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Income Taxes | 6 Months Ended
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Jun. 30, 2020
Income Taxes |
Income Taxes | 4. Income Taxes Our effective income tax rate was 22.2% and 19.5% for the three and six months ended June 30, 2020, respectively, compared with 23.3% and 24.0% for the three and six months ended June 30, 2019, respectively. The decrease in our effective income tax rate when comparing the current and prior year periods was primarily driven by (i) a decrease in pre-tax income in 2020, which increased the effective tax rate impact of our federal tax credits, and to a lesser extent; (ii) $52 million non-cash impairment charge recognized in 2019 that was not deductible for tax purposes and (iii) excess tax benefits associated with equity-based compensation, which were slightly higher in 2020 than in the prior year. These items are discussed further below. 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. 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 qualify for federal tax credits that we expect to realize through 2030 under Section 42 or Section 45D of the Internal Revenue Code. We also held a residual financial interest in an entity that owns a refined coal facility that qualified for federal tax credits under Section 45 of the Internal Revenue Code through 2019. The entity sold the majority of its assets in the first quarter of 2020, which resulted in a $7 million non-cash impairment of our investment at that time. 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 within our Condensed Consolidated Statements of Operations. During the three and six months ended June 30, 2020, we recognized $17 million and $43 million (including the $7 million impairment of the refined coal facility noted above for the six-month period) of net losses and a reduction in our income tax expense of $17 million and $41 million, respectively, primarily due to tax credits realized from these investments. In addition, during the three and six months ended June 30, 2020, we recognized interest expense of $3 million and $6 million, respectively, associated with our investments in low-income housing properties. During the three and six months ended June 30, 2019, we recognized $12 million and $21 million of net losses and a reduction in our income tax expense of $18 million and $33 million, respectively, primarily due to tax credits realized from these investments. In addition, during the three and six months ended June 30, 2019, we recognized interest expense of $2 million and $4 million, respectively, associated with our investments in low-income housing properties. See Note 13 for additional information related to these unconsolidated variable interest entities. Equity-Based Compensation — During the three and six months ended June 30, 2020, we recognized a reduction in income tax expense of $2 million and $23 million, respectively, for excess tax benefits related to the vesting or exercise of equity-based compensation awards compared with $5 million and $17 million, respectively, for the comparable prior year periods. Tax Implications of Impairments — We recognized a $52 million non-cash impairment charge in the first quarter of 2019 which was not deductible for tax purposes. The non-cash impairment charges recognized during the three and six months ended June 30, 2020 are deductible for tax purposes. See Note 9 for additional information related to the impairments. Recent Legislation — On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted in response to the COVID-19 pandemic. The CARES Act contains numerous income tax provisions, none of which directly affected our income tax expense for the three and six months ended June 30, 2020 or are expected to have a material impact on our income tax expense in future reporting periods. The Company is evaluating the impact of the CARES Act and expects to benefit from the deferral of certain payroll taxes through the end of calendar year 2020.

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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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