INCOME TAXES

9 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Our quarterly income tax provision is calculated using an estimated annual effective income tax approach. The quarterly effective tax rate can differ from our estimated annual effective tax rate as the Company cannot apply an effective tax rate approach for all of its operations. For those entities that can apply an effective tax rate approach, as of September 30, 2022, our annual effective tax rate, excluding discrete items, is 25.9%, as compared to 32.1% as of September 30, 2021. 

The remaining entities, which are operations that generate pre-tax losses which cannot be tax benefited and/or have an effective tax rate which cannot be reliably estimated, have to account for their income taxes on a discrete year-to-date basis as of the end of each quarter and are excluded from the effective tax rate approach. The estimated annual effective tax rate for 2022 and 2021 also excludes the unfavorable impact of withholding taxes associated with certain intercompany payments, including royalties, service charges, interest and dividends, which in the aggregate are relatively consistent each year due to the need to repatriate funds to cover costs incurred in the U.S. and U.K., such as interest on debt and central expenses. Withholding taxes associated with the relatively consistent intercompany payments are accounted for discretely and accrued in the provision for income taxes as they become due.

The provision for income taxes for the three months ended September 30, 2022 and 2021 was $22.1 and $(10.4), respectively. Our effective tax rates for the three months ended September 30, 2022 and 2021 were (25.3)% and 22.6%, respectively. The provision for income taxes for the nine months ended September 30, 2022 and 2021 was $23.3 and $15.5, respectively. Our effective tax rates for the nine months ended September 30, 2022 and 2021 were (9.8)% and (10.5)%, respectively.

The effective tax rates for the three months ended September 30, 2022 and 2021 were impacted by CTI restructuring charges which could not all be benefited, losses which could not all be benefited, country mix of earnings and withholding taxes. The effective tax rate in the quarter ended September 30, 2022 was also unfavorably impacted by the recording of valuation allowances to adjust our non-U.S. deferred tax assets to amounts that are "more likely than not" to be realized of $22.9, largely in Brazil, which was offset by other miscellaneous net tax benefits of $1.2. The effective tax rate in the quarter ended September 30, 2021 was favorably impacted by the release of reserves for uncertain tax positions of $10.4 offset by the net recording of valuation allowances of $1.5.

The effective tax rates for the nine months ended September 30, 2022 and 2021 were impacted by CTI restructuring charges which could not all be benefited, losses which could not all be benefited, country mix of earnings and withholding taxes. The effective tax rate in the nine months ended September 30, 2022 was also unfavorably impacted by the recording of valuation allowances to adjust our non-U.S. deferred tax assets to amounts that are "more likely than not" to be realized of $26.7, largely in Brazil, and other miscellaneous net tax expense of $3.6. The effective tax rate in the nine months ended September 30, 2021 was also unfavorably impacted by the accrual of net income tax expense of approximately $.4 due to the net release of reserves for uncertain tax positions of $7.8, the net recording of valuation allowances of $7.5, and miscellaneous income tax expense of approximately $.7.

In prior years, we had previously recorded valuation allowances against certain deferred tax assets associated with the U.S. and various foreign jurisdictions. We intend to continue maintaining these valuation allowances on our deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances. Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of any such valuation allowance release is subject to change depending on the basis of the level of profitability that we are able to achieve. The Company continuously monitors its operational and capital structure changes, business performance, tax planning actions and tax planning strategies that could potentially allow for the recognition of deferred tax assets which are currently subject to a valuation allowance. There is the possibility that in the foreseeable future, certain deferred tax assets could be recognized, related to improvements in actual and/or expected operating results.

Further, the Company continuously assesses available positive and negative evidence to estimate whether sufficient future taxable income will be generated to utilize our existing deferred tax assets that are not subject to a valuation allowance. The Company continuously monitors the performance of entities and assesses the need for any further valuation allowances based on market performance and executability of tax planning actions and opportunities (including corporate restructuring). Should macroeconomic and sociopolitical conditions change, or our business operations not improve, or tax planning actions and opportunities not be implemented, up to approximately $54 of the Company's net deferred tax assets could potentially need to be offset with the recording of a valuation allowance in the future.