INCOME TAXES

9 Months Ended

Sep. 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 September 30, 2024 and 2023 was 5% and 56%, respectively. During the three months ended September 30, 2024, the Company recorded a discrete tax benefit of approximately $18 million related to a reduction in certain unrecognized tax benefits and accrued interest for matters where the statute of limitations lapsed, a discrete tax expense of $4 million related to net changes to valuation allowances, a discrete tax benefit of approximately $36 million related to post Spin-Off restructuring and a discrete tax benefit of approximately $1 million related to various changes in filing positions for prior years. During the three months ended September 30, 2023, the Company recorded a discrete tax benefit of approximately $31 million related to various changes in filing positions for prior years, a discrete tax benefit of approximately $12 million in relation to the Spin-Off and a discrete tax expense of approximately $87 million for changes in judgment related to the realization of deferred tax assets, primarily due to the impact of the Spin-Off on the allocation of the Company’s profits across jurisdictions for tax purposes as well as various tax structuring actions and strategies.

The Company’s effective tax rate for the nine months ended September 30, 2024 and 2023 was 5% and 30%, respectively. During the nine months ended September 30, 2024, the Company recorded a discrete tax benefit of approximately $107 million related to reductions in certain unrecognized tax benefits and accrued interest for matters where the statute of limitations lapsed, a discrete tax benefit of approximately $36 million related to post Spin-Off restructuring and a discrete tax benefit of approximately $4 million related to various changes in filing positions for prior years. During the nine months ended September 30, 2023, the Company recorded a discrete tax benefit of approximately $41 million in relation to the Spin-Off, a discrete tax benefit of approximately $39 million related to various changes in filing positions for prior years, a discrete tax benefit of approximately $14 million related to the resolution of tax audits, a discrete tax expense of approximately $9 million for the impact of enacted tax law changes and a discrete tax expense of approximately $85 million for changes in judgment related to the realization of deferred tax assets, primarily due to the impact of the Spin-Off on the allocation of the Company’s profits across jurisdictions for tax purposes as well as various tax structuring actions and strategies.

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).