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Income Taxes | 9 Months Ended
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Sep. 30, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | The Tax Cuts and Jobs Act (the “TCJA”) makes broad and complex changes to the U.S. tax code, including but not limited to: (i) reducing the U.S. federal corporate tax rate from 35 percent to 21 percent; (ii) requiring companies to pay a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries; (iii) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (iv) creating new taxes on certain foreign earnings; (v) eliminating certain deductions; and (vi) providing the option to full expensing of qualified property. The SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the tax effects of the TCJA. SAB 118 provides a measurement period that should not extend beyond one year from the TCJA enactment date for companies to complete the accounting under Accounting Standards Codification No. 740 (“ASC 740”). In accordance with SAB 118, a company must reflect the income tax effects of a company’s accounting for those tax effects of the TCJA for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain tax effects of the TCJA is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a reasonable estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax law that were in effect immediately before the enactment of the TCJA. The TCJA is complex and its impact may materially differ from the Company’s estimates due to, among other things, changes in the Company’s assumptions, implementation guidance that may be issued from the IRS and related interpretations and clarifications of the tax law relevant for the completion of the Company’s 2017 tax return filings. The Company expects to complete its assessment of these items during 2018, and any adjustments to the provisional amounts initially recorded will be included as an adjustment to income tax expense or benefit in the period the amounts are determined in accordance with SAB 118. While item (ii) above has not been completed, the Company has not accrued any deemed repatriation taxes on unrepatriated earnings of its foreign subsidiaries, since its preliminary assessments indicates that such foreign subsidiaries have no net cumulative unremitted earnings due to historical repatriation. There has been no change to this estimate in the first nine months of 2018. The remaining TCJA summary items (i and iii through vi above) have been reflected in the Company’s 2018 effective tax rate based on the Company’s best estimates as indicated in the rate reconciliation table. The application of the new Global Intangible Low Taxed Income (“GILTI”) tax rules to the Company, which is part of item (iv) above is not complete. The rules are complex, and under GAAP, the Company is allowed to make a policy choice of either (a) treating taxes due on future U.S. inclusions in taxable income related to GILTI as current period expense when incurred (the “period cost method”) or (b) factoring such amounts into a company’s measurement of its deferred income taxes (“deferred method”). The selection of an accounting policy with respect to the new GILTI tax rules will depend, in part, on the Company’s analysis of its global income to determine whether it expects to have future U.S. inclusions in taxable income related to GILTI and, if so, what the impact is expected to be. Accordingly, the Company has not made a policy decision regarding whether to record deferred income taxes on GILTI. Tredegar recorded tax expense of $3.1 million on pretax net income of $1.8 million in the first nine months of 2018. Therefore, the effective tax rate in the first nine months of 2018 was 172.1%, compared to 14.7% in the first nine months of 2017. The quarterly effective tax rate is an estimate based on a proration of the components of the Company’s estimated annual effective tax rate. The significant differences between the U.S. federal statutory rate and the effective income tax rate for the nine months ended September 30, 2018 and 2017 are as follows:
(In thousands, except percentages) | 2018 |  | 2017
Nine Months Ended September 30, | Amount |  | % |  | Amount |  | %
Income tax expense at federal statutory rate | $ | 383 |  |  | 21.0 |  |  | $ | 23,047 |  |  | 35.0 |
Goodwill impairment charge | 1,788 |  |  | 98.2 |  |  | — |  |  | — |
Foreign rate differences | 1,159 |  |  | 63.6 |  |  | 1,022 |  |  | 1.5 |
U.S. Tax on Foreign Branch Income | 953 |  |  | 52.3 |  |  | — |  |  | — |
Tax contingency accruals and tax settlements | 480 |  |  | 26.4 |  |  | (284 | ) |  | (0.4 | )
Valuation allowance for capital loss carry-forwards | 245 |  |  | 13.4 |  |  | (25 | ) |  | — |
Non-deductible expenses | 230 |  |  | 12.6 |  |  | 368 |  |  | 0.5 |
Valuation allowance due to foreign losses and impairments | 185 |  |  | 10.1 |  |  | 272 |  |  | 0.4 |
Stock-based compensation | 173 |  |  | 9.5 |  |  | 192 |  |  | 0.3 |
State taxes, net of federal income tax benefit | 87 |  |  | 4.8 |  |  | 866 |  |  | 1.3 |
Unremitted earnings from foreign operations | — |  |  | — |  |  | 117 |  |  | 0.2 |
Domestic production activities deduction | — |  |  | — |  |  | (610 | ) |  | (0.9 | )
Remitted earnings from foreign operations | — |  |  | — |  |  | (413 | ) |  | (0.6 | )
Increase in value of kaléo investment held abroad | — |  |  | — |  |  | (2,326 | ) |  | (3.5 | )
Settlement of Terphane acquisition escrow | — |  |  | — |  |  | (4,200 | ) |  | (6.4 | )
Worthless stock deduction | — |  |  | — |  |  | (8,057 | ) |  | (12.2 | )
Research and development tax credit | (318 | ) |  | (17.4 | ) |  | (458 | ) |  | (0.7 | )
Changes in estimates related to prior year tax provision | (414 | ) |  | (22.7 | ) |  | 156 |  |  | 0.2 |
Foreign Derived Intangible Income (FDII) | (472 | ) |  | (25.9 | ) |  | — |  |  | — |
Foreign tax incentives | (1,344 | ) |  | (73.8 | ) |  | — |  |  | — |
Effective income tax rate | $ | 3,135 |  |  | 172.1 |  |  | $ | 9,667 |  |  | 14.7 |
Tredegar accrues U.S. federal income taxes on unremitted earnings of all foreign subsidiaries where required. However, due to changes in the taxation of dividends under TCJA, Tredegar will only record U.S. federal income taxes on unremitted earnings of its foreign subsidiaries where Tredegar cannot take steps to eliminate any potential tax on future distributions from its foreign subsidiaries. The Brazilian federal statutory income tax rate is a composite of 34.0% (25.0% of income tax and 9.0% of social contribution on income). Terphane Ltda.’s manufacturing facility in Brazil is the beneficiary of certain income tax incentives that allow for a reduction in the statutory Brazilian federal income tax rate to 15.25% levied on the operating profit on certain of its products. The incentives have been granted for a 10-year period, which has a commencement date of January 1, 2015. The benefit from the tax incentives was $1.3 million in the first nine months of 2018 (none in 2017). Tredegar and its subsidiaries file income tax returns in the U.S., various states and jurisdictions outside the U.S. With exceptions for some U.S. states and non-U.S. jurisdictions, Tredegar and its subsidiaries are no longer subject to U.S. federal, state or non-U.S. income tax examinations by tax authorities for years before 2014. The Company includes tax-related interest and penalties in income tax expense. During the first nine months of 2018, $0.1 million of interest and penalties were accrued. As of September 30, 2018, $0.2 million of interest and penalties are accrued as a tax liability.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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