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Taxes | 9 Months Ended
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Sep. 30, 2021
Taxes |
Taxes | 9. Taxes ​ The Company’s effective tax rate for the three months ended September 30, 2021 decreased to 22.2 percent from 30.1 percent for the three months ended September 30, 2020. The decrease in the effective income tax rate was driven by the utilization of U.S. foreign tax credits for which a benefit had not been previously recognized compared to a valuation allowance recorded for the three months ended September 30, 2020. The remaining decrease in the effective tax rate was driven by a $20 million impairment adjustment on the net assets contributed to the Arcor joint venture, as described in Note 5 of the Notes to the Condensed Consolidated Financial Statements, with no corresponding income tax expense recorded with respect to the impairment, a change in mix of earnings, including the consolidation of PureCircle, and certain other items in the prior year. These items were partially offset by a decrease in the value of the Mexican peso against the U.S. dollar during the three months ended September 30, 2021, as compared to an increase during the three months ended September 30, 2020 and a valuation allowance on net operating losses compared to the utilization of net operating losses for which a benefit had not been previously recognized for the three months ended September 30, 2020. ​ The effective tax rate for the nine months ended September 30, 2021 was 66.5 percent compared to 34.4 percent for the nine months ended September 30, 2020. The primary cause of the increase in the effective tax rate was a $340 million impairment charge related to the net assets contributed to the Arcor joint venture. There was no corresponding income tax benefit recorded with respect to the impairment. This item was partially offset by a tax benefit of $30 million due to the reversal of an accrual for withholding tax on the unremitted earnings of a foreign subsidiary. The remaining change in the effective income tax rate was primarily driven by a decrease in the value of the Mexican peso against the U.S. dollar. The decrease in the value of the Mexican peso against the U.S. dollar produced taxable translation gains on net-U.S.-dollar-monetary assets held in Mexico for which there was no corresponding gain in pre-tax income. Consequently, the Company recorded a tax expense of $16 million in the nine months ended September 30, 2020, as compared to $4 million in the nine months ended September 30, 2021. ​ In January 2019, the Company’s Brazilian subsidiary received a favorable decision from the Federal Court of Appeals in Sao Paulo, Brazil, related to certain indirect taxes collected in prior years. The Company finalized its calculation of the amount of the credits and interest due from the favorable decision, concluding that the Company could be entitled to approximately $66 million of credits spanning a period from 2005 to 2018. The Department of Federal Revenue of Brazil, however, issued an Internal Ruling in which it charged that the Company is entitled to only $22 million of the calculated indirect tax credits and interest for the period from 2005 to 2014. The Brazil National Treasury filed a motion for clarification with the Brazilian Supreme Court, asking the Court, among other things, to modify the lower court’s decision to approve the Internal Ruling, which could impact the decision in favor of the Company. During the year ended December 31, 2020, the Company received another favorable court judgment that clarified the calculation of the Company’s benefit, allowing the Company to claim gross treatment within the indirect tax claim calculation and a larger indirect tax claim against the government. As a result of the decision, the Company recorded an additional $35 million pre-tax benefit in the Consolidated Income Statement in Other income for the year ended December 31, 2020, related to the open period of 2005 to 2014. In May 2021, the Brazilian Supreme Court issued its ruling related to the calculation of certain indirect taxes, which affirmed the lower court rulings that the Company had received in previous years and affirmed that the Company is entitled to the previously recorded tax credits. The Supreme Court ruling ensures that the Company will be entitled to $15 million of additional credits from the period of 2015 to 2018 that was previously unrecorded pending a final court ruling. The Company recorded the $15 million of additional credits during the three months ended June 30, 2021 within Other Income (expense), net in the Condensed Consolidated Income Sheet. As of September 30, 2021, the Company has $51 million of remaining tax credits recorded in Other assets and Prepaid expenses on the Condensed Consolidated Balance Sheets that result in deferred income taxes of $17 million. The Company will use the tax offsets to eliminate its Brazilian federal tax payments in 2021 and future years, including the income tax payable with respect to the indirect taxes recovered. ​

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