Income Taxes |
9 Months Ended |
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Sep. 30, 2022 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes | INCOME TAXES We recorded an income tax benefit of $752 million and $762 million during the three and nine months ended September 30, 2022, respectively, and an income tax benefit of $1,860 million and $1,864 million during the three and nine months ended September 30, 2021, respectively.
We have historically calculated our provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate to year-to-date ordinary income or loss (“annual effective tax rate method”). Because of significant sensitivities in the annual effective tax rate as a result of variability in our earnings due to pre-tax derivative losses arising from changes in fair value from our IPM agreements and the portion of our earnings attributable to non-controlling interest, a relatively small change in estimated ordinary income or loss would result in significant changes in the estimated annual effective tax rate such that we are unable to make a reliable estimate of the annual effective tax rate for the three and nine months ended September 30, 2022. Accordingly, we have applied a discrete-period method to calculate income taxes for the three and nine months ended September 30, 2022 based on the year-to-date effective tax rate (“year-to-date effective tax rate method”). The year-to-date effective tax rate method treats the year-to-date period as if it was the annual period and determines the income tax expense or benefit on that basis.
Utilizing the year-to-date effective tax rate method, our effective tax rate for the three and nine months ended September 30, 2022 was 22.1% and 23.3%, respectively. The effective tax rate for the three and nine months ended September 30, 2022 represents a tax benefit on pre-tax loss and was higher than the statutory rate primarily due to our projected foreign derived intangible income (“FDII”) deduction, which results in income from our sales to foreign customers being taxed at a lower effective tax rate.
We used the annual effective tax rate method to calculate our income tax benefit for the three and nine months ended September 30, 2021, which was 67.0% and 79.7%, respectively, as it was determined that the annual effective tax rate method would produce a reliable estimate. The effective tax rate for the three and nine months ended September 30, 2021 did not bear a customary relationship to the statutory income tax rate due to variability in our earnings due to pre-tax derivative losses arising from changes in fair value from our IPM agreements and the portion of our earnings attributable to non-controlling interest.
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