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Income Taxes | 6 Months Ended
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Jun. 30, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes We compute and apply to ordinary income an estimated annual effective tax rate on a quarterly basis based on current and forecasted business levels and activities, including the mix of domestic and foreign results and enacted tax laws. The estimated annual effective tax rate is updated quarterly based on actual results and updated operating forecasts. Ordinary income refers to income (loss) before income tax expense excluding significant, unusual, or infrequently occurring items. The tax effect of an unusual or infrequently occurring item is recorded in the interim period in which it occurs as a discrete item of tax. The following tables summarize the provision for income taxes for the six months ended June 30, 2018 and June 30, 2017:
| For the Three Months Ended June 30, |  | For the Six Months Ended June 30,
| 2018 |  | 2017 |  | 2018 |  | 2017
| (Dollars in thousands)
Tax (benefit) expense | $ | (17,264 | ) |  | $ | 925 |  |  | $ | 11,379 |  |  | $ | 1,286 |
Pretax income (loss) | 184,499 |  |  | (12,408 | ) |  | 435,189 |  |  | (34,325 | )
Effective tax rates | (9.4 | )% |  | (7.5 | )% |  | 2.6 | % |  | (3.7 | )%
The effective tax rate for the three months ended June 30, 2017 was (7.5)% This rate differs from the U.S. statutory rate of 35% primarily due to recent losses in the U.S. and Switzerland where we received no tax benefit due to a full valuation allowance and worldwide earnings from various countries taxed at different rates. The recognition of the valuation allowance does not result in or limit the Company's ability to utilize these tax assets in the future. The effective tax rate for the three months ended June 30, 2018 was (9.4)%. This rate differs from the U.S. statutory rate of 21% primarily due to the favorable impact of the partial release of a valuation allowance recorded against the deferred tax asset related to U.S. tax attributes and the tax impact of worldwide earnings from various countries taxed at different rates. The tax expense changed from a charge of $0.9 million for the quarter ended June 30, 2017 to a tax benefit of $17.3 million for the quarter ended June 30, 2018. This change is primarily due to the partial release of a valuation allowance in the amount of $80.1 million recorded against the deferred tax asset related to U.S. tax attributes. This change is also the result of a shift in the jurisdictional mix of earnings and losses from year to year. Certain jurisdictions shifted from pre-tax losses in the second quarter of 2017 to pretax earnings in the second quarter of 2018. For the six months ended June 30, 2017, the effective tax rate of (3.7)% differs from the U.S. statutory rate of 35% primarily due to recent losses in the U.S. and Switzerland where we receive no tax benefit due to a full valuation allowance and worldwide earnings from various countries tax a different rates. The recognition of the valuation allowance does not result in or limit the Company's ability to utilize these tax assets in the future. For the six months ended June 30, 2018, the effective tax rate of 2.6% differs from the U.S. statutory rate of 21% primarily due the partial release of a valuation allowance recorded against the deferred tax asset related to U.S. tax attributes and worldwide earnings from various countries taxed at different rates. The recognition of the valuation allowance does not result in or limit the Company's ability to utilize these tax assets in the future. The tax expense changed from a charge of $1.3 million for the six months ended June 30, 2017 to a tax charge of $11.4 million for the six months ended June 30, 2018. This change is primarily due to the partial release of a valuation allowance recorded against the deferred tax asset related to US tax attributes and shift in the jurisdictional mix of earnings and losses from year to year. Certain jurisdictions shifted from pre-tax losses in the first half of 2017 to pretax earnings in the first half of 2018. As of June 30, 2018, we had unrecognized tax benefits of $2.5 million, $2.2 million of which, if recognized, would have a favorable impact on our effective tax rate. We file income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. All U.S. federal tax years prior to 2014 are generally closed by statute or have been audited and settled with the applicable domestic tax authorities. All other jurisdictions are still open to examination beginning after 2011. As of June 30, 2018, we determined that sufficient positive evidence existed that allowed us to conclude that a full valuation allowance was no longer required to be recorded against the deferred tax assets related the U.S. tax attributes. This positive evidence was primarily supplied by the Company exiting a cumulative loss period as well as sufficient U.S. forecasted taxable income that would utilize the US tax attributes and thus generate the tax benefit recorded at June 30, 2018. We continue to assess the realization of our deferred tax assets based on determinations of whether it is more likely than not that deferred tax benefits will be realized through the generation of future taxable income. Appropriate consideration is given to all available evidence, both positive and negative, in assessing the need for a valuation allowance. Examples of positive evidence would include a strong earnings history, an event or events that would increase our taxable income through a continued reduction of expenses, and tax planning strategies that would indicate an ability to realize deferred tax assets. In circumstances where the significant positive evidence does not outweigh the negative evidence in regards to whether or not a valuation allowance is required, we have established and maintained valuation allowances on those net deferred tax assets. Tax Cuts and Jobs Act On December 22, 2017, the U.S. government enacted the Tax Cuts and Jobs Act (the "Tax Act"), which significantly revised the U.S. corporate income tax system. These changes include a federal statutory rate reduction from 35% to 21%, the elimination or reduction of certain domestic deductions and credits and limitations on the deductibility of interest expense and executive compensation. The Tax Act also transitioned international taxation from a worldwide system to a modified territorial system and includes base erosion prevention measures which have the effect of subjecting certain earnings of our foreign subsidiaries to U.S. taxation as global intangible low taxed income (or "GILTI"). In general, these changes were effective beginning in 2018. The Tax Act also includes a one time mandatory deemed repatriation or transition tax on the accumulated previously untaxed foreign earnings of our foreign subsidiaries. For the fourth quarter of 2017, we were able to reasonably estimate certain Tax Act effects and, therefore, recorded provisional adjustments associated with the deemed repatriation transition tax and remeasurement of certain deferred tax assets and liabilities. As of the second quarter, the previously disclosed provisional amounts continue to be provisional. We have not made any additional measurement-period adjustments related to transition tax during 2018, because the Company has not yet completed the calculation of the total post-1986 E&P for these foreign subsidiaries. Further, the transition tax is based in part on the amount of those earnings held in cash and other specified assets. This amount may change when the Company finalizes the calculation of post-1986 foreign E&P previously deferred from U.S. federal taxation and finalize the amounts held in cash or other specified assets. We are continuing to gather additional information to complete our accounting for these items and expect to complete our accounting within the prescribed measurement period. On August 1, 2018, the U.S. Department of Treasury and the Internal Revenue Service issued proposed regulations under code section 965. Due to the complexity of the new GILTI tax rules, the Company is continuing to evaluate this provision of the Tax Act and the application of ASC 740. We have included an estimate of the 2018 current GILTI impact in our effective tax rate for the first half of 2018.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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