|9 Months Ended|
Oct. 01, 2021
|Income Taxes||INCOME TAXES
The Company recorded income taxes of $609 million (19.7 percent effective tax rate) and $441 million (20.2 percent effective tax rate) during the three months ended October 1, 2021 and September 25, 2020, respectively. The Company recorded income taxes of $2,111 million (22.3 percent effective tax rate) and $1,094 million (14.8 percent effective tax rate) during the nine months ended October 1, 2021 and September 25, 2020, respectively.
The Company’s effective tax rates for the three and nine months ended October 1, 2021 and September 25, 2020 vary from the statutory U.S. federal income tax rate of 21.0 percent primarily due to the tax impact of significant operating and nonoperating items, as described in Note 11, along with the tax benefits of having significant operations outside the United States and significant earnings generated in investments accounted for under the equity method, both of which are generally taxed at rates lower than the statutory U.S. rate.
The Company’s effective tax rates for the three and nine months ended October 1, 2021 included $75 million and $251 million, respectively, of net tax expense related to various discrete tax items, including changes in tax laws in certain foreign jurisdictions and the net tax impact of agreed-upon audit issues.
The Company’s effective tax rates for the three and nine months ended September 25, 2020 included $15 million of net tax expense and $138 million of net tax benefits, respectively, associated with various discrete tax items, including return to provision adjustments, excess tax benefits associated with the Company’s stock-based compensation arrangements, the net tax impact of tax law changes in certain foreign jurisdictions, and net tax charges for changes to our uncertain tax positions, including interest and penalties. The Company’s effective tax rate for the nine months ended September 25, 2020 also included a tax benefit of $40 million associated with the gain recorded upon the acquisition of the remaining interest in fairlife. Refer to Note 2 for additional information on the fairlife acquisition.
On November 18, 2020, the Tax Court issued the Opinion regarding the Company’s 2015 litigation with the IRS involving transfer pricing tax adjustments in which the Tax Court predominantly sided with the IRS. The Company strongly disagrees with the Opinion and intends to vigorously defend its position. Refer to Note 8.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef