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Income Taxes
 6 Months Ended
Jun. 30, 2024
Income Tax Disclosure [Abstract]  
Income Taxes
14.Income Taxes
The Company’s effective tax rate was 27.5 percent and 27.2 percent for the three and six months ended June 30, 2024, respectively, and 19.1 percent and 24.4 percent for the three and six months ended June 30, 2023, respectively. Income tax expense is based on an estimated annual effective rate, which requires the Company to make its best estimate of annual pretax income or loss. The Company’s effective tax rate for the six months ended June 30, 2024 was adversely impacted by a discrete tax item of $3.7 million primarily associated with an uncertain tax position related to state income taxes, the vast majority of which was offset by excess tax benefits arising from stock-based compensation. The Company’s effective tax rates for the three and six months ended June 30, 2023 were favorably impacted by a release in valuation allowance largely attributable to foreign tax credits and net operating losses in the U.K.
Undistributed earnings of certain foreign subsidiaries of the Company amounted to $283.5 million and $231.6 million at June 30, 2024 and December 31, 2023, respectively. The Company continues to maintain its indefinite reinvestment assertion for its investments in foreign subsidiaries except for any historical undistributed earnings and future earnings for WEX Australia. The total amount of our foreign subsidiaries’ earnings in which the Company continues to assert indefinite reinvestment approximates $251.4 million at June 30, 2024. Upon distribution of these earnings, the Company would be subject to withholding taxes payable to foreign countries, where applicable, but would generally have no further federal income tax liability. It is not practicable to estimate the unrecognized deferred tax liability associated with these undistributed earnings; however, it is not expected to be material.
The Organization for Economic Cooperation and Development (“OECD”) Pillar Two global minimum tax rules, which generally provide for a minimum effective tax rate of 15 percent, are intended to apply for tax years beginning in 2024. On July 17, 2023, the OECD published Administrative Guidance proposing certain safe harbor rules that effectively extend certain effective dates to January 1, 2027. The Company is closely monitoring developments and evaluating the impact of these new rules, including eligibility to qualify for these safe harbor rules. We do not expect the impact of these new rules to have a material effect on the Company’s condensed consolidated financial position, results of operations or cash flows.