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INCOME TAXES | 9 Months Ended
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Sep. 30, 2017
INCOME TAXES [ABSTRACT] |
INCOME TAXES | (8)INCOME TAXES The Company accounts for income taxes in accordance with the accounting literature for income taxes, which requires recognition of deferred tax assets and liabilities for the expected future income tax consequences of transactions that have been included in the Consolidated Financial Statements. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using tax rates in effect for the year in which the differences are expected to reverse. Quarterly, the Company assesses the likelihood that its net deferred tax assets will be recovered. Based on the weight of all available evidence, both positive and negative, the Company records a valuation allowance against deferred tax assets when it is more-likely-than-not that a future tax benefit will not be realized. In accordance with ASC 740, the Company recorded a liability during the first quarter of 2016 of $1.1 million, inclusive of penalties and interest, for uncertain tax positions. See Note 1 for further information on this item. During the second quarter of 2016, $0.3 million of liability was released due to the closing of a statute of limitations. During the third quarter of 2016, $0.8 million of liability was released due to the favorable outcome of communications with a revenue authority related to site compliance for locations with tax advantaged status. During the third quarter of 2016, $0.5 million of liability was released due to the closing of a statute of limitations. As of September 30, 2017, the Company had $31.0 million of gross deferred tax assets (after a $10.5 million valuation allowance) and net deferred tax assets (after deferred tax liabilities) of $30.8 million related to the U.S. and international tax jurisdictions whose recoverability is dependent upon future profitability. The effective tax rate for the three and nine months ended September 30, 2017 was 11.7% and 15.0%, respectively. The effective tax rate for the three and nine months ended September 30, 2016 was (6.9)% and 15.2%, respectively. The Company’s U.S. income tax returns filed for the tax years ending December 31, 2014 to present remain open tax years. The Company has been notified of the intent to audit, or is currently under audit of, income taxes for Canada for tax years 2009 and 2010, the state of Michigan in the United States for tax years 2012 through 2015, for the Philippines branch for tax year 2015, for Belgium for tax years 2014 and 2015, and for eLoyalty in Ireland for tax year 2016. Although the outcome of examinations by taxing authorities are always uncertain, it is the opinion of management that the resolution of these audits will not have a material effect on the Company’s Consolidated Financial Statements. During the third quarter of 2017, the Company closed the audit in Hong Kong for 2014 with no changes. Additionally, during the second quarter of 2016, the Company successfully closed the audit in the U.S. for the acquired entity Technology Solutions Group for the tax year 2012 (prior to acquisition) with no changes. The Company also closed in the fourth quarter of 2016 the audit in New Zealand for tax years 2013 and 2014 with no changes. The Company has been granted “Tax Holidays” as an incentive to attract foreign investment by the government of the Philippines. Generally, a Tax Holiday is an agreement between the Company and a foreign government under which the Company receives certain tax benefits in that country, such as exemption from taxation on profits derived from export-related activities. In the Philippines, the Company has been granted multiple agreements with an initial period of four years and additional periods for varying years, expiring at various times between 2011 and 2020. The aggregate effect on income tax expense for the three months ended September 30, 2017 and 2016 was approximately $2.8 million and $2.0 million, respectively, which had a favorable impact on diluted net income per share of $0.06 and $0.04, respectively. The aggregate effect on income tax expense for the nine months ended September 30, 2017 and 2016 was approximately $8.9 million and $4.5 million, respectively, which had a favorable impact on diluted net income per share of $0.19 and $0.10, respectively.

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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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