Income Taxes

9 Months Ended

Sep. 30, 2019

Income tax provisions for interim periods are based on estimated annual income tax rates, adjusted to reflect the effects of any significant infrequent or unusual items which are required to be discretely recognized within the current interim period. As a result of the 2017 Tax Act, the Company changed its indefinite reversal assertion related to its undistributed earnings of its foreign subsidiaries and no longer considers a majority of its foreign earnings permanently reinvested outside of the United States ("U.S."). As a result, the effective tax rates in the periods presented are largely based upon the forecasted pre-tax earnings mix and allocation of certain expenses in various taxing jurisdictions where the Company conducts its business.

The effective tax rate is as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2019		2018		2019		2018
Effective tax rate	(150.0	)%	(80.0	)%	—	%	(87.5	)%

For the three months ended September 30, 2019, a $5 million discrete tax benefit was recorded related to the reversal of an uncertain tax position resulting from the expiration of the statute of limitations. For the nine months ended September 30, 2019, the $5 million discrete tax benefit was partially offset by $4 million in discrete tax expense recorded in the second quarter related to the reversal of the United States Tax Court’s decision in the Altera Corp. v. Commissioner case by the Ninth Circuit Court of Appeals on June 7, 2019. The Altera case focused on whether current U.S. Treasury Regulations requiring the inclusion of stock-based compensation expense in a taxpayer's cost-sharing calculations are valid. As a result of these discrete items and incremental tax expense related to equity compensation, the Company recorded insignificant income tax expense on a pre-tax net loss of $1 million for the nine months ended September 30, 2019, resulting in an effective income tax rate of zero percent.

For the three and nine months ended September 30, 2018, the Company recorded a $7 million tax benefit as an adjustment to the provisional estimates as a result of additional regulatory guidance and changes in interpretations and assumptions the Company has made as a result of the 2017 Tax Act. This resulted in an income tax benefit for the respective periods.

The Company estimates its annual effective tax rate for 2019 to be approximately 300%, which takes into consideration, among other things, the forecasted earnings mix by jurisdiction, and the impact of discrete tax items. The 2017 Tax Act subjects U.S. shareholders to a tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries. The Company has elected to provide for the tax expense related to GILTI in the year the tax is incurred, and has included approximately $1 million of tax expense related to GILTI in our forecasted marginal effective tax rate for 2019.