Income Taxes

3 Months Ended

Mar. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company's provision for income taxes is based upon an estimated annual tax rate for the year applied to federal, state and foreign income. On a quarterly basis, the annual effective tax rate is adjusted, as appropriate, based upon changed facts and circumstances, if any, as compared to those forecasted at the beginning of the fiscal year and each interim period thereafter.

The Company's effective tax rate for the three months ended March 31, 2020 was 26%. This rate includes reductions in income tax expense of $4 million related to restructuring expense and $12 million for other one-time adjustments. The other one-time adjustments primarily relate to tax law changes in India that were enacted during the quarter and the release of certain unrecognized tax benefits due to the closure of an audit.

The Company's effective tax rate for the three months ended March 31, 2019 was 34.7%. This rate includes reductions of income tax expense of $3 million related to restructuring expense and $5 million for other one-time tax adjustments. This rate also includes an increase in income tax expense of $22 million due to the U.S. Department of the Treasury's issuance of the final regulations in the first quarter of 2019 related to the calculation of the one-time transition tax associated with the Tax Cuts and Jobs Act of 2017.

The annual effective tax rates differ from the U.S. statutory rate primarily due to foreign rates which differ from those in the U.S., U.S. taxes on foreign earnings, the realization of certain business tax credits, including foreign tax credits, and favorable permanent differences between book and tax treatment for certain items, including equity in affiliates' earnings.