The increase in the effective tax rate when comparing the three months ended June 30, 2022 to the three months ended June 30, 2021 was primarily due the geographical mix of income towards higher tax regions and tax benefits unique to the period ended June 30, 2021. These amounts include a tax benefit related to stock-based compensation deductions.

The Company’s effective tax rate was 20.2% and (2.0)% for the six months ended June 30, 2022 and 2021, respectively. The increase in the effective tax rate when comparing the six months ended June 30, 2022 to the six months ended June 30,

2021 was primarily due to tax items unique to the period ended June 30, 2021. These amounts include stock-based compensation deductions and a tax benefit related to a favorable foreign tax ruling in the period ended June 30, 2021.

The Company’s net unrecognized tax benefits totaled $106.7 million and $103.5 million as of June 30, 2022 and December 31, 2021, respectively. At June 30, 2022, $92.4 million included in the balance for tax positions would affect the annual effective tax rate if recognized. The Company recognizes interest accrued related to uncertain tax positions and penalties in income tax expense. As of June 30, 2022, the Company has accrued $1.9 million for the payment of interest.

At June 30, 2022, the Company had $392.0 million in net deferred tax assets. The authoritative guidance requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company reviews deferred tax assets periodically for recoverability and makes estimates and judgments regarding the expected geographic sources of taxable income and gains from investments, as well as tax planning strategies in assessing the need for a valuation allowance. If the estimates and assumptions used in the Company's determination change in the future, the Company could be required to revise its estimates of the valuation allowances against its deferred tax assets and adjust its provisions for additional income taxes.

The Company and one or more of its subsidiaries are subject to U.S. federal income taxes in the United States, as well as income taxes of multiple state and foreign jurisdictions. The Company is currently under examination by the United States Internal Revenue Service for 2017 through 2020 tax years. With few exceptions, the Company is generally not subject to examination for state and local income tax, or in non-U.S. jurisdictions, by tax authorities for years prior to 2017.

The Company's U.S. liquidity needs are currently satisfied using cash flows generated from its U.S. operations, borrowings, or both. The Company also utilizes a variety of tax planning strategies in an effort to ensure that its worldwide cash is available in locations in which it is needed. The Company expects to repatriate a substantial portion of its foreign earnings over time, to the extent that the foreign earnings are not restricted by local laws or result in significant incremental costs associated with repatriating the foreign earnings.