Income Taxes

The following table presents income tax expense and the effective tax rate:



	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
	(Dollars in thousands)
Income tax expense	$	36,527		$	36,772		$	54,699		$	67,909
Effective tax rate	22		%	23		%	17		%	22		%

The effective tax rate for the three months ended June 30, 2018 was higher than the statutory federal rate of 21% primarily due to state income taxes, partially offset by foreign income taxed at lower rates. The effective tax rate for the six months ended June 30, 2018 was lower than the federal statutory rate, primarily due to $12.1 million of tax benefits recognized related to changes to provisional amounts previously recognized for the impact of the Tax Act, $6.0 million of excess tax benefits related to stock-based compensation and foreign income taxed at lower rates, partially offset by state income taxes. The effective tax rate for the three and six months ended June 30, 2017 was lower than the statutory federal rate of 35% primarily due to tax benefits from foreign income taxed at lower rates, partially offset by state income taxes. Additionally, the effective tax rate for the six months ended June 30, 2017 was reduced by $6.7 million of excess tax benefits related to stock-based compensation.

The Tax Act was enacted on December 22, 2017, most provisions of which became effective starting in 2018. The Company recorded provisional amounts of deferred taxes for the impact of various parts of the Tax Act in 2017. These provisional amounts were adjusted in the first quarter of 2018, primarily due to new IRS guidance, resulting in an income tax benefit of $12.1 million, and a reduction in the amount of foreign tax credit carryforwards reported as of December 31, 2017 to $67.9 million. The Company has not completed its accounting for the tax effects of the enactment of the Tax Act. Specifically, the amounts recorded for the U.S. tax on accumulated foreign earnings, net of foreign tax credits, the amounts recorded for foreign tax credits related to the foreign withholding tax on unremitted foreign earnings, and the state income tax effects of these items are provisional amounts based on the Company’s estimates. The Company expects to complete the accounting for these impacts of the Tax Act in the fourth quarter of 2018 as it finalizes its cumulative earnings and profits of its foreign subsidiaries and receives additional guidance from the IRS pertaining to the Tax Act. The impacts of additional guidance and changes in estimates related to the effects of the Tax Act, if any, will be recorded in the period the additional guidance or information is available.

As a result of the Tax Act, the Company no longer intends to indefinitely reinvest the earnings of its foreign subsidiaries offshore, and accordingly, during the six months ended June 30, 2018 the Company completed the repatriation of $1.15 billion of cash held by foreign subsidiaries, net of $60.7 million of foreign withholding taxes which was recorded in deferred tax liabilities in 2017.

As of June 30, 2018, the Company’s Other long-term tax liabilities reflect the $85.0 million noncurrent liability for U.S. income taxes on accumulated foreign earnings, net of applicable foreign tax credits. The $8.1 million current portion of the liability is included as a reduction of income tax receivables in Other current assets as of June 30, 2018. Both the current and noncurrent portion of these liabilities in addition to the $8.5 million paid in the second quarter of 2018, had been included in deferred tax liabilities as of December 31, 2017. Other long-term tax liabilities as of June 30, 2018 also reflects the reclassification of unrecognized tax benefits, as deferred tax assets related to tax credits and loss carryforwards are no longer available to offset the liabilities.

The excess interest deductions on the Subordinated Convertible Debentures that were converted will not be subject to recapture, and accordingly, the $439.2 million deferred tax liability related to the debentures was reversed into Additional paid-in capital upon extinguishment of the debt. As a result of this decrease in deferred tax liabilities, the Company is in a net deferred tax asset position as of June 30, 2018 for every tax jurisdiction.