Income Taxes

We determine our interim tax provision using an Estimated Annual Effective Tax Rate methodology (“EAETR”) in accordance with GAAP. The EAETR is applied to the year-to-date ordinary income, exclusive of discrete items. The tax effects of discrete items are then included to arrive at the total reported interim tax provision.

The determination of the EAETR is based upon a number of estimates, including the estimated annual pretax ordinary income in each tax jurisdiction in which we operate. As our projections of ordinary income change throughout the year, the EAETR will change period-to-period. The tax effects of discrete items are recognized in the tax provision in the period they occur in accordance with GAAP. Depending on various factors, such as the item’s significance in relation to total income and the rate of tax applicable in the jurisdiction to which it relates, discrete items in any quarter can materially impact the reported effective tax rate. As a global enterprise, our tax expense can be impacted by changes in tax rates or laws, the finalization of tax audits and reviews, as well as other factors. As such, there can be significant volatility in interim tax provisions.

In the first quarter of 2017, we changed our assertion on unremitted earnings for certain foreign subsidiaries as a result of our expected sale of our discontinued FMC Health and Nutrition segment. Therefore, as part of March 31, 2017, we provided deferred tax liabilities of approximately $17.8 million attributable to outside basis differences within the FMC Health and Nutrition segment. We have not provided income taxes on undistributed earnings of our other foreign subsidiaries or affiliates since our intention remains that such earnings will be indefinitely reinvested. Refer to Note 10 for more information.

The below chart provides a reconciliation between our reported effective tax rate and the EAETR of our continuing operations.



	Three Months Ended March 31
	2017							2016
(in Millions)	Before Tax		Tax			Effective Tax Rate %		Before Tax		Tax			Effective Tax Rate %
Continuing operations	$	54.4	$	9.4		17.3	%	$	46.4	$	20.4		44.0	%
Discrete items:
Acquisition-related charges ⁽¹⁾	9.2		2.6					—		—
Currency remeasurement ⁽²⁾	5.1		2.6					2.1		—
Other discrete items ⁽³⁾	38.1		2.1					46.9		0.2
Tax only discrete items ⁽⁴⁾	—		(4.0		)			—		(2.5		)
Total discrete items	$	52.4	$	3.3				$	49.0	$	(2.3	)
Continuing operations, before discrete items	$	106.8	$	12.7				$	95.4	$	18.1
Estimated Annualized Effective Tax Rate (EAETR) ⁽⁵⁾						11.9	%						19.0	%

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(1)	See Note 3 for more information on acquisition-related charges.


(2)	Represents transaction gains or losses for currency remeasurement offset by associated hedge gains or losses, which are accounted for discretely in accordance with GAAP. Certain transaction gains or losses for currency remeasurement are not taxable, while offsetting hedge gains or losses are taxable.


(3)	GAAP generally requires subsidiaries for which a full a valuation allowance has been provided to be excluded from the EAETR. For the three months ended March 31, 2017 and March 31, 2016, the other discrete items component of the EAETR reconciliation primarily relates to the discrete accounting for these pretax losses.


(4)	For the three months ended March 31, 2017, tax only discrete items is comprised primarily of the tax effect of changes in valuation allowances of historical deferred tax assets. For the three months ended March 31, 2016, this component was comprised primarily of currency remeasurement associated with foreign statutory operations.


(5)	The primary drivers for the decrease in the first quarter effective tax rate for 2017 compared to 2016 are shown in the table above. The remaining change was due to reduced domestic earnings in our FMC Agricultural Solutions business and the impact of the full integration of Cheminova into our global supply chain.