Income Taxes

3 Months Ended

Mar. 31, 2021

Income tax expense attributable to our earnings before income taxes differs from the amounts computed using the applicable income tax rate as a result of the following factors:


	Three months ended March 31,
		2021		2020
		in millions

Computed “expected” tax expense (a)		$	(306.1)	$	(192.1)
Non-deductible or non-taxable foreign currency exchange results		119.7		153.6
Change in valuation allowances		34.5		(88.7)
International rate differences (b)		(23.9)		(16.1)
Recognition of previously unrecognized tax benefits		20.5		—
Non-deductible or non-taxable interest and other items		(15.7)		(20.4)
Tax benefit associated with technology innovation (c)		5.8		44.8
Enacted tax law and rate changes		(0.3)		36.1
Basis and other differences in the treatment of items associated with investments in subsidiaries and affiliates (d)		0.2		3.1
Other, net		(5.2)		(0.4)
Total income tax expense		$	(170.5)	$	(80.1)

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(a)The statutory or “expected” tax rates are the U.K. rates of 19.0% for the 2021 period and 17.5% for the 2020 period. The statutory rate for the 2020 period represents the blended rate in effect for the year ended December 31, 2020 based on the 19.0% statutory rate that was in effect for the first quarter of 2020 and the 17.0% statutory rate that was expected to be in effect for the remainder of 2020. On July 22, 2020, legislation was enacted in the U.K. to maintain the corporate income tax rate at 19.0%, reversing previous legislation that had reduced the U.K. rate to 17.0% from April 1, 2020. The impact

of this rate change on our deferred balances was recorded during the third quarter of 2020. In March 2021, it was announced that the U.K. corporate tax rate will increase to 25% from April 1, 2023. This U.K. rate change has yet to be enacted and the impact on our deferred tax balances will not be recorded until the quarter of enactment.

(b)Amounts reflect adjustments (either a benefit or expense) to the “expected” tax benefit (expense) for statutory rates in jurisdictions in which we operate outside of the U.K.

(c)Amount reflects the recognition of the innovation income tax deduction in Belgium. The amount for the 2020 period includes the one-time effect of deductions related to prior periods.

(d)These amounts reflect the net impact of differences in the treatment of income and loss items between financial reporting and tax accounting related to investments in subsidiaries and affiliates, including the effects of foreign earnings.

As of March 31, 2021, our unrecognized tax benefits of $573.4 million included $390.2 million of unrecognized tax benefits that would have a favorable impact on our effective income tax rate if ultimately recognized, after considering amounts that we would expect to be offset by valuation allowances and other factors.

During the next 12 months, it is reasonably possible that the resolution of ongoing examinations by tax authorities, as well as the expiration of statutes of limitation and other items, could result in reductions to our unrecognized tax benefits related to tax positions taken as of March 31, 2021. The amount of any such reductions could range up to $147.0 million, substantially all of which would not have a positive impact on our effective tax rate. Other than the potential impacts of these ongoing examinations and the expected expiration of certain statutes of limitation, we do not expect any material changes to our unrecognized tax benefits during the next 12 months. No assurance can be given as to the nature or impact of any changes in our unrecognized tax positions during the next 12 months.

Certain of our subsidiaries are currently involved in income tax examinations in various jurisdictions in which we operate, including Belgium, the Netherlands, Poland, the U.K. and the U.S. While we do not expect adjustments from the foregoing examinations to have a material impact on our consolidated financial position, results of operations or cash flows, no assurance can be given that this will be the case given the amounts involved and the complex nature of the related issues.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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