XML 23 R12.htm IDEA: XBRL DOCUMENT v3.23.3
Income Taxes
 9 Months Ended
Sep. 30, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Our quarterly provision for income taxes is measured using an estimated annual effective tax rate, adjusted for discrete items within the periods presented. The comparison of our effective tax rate between periods is significantly impacted by the level and mix of earnings and losses by tax jurisdiction and discrete items.
The income tax provision for the three months ended September 30, 2023 was $33 million resulting in an effective tax rate of 17.8%, compared to a $5 million expense resulting in an effective tax rate of 27.8% for the same period in 2022. The income tax provision for the nine months ended September 30, 2023 was $82 million resulting in an effective tax rate of 19.3%, compared to a $45 million expense resulting in an effective tax rate of 17.8% for the same period in 2022. The effective tax rate for the three and nine month periods ended September 30, 2023 was lower than the U.S. federal statutory rate primarily due to the favorable impact of earnings mix partially offset by the Global Intangible Low Taxed Income inclusion and nondeductible transaction costs.
Unrecognized Tax Benefits
During 2019, Xylem’s Swedish subsidiary received a tax assessment for the 2013 tax year related to the tax treatment of an intercompany transfer of certain intellectual property that was made in connection with a reorganization of our European businesses. Xylem filed an appeal with the Administrative Court of Växjö, which rendered a decision adverse to Xylem in June 2022 for SEK813 million (approximately $75 million), consisting of the full tax assessment amount plus penalties and interest. Xylem has appealed this decision with the intermediate appellate court, the Administrative Court of Appeal (the “Court”). At this time, management, in consultation with external legal advisors, continues to believe it is more likely than not that Xylem will prevail on the proposed assessment and will continue to vigorously defend our position through the appellate process. Both parties will have the ability to seek appeal of the Court’s decision to the Supreme Administrative Court of Sweden. There can be no assurance that the final determination by the authorities will not be materially different than our position. As of September 30, 2023, we do not have any unrecognized tax benefits related to this uncertain tax position.