Taxes Based on Income

9 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

Taxes Based on Income

Taxes Based on Income

The following table summarizes our income before taxes, provision for income taxes, and effective tax rate:

	Three Months Ended						Nine Months Ended
(Dollars in millions)	September 30, 2023			October 1, 2022			September 30, 2023			October 1, 2022
Income before taxes	$	184.6		$	272.5		$	493.1		$	830.1
Provision for income taxes	46.3			51.0			133.2			195.9
Effective tax rate	25.1		%	18.7		%	27.0		%	23.6		%

Our provision for income taxes for the three and nine months ended September 30, 2023 included $3.6 million and $7.4 million, respectively, of net tax charge related to the tax on global intangible low-taxed income (“GILTI”) of our foreign subsidiaries after benefiting from our current year exclusion election, as well as the recognition of foreign withholding taxes on current year earnings, partially offset by the benefit from foreign-derived intangible income (“FDII”). Our provision for income taxes for the three and nine months ended September 30, 2023 was also adversely affected by the recognition of uncertain tax positions in certain foreign jurisdictions and higher non-deductible expenses resulting from foreign currency fluctuations. In addition, our provision for income taxes for the three and nine months ended September 30, 2023 included a $14.7 million of return-to-provision discrete benefit primarily related to our GILTI exclusion election and benefits from additional foreign tax credits recognized under temporary relief granted by the Internal Revenue Service (“IRS”) in July 2023, upon completion of our 2022 U.S. federal tax return.

Our provision for income taxes for the three and nine months ended October 1, 2022 included $2.8 million and $16.5 million, respectively, of net tax charge related to the tax on GILTI of our foreign subsidiaries and the recognition of foreign withholding taxes on current year earnings, partially offset by the benefit from FDII. Our provision for income taxes for the three and nine months ended October 1, 2022 also included the following discrete items: (i) $17.3 million of return-to-provision benefit, including $11.9 million related to our GILTI exclusion election and a lower net tax charge from other international inclusion items upon completion of our 2021 U.S. federal tax return; (ii) the benefit from the settlement of certain foreign tax audits for tax years 2011-2014; and (iii) the return-to-provision benefit from treating the interest portion of the Brazil indirect tax credit reclaimed in 2021 as non-taxable, pursuant to a Brazilian court decision. In addition, our provision for income taxes for the nine months ended October 1, 2022 included $6.4 million of net discrete tax benefit primarily from decreases in certain tax reserves, including interest and penalties, as a result of closing tax years.

The amount of income taxes we pay is subject to ongoing audits by taxing jurisdictions around the world. Our estimate of the potential outcome of any uncertain tax issue is subject to our assessment of the relevant risks, facts and circumstances existing at the time. We believe that we have adequately provided for reasonably foreseeable outcomes related to these matters. However, our future results may include favorable or unfavorable adjustments to our estimated tax liabilities in the period the assessments are made or resolved, which may impact our effective tax rate. The final determination of tax audits and any related legal proceedings could materially differ from the amounts currently reflected in our tax provision for income taxes and the related liabilities. We and our U.S. subsidiaries have completed the IRS Compliance Assurance Process through 2018. With limited exceptions, we are no longer subject to income tax examinations by tax authorities for years prior to 2010.

It is reasonably possible that, during the next 12 months, we may realize a net decrease in our uncertain tax positions, including interest and penalties, of approximately $8 million, primarily as a result of closing tax years.