Income Taxes |
6 Months Ended |
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Jun. 30, 2025 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes | Income Taxes For interim tax reporting, we estimate an annual effective tax rate which is applied to the year-to-date ordinary income. Tax effects of significant, unusual, or infrequently occurring items are excluded from the estimated annual effective tax rate calculation and recognized in the interim period in which they occur. Our effective income tax rate fluctuates based on, among other factors, changes in pre-tax income in countries with varying statutory tax rates, changes in valuation allowances, changes in foreign exchange gains or losses, the amount of exempt income, changes in unrecognized tax benefits associated with uncertain tax positions and changes in tax laws. Our exempt income primarily includes interest income, export incentives, and equity earnings of joint ventures. Interest income earned by certain of our subsidiaries through intercompany financings is taxed at rates substantially lower than the U.S. statutory rate. Export incentives relate to tax benefits derived from elections and structures available for U.S. exports. Equity earnings attributable to the earnings of our joint ventures, when paid through dividends to certain European subsidiaries, are exempt from all or portions of normal statutory income tax rates. We currently anticipate the favorable treatment for interest income, dividends, and export incentives to continue in the current year based on current law. The United Kingdom, as well as certain other jurisdictions in which we operate, enacted legislation implementing the Organization for Economic Cooperation and Development’s Pillar Two Model Rules effective as of January 1, 2024. This legislation did not have a material impact on the Consolidated Financial Statements, however, we continue to assess and monitor legislative changes. On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law. OBBBA includes tax reform extending and modifying certain key Tax Cuts & Jobs Act provisions such as accelerated tax deductions for qualified property and domestic research expenditures, and modifications to the limitations on deductions for interest expense. The provisions of the OBBBA have different effective dates where some are effective in 2025 and others not until 2026. This legislation is not expected to have a material impact on the Consolidated Financial Statements; however, we continue to assess the impact. Our effective income tax rate for the second quarter of 2025 was 30.8% compared to 21.1% for the second quarter of 2024. The higher effective tax rate for the second quarter of 2025 was primarily due to the discrete tax recognition of foreign exchange gains and losses with lower pre-tax earnings that increased our effective income tax rate by 26.9 percentage points. This increase to the effective tax rate was partially offset by the increased relative impact of our tax rate drivers, primarily exempt income and fluctuations in return to accruals, due to lower earnings that decreased our effective income tax rate by 15.3 percentage points. Our effective income tax rate for the first six months of 2025 was 37.1% compared to 20.8% for the first six months of 2024. The higher effective tax rate for the first six months of 2025 was primarily due to the discrete tax recognition of foreign exchange gains and losses with lower pre-tax earnings that increased our effective tax rate by 32.2 percentage points. This increase to the effective tax rate was partially offset by the increased relative impact of our tax rate drivers, primarily exempt income, due to decreased earnings that decreased our effective income tax rate by 11.9 percentage points.
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