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Income Taxes | 9 Months Ended
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Sep. 30, 2019
Income Taxes |
Income Taxes | 5. Income Taxes Our effective income tax rate was 19.4% and 22.2% for the three and nine months ended September 30, 2019, respectively, compared with 16.6% and 18.9% for the three and nine months ended September 30, 2018, respectively. We evaluate our effective income tax rate at each interim period and adjust it as facts and circumstances warrant. Investments Qualifying for Federal Tax Credits — We have significant financial interests in entities established to invest in and manage low-income housing properties and a refined coal facility. On August 28, 2019 we acquired an additional noncontrolling interest in a limited liability company established to invest in and manage low-income housing properties. Our consideration for this investment totaled $160 million, which was comprised of a $140 million note payable and an initial cash payment of $20 million. We support the operations of these entities in exchange for a pro-rata share of the tax credits they generate. The low-income housing investments and the coal facility’s refinement processes qualify for federal tax credits that we expect to realize through 2030 under Section 42, through 2024 under Section 45D, and through the end of 2019 under Section 45, of the Internal Revenue Code. We account for our investments in these entities using the equity method of accounting, recognizing our share of each entity’s results of operations and other reductions in the value of our investments in equity in net losses of unconsolidated entities, in our Condensed Consolidated Statements of Operations. During the three and nine months ended September 30, 2019, we recognized $11 million and $32 million of net losses and a reduction in our income tax expense of $36 million and $69 million, respectively, primarily due to tax credits realized from these investments. In addition, during the three and nine months ended September 30, 2019, we recognized interest expense of $2 million and $6 million, respectively, associated with our investments in low-income housing properties. During the three and nine months ended September 30, 2018, we recognized $5 million and $17 million of net losses and a reduction in our income tax expense of $18 million and $40 million, respectively, primarily due to tax credits realized from these investments. Interest expense associated with our investments in low-income housing properties was not material for the three and nine months ended September 30, 2018. See Note 14 for additional information related to these unconsolidated variable interest entities. Equity-Based Compensation — During the three and nine months ended September 30, 2019, we recognized a reduction in income tax expense of $5 million and $22 million, respectively, for excess tax benefits related to the vesting or exercise of equity-based compensation awards compared with $3 million and $15 million, respectively, for the comparable prior year periods. Adjustments to Accruals and Related Deferred Taxes — During the three and nine months ended September 30, 2019, adjustments to our accruals and related deferred taxes due to the filing of our 2018 income tax returns and changes in state and foreign laws resulted in a reduction in our income tax expense of $13 million compared with $27 million and $35 million, respectively, for the comparable prior year periods. Enactment of Tax Reform — In accordance with the applicable accounting guidance, the Company recognized the provisional tax impacts related to the remeasurement of our deferred income tax assets and liabilities and the one-time, mandatory transition tax on deemed repatriation during the year ended December 31, 2017. In September 2018, measurement period adjustments to the provisional tax impacts due to the filing of our 2017 income tax returns resulted in a reduction in our income tax expense of $12 million. Tax Audit Settlements — We are currently under audit by the IRS and various state and local taxing authorities and our audits are in various stages of completion. In June 2018, we settled various tax audits, which resulted in a reduction in our income tax expense of $33 million. Tax Implications of Impairment — We recognized a $52 million impairment charge in the first quarter of 2019 which was not deductible for tax purposes. In the third quarter of 2018, we recognized a $29 million charge to impair a landfill which was deductible for tax purposes and resulted in no impact to our effective income tax rate. See Note 10 for additional information.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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