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Income Taxes
 9 Months Ended
Sep. 30, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
For the three and nine months ended September 30, 2024, the provision for income taxes was $53.3 million and $89.1 million, respectively, primarily driven by a change in the company’s indefinite reinvestment assertion of the earnings in certain foreign subsidiaries and the geographic distribution of income. For the three and nine months ended September 30, 2024, the effective tax rate was (619.8)% and (66.2)%, respectively, primarily driven by a change in the company’s indefinite reinvestment assertion of the earnings in certain foreign subsidiaries, non-creditable withholding taxes in the U.S., jurisdictions with no valuation allowance that are subject to tax, and U.S. operating losses with no tax benefit as the deferred tax assets are subject to
a full valuation allowance. The effective tax rate for the three and nine months ended September 30, 2024 was also impacted by an additional valuation allowance of $7.4 million in United Kingdom.
For the three and nine months ended September 30, 2023, the provision for income taxes was $20.4 million and $55.7 million, respectively, primarily driven by geographic distribution of income. For the three and nine months ended September 30, 2023, the effective tax rate was (71.6)% and (26.9)%, respectively, primarily driven by U.S. operating losses with no tax benefit as the deferred tax assets are subject to a full valuation allowance, non-creditable withholding taxes in the U.S. and jurisdictions with no valuation allowance that are subject to tax. The effective tax rate for the three and nine months ended September 30, 2023 was also impacted by an additional valuation allowance of $3.9 million in Latin America.
Accounting rules governing income taxes require that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. These rules also require that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or the entire deferred tax asset will not be realized.
The company evaluates the realizability of its deferred tax assets by assessing its valuation allowance and by adjusting such amount, if necessary. The realization of the company’s net deferred tax assets as of September 30, 2024, is primarily dependent on the ability to generate sustained taxable income in various jurisdictions. Judgment is required to estimate forecasted future taxable income, which may be impacted by future business developments, actual results, strategic operational and tax initiatives, legislative, and other economic factors and developments. Any increase or decrease in the valuation allowance would result in additional or lower income tax expense in that period and could have a significant impact on that period’s earnings.
A full valuation allowance is currently maintained for all U.S. and certain foreign deferred tax assets in excess of deferred tax liabilities. The company will record a tax provision or benefit for those international subsidiaries that do not have a full valuation allowance against their net deferred tax assets. Any profit or loss recorded for the company’s U.S. operations will have no provision or benefit associated with it due to such valuation allowance, except with respect to withholding taxes not creditable against future taxable income. As a result, the company’s provision or benefit for taxes may vary significantly depending on the geographic distribution of income.
Under U.S. tax law, distributions from foreign subsidiaries to U.S. stockholders are generally exempt from taxation. Consequently, the deferred income tax liability on undistributed earnings is generally limited to any foreign withholding or other foreign taxes that will be imposed on such distributions. As of September 30, 2024, the company is no longer asserting indefinite reinvestment of the earnings of certain foreign subsidiaries, as such, a related deferred tax liability of $29.0 million has been established for the company’s investment in those foreign subsidiaries. The deferred tax liability is included in other long-term liabilities on the company’s consolidated balance sheet.
A corporation’s ability to deduct its federal net operating loss (NOL) carryforwards and utilize certain other available tax attributes can be substantially constrained under the general annual limitation rules of Section 382 of the U.S. Internal Revenue Code (Section 382) if it undergoes an “ownership change” as defined in Section 382 (generally where cumulative stock ownership changes among material stockholders exceed 50 percent during a rolling three-year period). Similar rules may apply under state tax laws. A future tax “ownership change” pursuant to Section 382 or future changes in tax laws that impose tax attribute utilization limitations may severely limit or effectively eliminate the company’s ability to utilize its NOL carryforwards and other tax attributes.