v3.25.2
Income Taxes
 6 Months Ended
Jun. 30, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The following table shows our effective tax rate for the three and six months ended June 30, 2025 and June 30, 2024:

 Three months ended June 30,Six months ended June 30,
(in millions)2025202420252024
Income before income taxes and equity in investments of unconsolidated entities$116.5 $89.5 $225.0 $176.5 
Equity in investments of unconsolidated entities(1.2)(1.2)(3.8)(2.7)
Income before income taxes$115.3 $88.3 $221.2 $173.8 
Income tax expense$26.3 $19.2 $53.7 $40.5 
Effective tax rate22.8 %21.7 %24.3 %23.3 %

Our effective tax rate in the second quarter and first six months of 2025 was 22.8% and 24.3%, respectively, reflecting an increase of 1.1 and 1.0 percentage points, respectively, compared with the same periods in the prior year.

On July 4, 2025, the One Big Beautiful Bill Act (the OBBB) was enacted in the United States. The OBBB contains several changes impacting corporate taxpayers, including modifications to the capitalization of research and development expenses, changes to calculations for the limitation on deductions for interest expense, and the reestablishment of accelerated depreciation (full expensing) on fixed assets. The OBBB also includes adjustments to the calculation of certain international tax framework provisions, which were initially established by the Tax Cuts and Jobs Act of 2017. The OBBB has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. We are currently assessing the potential implications of the OBBB; however, an estimate of the impact of the OBBB on our consolidated financial statements cannot be made at this time.

The Organization for Economic Co-operation and Development (OECD) has proposed a global minimum tax of 15% of reported profits (Pillar Two) that has been agreed upon in principle by over 140 countries. Since the proposal, many countries incorporated Pillar Two model rule concepts into their domestic laws. Although the model rules provide a framework for applying the minimum tax, countries may enact Pillar Two slightly different than the model rules and on different timelines. Other countries are also considering changes to their tax laws to adopt certain parts of the OECD’s proposals. Pillar Two represents a significant change in the international tax regime and could result in increases to our effective tax rate as a result of the imposition of minimum taxes. Pillar Two did not have a material impact to our consolidated financial statements as of June 30, 2025. We are continuing to monitor developments and administrative guidance in addition to evaluating the potential impact of Pillar Two on our consolidated financial statements for future periods.

Unrecognized Tax Benefits

The table below provides information concerning our gross unrecognized tax benefits as of June 30, 2025 and December 31, 2024, as well as the effect these gross unrecognized tax benefits would have on our income tax expense, if they were recognized.

(in millions)As of June 30, 2025As of December 31, 2024
Gross unrecognized tax benefits$12.3 $11.1 
Gross unrecognized tax benefits that would affect income tax expense$12.3 $11.1 
Decrease in income tax expense upon recognition of gross unrecognized tax benefits$11.9 $10.9 

Our Consolidated Balance Sheets include the following liabilities for unrecognized tax benefits. These amounts include interest and penalties, less any associated tax benefits.
Liabilities for Unrecognized Tax Benefits (in millions)As of June 30, 2025As of December 31, 2024
Current liability$0.1 $0.1 
Non-current liability13.1 11.7 
Total liability for unrecognized tax benefits$13.2 $11.8 

We conduct business globally, and, as a result, we file income tax returns in US federal, state, local, and foreign jurisdictions. In the normal course of business, we are subject to examination by tax authorities throughout the world. The open tax years for our US federal tax returns and most state tax returns include the years 2020 to the present.

We are currently under audit by state and local tax authorities in the US as well as tax authorities in certain non-US jurisdictions. It is likely that the examination phase of some of these state, local, and non-US audits will conclude in 2025. It is not possible to estimate the effect of current audits on previously recorded unrecognized tax benefits.

Approximately 83% of our cash, cash equivalents, and investments balance as of June 30, 2025, was held by our operations outside of the US. With the exception of $142.0 million in earnings of certain of our foreign subsidiaries that we disclosed in the fourth quarter of 2024, we generally consider most of our US directly-owned foreign subsidiary earnings to be permanently reinvested. We anticipate a one-time repatriation of these earnings back to the US via distribution later in 2025. We have recorded a deferred tax liability of $7.1 million that reflects the income tax effects of the repatriation of these earnings, mostly due to non-US withholding taxes, that would be due at the time of remittance. We have not recorded deferred income taxes on the remaining balance of accumulated undistributed earnings of our foreign subsidiaries because we consider those earnings to be permanently reinvested, and we do not anticipate dividends in the foreseeable future.

Certain of our non-US operations have incurred net operating losses (NOLs), which may become deductible to the extent these operations become profitable. For each of our operations, we evaluate whether it is more likely than not that the tax benefits related to NOLs will be realized. As part of this evaluation, we consider evidence such as tax planning strategies, historical operating results, forecasted taxable income, and recent financial performance. In the year that certain non-US operations record a loss, we do not recognize a corresponding tax benefit, which increases our effective tax rate. Upon determining that it is more likely than not that the NOLs will be realized, we reduce the tax valuation allowances related to these NOLs, which results in a reduction to our income tax expense and our effective tax rate in that period.