Income Taxes

6 Months Ended

Jun. 30, 2019

Income tax provisions for interim periods are based on estimated annual income tax rates, adjusted to reflect the effects of any significant infrequent or unusual items which are required to be discretely recognized within the current interim period. As a result of the Tax Cuts and Jobs Act of 2017 (the "2017 Tax Act”), the Company changed its indefinite reversal assertion related to its undistributed earnings of its foreign subsidiaries and no longer considers a majority of its foreign earnings permanently reinvested outside of the United States ("U.S."). As a result, the effective tax rates in the periods presented are largely based upon the forecasted pre-tax earnings mix and allocation of certain expenses in various taxing jurisdictions where the Company conducts its business.

The effective tax rate is as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
In millions	2019		2018		2019		2018
Effective tax rate	120.0	%	33.3	%	(120.0	)%	(50.0	)%

For the three months and six months ended June 30, 2019, a $4 million discrete tax item was recorded related to an uncertain tax position resulting from the reversal of the Tax Court’s decision in the Altera case by the Ninth Circuit Court of Appeals on June 7, 2019. The Altera case focused on whether current U.S. Treasury Regulations requiring the inclusion of stock-based compensation expense in a taxpayer's cost-sharing calculations are valid. As a result of this discrete item and incremental tax expense related to equity compensation, the Company recorded income tax expense of $6 million on a pre-tax net loss of $5 million for the six months ended June 30, 2019, resulting in an effective income tax rate of (120.0)%.

There were no material discrete tax items recorded for the three or six month periods ended June 30, 2018. Discrete tax items related to interest accruals on uncertain tax positions and equity-based compensation resulted in income tax expense of $1 million on a pre-tax net loss of $2 million for the six months ended June 30, 2018, resulting in an effective income tax rate of (50.0)%.

The Company estimates its annual effective tax rate for 2019 to be approximately 21%, which takes into consideration, among other things, the forecasted earnings mix by jurisdiction. The 2017 Tax Act subjects U.S. shareholders to a tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries. The Company has elected to provide for the tax expense related to GILTI in the year the tax is incurred. The Company does not expect a material amount of tax expense related to GILTI based on our forecasted marginal effective tax rate for 2019.