Note I – Income Taxes

The Company’s provision for income taxes for the three months ended March 31, 2018 and 2017, respectively, is based on the estimated annual effective tax rate, plus discrete items. The following table presents the provision for income taxes and the effective tax rates for the three months ended March 31, 2018 and 2017:

Note I – Income Taxes (continued)



	Three months ended March 31,
	2018			2017
Income before provision for income taxes	$	37,154		$	31,464
Provision for income taxes	$	7,956		$	10,942
Effective tax rate	21.4		%	34.8		%

The difference between the Company’s effective tax rates for the three months ended March 31, 2018 and 2017, and the U.S. statutory tax rates of 21% and 35%, respectively, are primarily due to the impact of the Tax Cuts and Jobs Act (the "Tax Cuts Act"). The effective tax rate may vary significantly due to fluctuations in the amount and source, including both foreign and domestic, of pretax income and changes in amounts of non-deductible expenses and other items that could impact the effective tax rate.

Provisional amounts in effective rate

The Tax Cuts Act, which was enacted on December 22, 2017, reduces the U.S. federal corporate income tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. We are applying the guidance in Staff Accounting Bulletin 118 when accounting for the enactment-date effects of the Tax Cuts Act. At March 31, 2018, we have not completed our accounting for all of the tax effects of the Tax Cuts Act. We will continue to make and refine our calculations as additional analysis is completed. Our estimates may also be affected as we gain a more thorough understanding of the Tax Cuts Act. These changes could be material to income tax expense.

Foreign tax effects

Transition Tax

The one-time transition tax is based on our total post-1986 earnings and profits ("E&P") which we had deferred from US income taxes under previous U.S. law. We originally recorded a provisional amount for our one-time transition tax liability attributable to our foreign subsidiaries, resulting in a transition tax liability of $21,994 recorded at December 31, 2017. At this time, we are further analyzing the current estimate of our transition tax calculation to finalize it no later than the fourth quarter of 2018. As of March 31, 2018, the Company continues to have provisional amounts recorded for the one-time transition tax liability. As we continue to refine our E&P analysis, we will refine our calculations of the one-time transition tax, which could affect the measurement of this liability. No additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the transition tax, or any additional outside basis difference inherent in these entities, as these amounts continue to be indefinitely reinvested in foreign operations.