Income Taxes

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



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars in thousands)
Income tax expense	$	40,621		$	34,645		$	95,320		$	102,554
Effective tax rate	23		%	23		%	19		%	22		%

The effective tax rate for the three months ended September 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 nine months ended September 30, 2018 was lower than the federal statutory rate, primarily due to $12.6 million of tax benefits recognized related to changes to provisional amounts previously recognized for the impact of the Tax Act, $7.2 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 nine months ended September 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 nine months ended September 30, 2017 was reduced by $8.2 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 2018, primarily due to new IRS guidance, resulting in an income tax benefit of $12.6 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 state income tax effects are provisional amounts based on the Company’s estimates, which are expected to be finalized in the fourth quarter of 2018 as the state income tax returns are filed and additional guidance from the IRS, if any is received.

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 nine months ended September 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 September 30, 2018, the Company’s Other long-term tax liabilities includes the $81.0 million noncurrent liability for U.S. income taxes on accumulated foreign earnings, net of applicable foreign tax credits, while the $4.8 million current portion of the liability is included in Accounts payable and accrued liabilities. Both the current and noncurrent portion of these liabilities in addition to the $10.6 million paid through September 30, 2018, had been included in deferred tax liabilities as of December 31, 2017. Other long-term tax liabilities as of September 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 September 30, 2018 for every tax jurisdiction.