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Income Taxes
 9 Months Ended
Sep. 30, 2023
Income Tax Disclosure [Abstract]  
Income Taxes
4. Income Taxes
At the end of each interim period, we make our best estimate of the annual effective tax rate and the impact of discrete items, if any, and adjust the rate as necessary.
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
(Dollars in millions)
Income before income tax expense (benefit)$23.1 $39.6 $77.9 $106.4 
Income tax expense (benefit)14.6 (2.9)29.7 14.3 
Effective tax rate63.2 %(7.3)%38.1 %13.4 %
During the three months ended September 30, 2023, the Company established an $8.5 million valuation allowance, which was a portion of an $11.3 million valuation allowance that was released during the third quarter of 2022 on deferred tax assets attributable to existing foreign tax credit carryforwards. The release of the valuation allowance during the third quarter of 2022 was a result of new regulations published in 2022 by the U.S. Treasury (2022 Foreign Tax Credit (“FTC”) final regulations) that made foreign taxes paid in future years to certain countries, including Brazil, no longer creditable in the U.S. After tax planning in 2022, the Company expected to be able to utilize its existing foreign tax credits carried forward from prior years.
During the third quarter of 2023, Brazil enacted new legislation that aligned the Brazil transfer pricing law with the 2022 OECD Guidelines. As a result, the Company has determined that Brazil taxes paid or accrued in 2024 and forward will become creditable under the 2022 final FTC regulations. Due to the change in the Brazilian tax law, the FTCs that are projected to be created will cause $8.5 million of the foreign tax credit carryforward from prior years to not be utilized, resulting in the establishment of the valuation allowance during the three and nine months ended September 30, 2023. Also during the third quarter of 2023, the IRS issued Notice 2023-55 that generally allows taxpayers to defer the application of the of the 2022 FTC final regulations until 2024. As allowed under the notice, the Company elected not to defer the application of the 2022 FTC final regulations.
The Company also recognized deferred tax benefits of $4.6 million from research and development tax credits during the three and nine months ended September 30, 2022. Additionally, income taxes recorded during the nine months ended September 30, 2022 included the revaluation of certain deferred tax liabilities due to changes in apportioned state tax rates, which resulted in an income tax benefit of $1.0 million recorded during the first quarter of 2022.
Before the impact of discrete items described above, the Company's effective tax rate was 26.1 percent and 27.2 percent for the three and nine months ended September 30, 2023, respectively, and 32.3 percent and 29.1 percent for the three and nine months ended September 30, 2022, respectively. The difference between the Company's effective tax rates and federal statutory rate of 21.0 percent during all periods presented reflect the impact of state taxes, compensation deduction limitations under Section 162(m) of the Internal Revenue Code as well as the impact of foreign taxes as a result of regulations published by the U.S. Treasury in 2022 and noted above.