INCOME TAXES

6 Months Ended

Jun. 30, 2024

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 June 30, 2024 and 2023 was (10)% and 11%, respectively. During the three months ended June 30, 2024, the Company recorded a discrete tax benefit of $89 million related to a reduction in certain unrecognized tax benefits and accrued interest for matters where the statute of limitations lapsed. In addition, the Company recorded a discrete tax benefit of $4 million related to net changes to valuation allowances. During the three months ended June 30, 2023, the Company recorded a discrete tax benefit of approximately $29 million in relation to the Spin-Off and a $10 million discrete tax benefit relating to various immaterial tax adjustments.

The Company’s effective tax rate for the six months ended June 30, 2024 and 2023 was 5% and 19%, respectively. During the six months ended June 30, 2024, the Company recorded a discrete tax benefit of $89 million related to a reduction in certain unrecognized tax benefits and accrued interest for matters where the statute of limitations lapsed. In addition, the Company recorded a discrete tax benefit of $4 million related to net changes to valuation allowances. During the six months ended June 30, 2023, the Company recorded a discrete tax benefit of approximately $29 million in relation to the Spin-Off, a discrete tax benefit of approximately $14 million was recorded related to the resolution of tax audits, a

$10 million discrete tax expense for the impact of enacted tax law changes and a discrete tax benefit of $9 million related to various immaterial tax adjustments.

The Company’s annual effective tax rates differ from the U.S. statutory rate primarily due to foreign rates that vary from those in the U.S., jurisdictions with pretax losses for which no tax benefit could be realized, U.S. taxes on foreign earnings, the realization of certain business tax credits (including foreign tax credits), and permanent differences between book and tax treatment for certain items (including the Foreign-Derived Intangible Income (“FDII”) deduction and the enhanced deduction of research and development expenses in certain jurisdictions).

The Company estimates that it is reasonably possible there could be a decrease of approximately $18 million in unrecognized tax benefits and interest in the next 12 months related to the conclusion of tax audits and the lapse of statutes of limitations subsequent to the reporting period in certain taxing jurisdictions.