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Income Taxes | 6 Months Ended
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Jun. 30, 2025
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The Company’s effective tax rate was 21.6% and 21.1% for the three months ended June 30, 2025 and 2024, respectively. The Company’s effective tax rate was 19.4% and 19.9% for the six months ended June 30, 2025 and 2024, respectively. The effective tax rate for the three months ended June 30, 2025 was higher than the statutory rate primarily as a result of state income taxes, net of federal benefit. The effective tax rate for the six months ended June 30, 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. The effective tax rate for the three months ended June 30, 2024 was higher than the statutory rate as a result of state income taxes, net of federal benefit. The effective tax rate for the six months ended June 30, 2024 was lower than the statutory rate as a result of tax preferred items including incentive compensation, partially offset by state income taxes, net of federal benefit. Included in the Company’s deferred income tax assets are tax benefits related to foreign net operating losses of $53 million, which do not expire, corporate alternative minimum tax (“CAMT”) credit carryforwards of $85 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 June 30, 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 $36 million; therefore, a valuation allowance has been established. The valuation allowance was $70 million and $67 million as of June 30, 2025 and December 31, 2024, respectively. As of June 30, 2025 and December 31, 2024, the Company had $170 million and $164 million, respectively, of gross unrecognized tax benefits. If recognized, approximately $138 million and $134 million, net of federal tax benefits, of unrecognized tax benefits as of June 30, 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 $4 million in the next 12 months primarily due to 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 $1 million and $8 million in interest and penalties for the three and six months ended June 30, 2025, respectively. The Company recognized a net increase of $1 million and $3 million in interest and penalties for the three and six months ended June 30, 2024, respectively. As of June 30, 2025 and December 31, 2024, the Company had a payable of $39 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 federal statutes of limitations are closed on years through 2018, except for two issues for 2016 which were claimed on an amended return. During the second quarter of 2025, the Internal Revenue Service (“IRS”) finalized the audit of tax years 2019 and 2020, except for one issue for 2020, which the Company has appealed. Also during the second quarter of 2025, the Company was notified the IRS will begin the examination of the Company’s U.S. income tax returns for tax years 2021 through 2023. 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 June 30, 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 June 30, 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. The legislation commonly referred to as the One Big Beautiful Bill Act (“OBBBA”) was enacted on July 4, 2025. The Company does not expect a material impact to the consolidated financial statements due to corporate tax law changes resulting from the OBBBA.

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