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INCOME TAXES | 6 Months Ended
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Jun. 30, 2021
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES For interim financial statement purposes, U.S. GAAP income tax expense/benefit related to ordinary income is determined by applying an estimated annual effective income tax rate against a company's ordinary income. Income tax expense/benefit related to items not characterized as ordinary income is recognized as a discrete item when incurred. The estimation of the Company's income tax provision requires the use of management forecasts and other estimates, application of statutory income tax rates, and an evaluation of valuation allowances. The Company's estimated annual effective income tax rate may be revised, if necessary, in each interim period. Benefit from income taxes for the six months ended June 30, 2021 was $61 million and included: (i) $50 million of income tax benefit for the Company's ordinary loss for the six months ended June 30, 2021 and (ii) $11 million of net income tax benefit for discrete items, which includes: (a) $54 million of net income tax benefit associated with certain legal settlements, (b) a $46 million tax provision related to potential and recognized withholding tax on intercompany dividends, (c) a $7 million tax benefit related to a deduction for stock compensation and (d) a $4 million tax provision associated with the filing of certain tax returns. Benefit from income taxes for the six months ended June 30, 2020 was $138 million and included: (i) $99 million of net income tax benefit for discrete items, which includes: (a) $64 million in net tax benefits related to the release of a valuation allowance, (b) $12 million in tax benefits recognized for changes in uncertain tax positions, (c) a $17 million tax benefit associated with a change in New Jersey law, (d) a $4 million tax benefit related to a deduction for stock compensation and (e) $2 million of net tax expense associated with filing certain tax returns and (ii) $39 million of income tax benefit for the Company's ordinary loss for the six months ended June 30, 2020. The Company records a valuation allowance against its deferred tax assets to reduce the net carrying value to an amount that it believes is more likely than not to be realized. When the Company establishes or reduces the valuation allowance against its deferred tax assets, the provision for income taxes will increase or decrease, respectively, in the period such determination is made except that, as a result of the 2018 adoption of guidance regarding intra-entity transfers, any change in valuation allowance surrounding the adoption of the intra-entity transfer resulting from this adoption was recorded within equity. The valuation allowance against deferred tax assets was $2,272 million and $2,252 million as of June 30, 2021 and December 31, 2020, respectively. The increase was primarily due to loss in Canada. The Company will continue to assess the need for a valuation allowance on a go-forward basis. On July 1, 2021, the G20 and Organisation for Economic Co-operation and Development ("OECD") inclusive framework on Base Erosion and Profit Shifting ("BEPS") (the "Inclusive Framework") published a statement on the key components of a two-pillar plan on global tax reform, which has now been agreed to by 131 OECD members. Under pillar one, the principle that the ‘largest and most profitable’ businesses will need to reallocate a share of global residual profit to market countries has been confirmed for businesses with global turnover above €20 billion and a profit margin above 10%. Under pillar two, the Inclusive Framework has agreed with the G7 that a global minimum tax should be at least 15%, calculated on a country-by-country basis. Notably for the Company, the countries which have not yet agreed to the Inclusive Framework include Ireland and Hungary. The Company will continue to monitor the updates and agreements made within the Inclusive Framework and expects that the impact of this plan will be material for the Company. As of June 30, 2021 and December 31, 2020, the Company had $1,118 million and $1,025 million of unrecognized tax benefits, which included $52 million and $49 million of interest and penalties, respectively. Of the total unrecognized tax benefits as of June 30, 2021, $542 million would reduce the Company’s effective tax rate, if recognized. The Company believes that it is reasonably possible that the total amount of unrecognized tax benefits at June 30, 2021 could decrease by approximately $198 million in the next 12 months as a result of the resolution of certain tax audits and other events. The Company continues to be under examination by the Canada Revenue Agency. The Company’s position as of June 30, 2021 with regard to proposed audit adjustments was updated to reflect an updated assessment received for 2014 which would primarily result in a loss of tax attributes that are subject to a full valuation allowance. In the U.S., the 2014 tax year remains open to the extent of a 2017 capital loss carried back to that year. The IRS is continuing their examination of the Company's annual tax filings for 2015 and 2016 and the Company's short period tax return for the period ended September 8, 2017, which was filed as a result of the Company's internal restructuring efforts during 2017. At this time, the Company expects to receive a proposed adjustment disallowing a significant capital loss in 2017. The Company believes it will sustain its deduction and no income tax provision has been recorded. The Company's U.S. affiliates remain under examination for various state tax audits in the U.S. for years 2015 through 2018. The Company’s subsidiaries in Germany are under audit for tax years 2014 through 2016. At this time, the Company does not expect that proposed adjustments, if any, would be material to the Company's Consolidated Financial Statements. The Company’s subsidiaries in Australia are under audit by the Australian Tax Office for various years beginning in 2011 through 2017. At this time, the Company does not expect that proposed adjustments, if any, would be material to the Company's Consolidated Financial Statements. Certain affiliates of the Company in regions outside of Canada, the U.S., Germany and Australia are currently under examination by relevant taxing authorities, and all necessary accruals have been recorded, including uncertain tax benefits. At this time, the Company does not expect that proposed adjustments, if any, would be material to the Company's Consolidated Financial Statements.

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