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Income Taxes | 3 Months Ended
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Mar. 31, 2025
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The Company’s effective tax rate was 15.1% and 18.8% for the three months ended March 31, 2025 and 2024, respectively. The effective tax rate for the three months ended March 31, 2025 was lower than the statutory rate as a result of tax preferred items including incentive compensation and foreign tax credits, net of addback, partially offset by state income taxes, net of federal benefit and unrecognized tax benefits. The effective tax rate for the three months ended March 31, 2024 was lower than the statutory rate as a result of tax preferred items including incentive compensation and foreign tax credits, net of addback, partially offset by state income taxes, net of federal benefit. The decrease in the effective tax rate for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was primarily due to lower pretax income in the current period compared to the prior period and the related impact on tax preferred items, an increase in the benefit for incentive compensation, and an increase in foreign tax credits, net of addback, partially offset by an increase in state income taxes, net of federal benefit and an increase in unrecognized tax benefits. Included in the Company’s deferred income tax assets are tax benefits related to foreign net operating losses of $52 million, which do not expire, corporate alternative minimum tax (“CAMT”) credit carryforwards of $98 million, which do not expire, and state net operating losses of $38 million, net of federal benefit, which will expire beginning December 31, 2025. The Company is required to establish a valuation allowance for any portion of its deferred tax assets that management believes will not be realized. Significant judgment is required in determining if a valuation allowance should be established and the amount of such allowance if required. Factors used in making this determination include estimates relating to the performance of the business. Consideration is given to, among other things in making this determination: (i) future taxable income exclusive of reversing temporary differences and carryforwards; (ii) future reversals of existing taxable temporary differences; (iii) taxable income in prior carryback years; and (iv) tax planning strategies. Based on analysis of the Company’s tax position as of March 31, 2025, management believes it is more likely than not that the Company will not realize certain state net operating losses of $32 million, state deferred tax assets of $2 million (both net of federal benefit), and foreign net operating losses of $34 million; therefore, a valuation allowance has been established. The valuation allowance was $68 million and $67 million as of March 31, 2025 and December 31, 2024, respectively. As of March 31, 2025 and December 31, 2024, the Company had $173 million and $164 million, respectively, of gross unrecognized tax benefits. If recognized, approximately $142 million and $134 million, net of federal tax benefits, of unrecognized tax benefits as of March 31, 2025 and December 31, 2024, respectively, would affect the effective tax rate. It is reasonably possible that the total amount of unrecognized tax benefits will change in the next 12 months. The Company estimates that the total amount of gross unrecognized tax benefits may decrease by approximately $16 million in the next 12 months primarily due to expected exam closures and state statutes of limitations expirations. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of the income tax provision. The Company recognized a net increase of $7 million and $2 million in interest and penalties for the three months ended March 31, 2025 and 2024, respectively. As of March 31, 2025 and December 31, 2024, the Company had a payable of $38 million and $31 million, respectively, related to accrued interest and penalties. The Company or one or more of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Internal Revenue Service (“IRS”) is currently auditing the Company’s U.S. income tax returns for 2019 and 2020. The Company’s state income tax returns are currently under examination by various jurisdictions for years ranging from 2017 through 2023. The Company is an applicable corporation required to compute CAMT, however, as of March 31, 2025, based on current estimates, the Company does not expect to be liable for CAMT in 2025. This estimate is based on interpretations and assumptions of available guidance, including proposed regulations, that the Company has made regarding the CAMT provisions of the Inflation Reduction Act of 2022. In December 2021, the Organization for Economic Co-operation and Development published the Pillar Two model rules which introduce new taxing mechanisms aimed at ensuring multinational enterprises pay a minimum level of tax on profits from each jurisdiction in which they operate. As of March 31, 2025 and December 31, 2024, the tax impact is not material to the consolidated financial statements. The Company continues to monitor the adoption and implementation of these rules and evaluate the potential impact on its consolidated financial statements.

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