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Income Taxes
9 Months Ended
Sep. 30, 2018
Income Tax Disclosure [Abstract]  
Income Taxes

11. Income Taxes

On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Act”) was signed into U.S. Law. In December 2017, the Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), which allows the Company to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. As of September 30, 2018, the Company has not completed its accounting for the tax effects of the enactment of the Tax Act; however, in certain cases, specifically as follows, the Company made a reasonable estimate of (i) the effects on its existing deferred tax balances and (ii) the effects of the one-time mandatory repatriation tax. The Company recognized a provisional tax expense of $35.9 million in the year ended December 31, 2017 associated with the items it could reasonably estimate. For the nine months ended September 30, 2018, the Company made an adjustment to its estimate related to executive compensation which resulted in $2.8 million of tax benefit. Due the timing of the release of the Tax Act, the complexity of the Tax Act and regulatory guidance that has recently been released and additional guidance expected to be released, the Company is still analyzing the Tax Act and refining its calculations, which could potentially impact the measurement of its income tax balances. The Company expects to complete its analysis within the measurement period in accordance with SAB 118.

At September 30, 2018, the Company has not yet determined its policy election with respect to whether to record deferred taxes for basis differences expected to reverse as a result of the Global Intangible Low-Taxed Income (“GILTI”) provisions in future periods or use the period cost method. The Company has recorded $5.0 million of tax expense in the nine months ended September 30, 2018 for the current impact of the GILTI provisions.

The effective tax rate for the three months ended September 30, 2018 was 12%. The Company reported a tax charge for the nine months ended September 30, 2018 while reporting a pretax loss for the same period. The resulting effective tax rate is a negative 11%. The earnings of the Company’s foreign entities for the three and nine months ended September 30, 2018 were $27.3 million and $32.7 million, respectively. The effective tax rate for the three and nine months ended September 30, 2018 were impacted by profits in certain foreign jurisdictions taxed at lower rates and equity compensation tax benefits, partially offset by lower domestic tax benefits resulting from the current GILTI tax and Base Erosion and Anti-Abuse Tax (“BEAT”) charges.

The Company reported a tax benefit for the three months ended September 30, 2017 while reporting a pretax profit for the same period. The resulting effective tax rate is a negative 193%. The effective tax rate for the nine months ended September 30, 2017 was 49%.The earnings of the Company’s foreign entities for the three and nine months ended September 30, 2017 were $15.2 million and $40.6 million, respectively. The effective tax rates for the three and nine months ended September 30, 2017 were impacted by profits and losses in certain foreign jurisdictions taxed at lower rates and domestic losses taxed at higher rates.

The Company’s effective tax rate could fluctuate significantly on a quarterly basis and could be negatively affected to the extent earnings are lower in the countries in which it operates that have a lower statutory rate or higher in the countries in which it operates that have a higher statutory rate or to the extent it has losses sustained in countries where the future utilization of losses are uncertain. The Company’s effective tax rate could also fluctuate due to changes in the valuation of its deferred tax assets or liabilities, or by changes in tax laws, regulations, accounting principles, or interpretations thereof. In addition, the Company is occasionally subject to examination of its income tax returns by tax authorities in the jurisdictions it operates. The Company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for income taxes.

The amount of unrecognized tax benefits for uncertain tax positions was $27.8 million as of September 30, 2018 and $27.2 million as of December 31, 2017, excluding related liabilities for interest and penalties of $1.1 million and $1.2 million as of September 30, 2018 and December 31, 2017, respectively.

The Company believes it is reasonably possible that the total amount of unrecognized tax benefits will decrease within the next 12 months by approximately $3.7 million, due to the settlement of various audits and the expiration of statutes of limitation.

During the three months ended September 30, 2018, the Company made a final determination in accordance with SAB 118 that the unremitted earnings and profits of its entities in Australia, Ireland, New Zealand, Romania, Russia and South Africa are no longer permanently reinvested. The Company continues to evaluate its position regarding any outside basis differences for its entities in those countries. The Company recorded a $0.5 million foreign tax charge related to the remittance of earnings from those countries. There are unremitted foreign earnings in other countries which continue to be reinvested indefinitely. For entities in countries not listed above, the Company continues to evaluate the potential foreign and U.S. state tax liabilities that would result from future repatriations from those non-U.S. subsidiaries, if any, and how the Tax Act will affect its existing accounting position regarding the indefinite reinvestment of undistributed foreign earnings.