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INCOME TAXES | 9 Months Ended
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Sep. 30, 2018
INCOME TAXES [ABSTRACT] |
INCOME TAXES | (8)INCOME TAXES In December 2017, the United States enacted comprehensive tax reform legislation known as the Tax Cuts and Jobs Act (the "2017 Tax Act") that, among other things, reduces the U.S. federal corporate income tax rate from 35% to 21% and implements a territorial tax system, but imposes an alternative “base erosion and anti-abuse tax” (“BEAT”), and an incremental tax on global intangible low taxed foreign income (“GILTI”) effective January 1, 2018. The Company’s selection of an accounting policy with respect to both the new GILTI and BEAT rules is to compute the related taxes in the period the entity becomes subject to GILTI. A reasonable estimate of the effects of these provisions has been included in the first, second and third quarter financial statements. The ultimate impact of the 2017 Tax Act may materially differ from the provisional amounts recorded, due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions taken as a result of the Tax Act. In addition, foreign and state governments may enact tax laws in response to the Tax Act that could result in further changes to global taxation and materially affect the Company’s financial position and results of operations. The Company expects to complete our analysis of the impacts of the 2017 Tax Act within the measurement period in accordance with SAB 118. Under the principles of SAB 118, the Company has continued to reassess their liability under the 2017 Tax Act in relation to the one-time mandatory repatriation tax on accumulated foreign earnings on domestic corporations effective for the 2017 tax year. As a result of that reassessment, an amount of $0.9 million, previously reserved as a tax contingency, was reclassified to the long term income taxes payable as a result of the guidance provided under Notice 2018-26. 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. As of September 30, 2018, the Company had $22.3 million of gross deferred tax assets (after a $10.1 million valuation allowance) and net deferred tax assets (after deferred tax liabilities) of $11.6 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, 2018 was 21.9% and 19.7%, respectively. The effective tax rate for the three and nine months ended September 30, 2017 was 11.7% and 15.0%, respectively. The Company’s U.S. income tax returns filed for the tax years ending December 31, 2015 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 Philippines for tax year 2015, Canada GST for tax years 2014 through 2018, and the state of Minnesota in the United States for tax years 2014 through 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 2018, the Company closed an audit in Ireland for the year 2016 with no material changes. The Company successfully closed their audit in the second quarter of 2017 in Hong Kong for the tax year 2014 with no material changes. The Company recorded a benefit in the amount of $0.8 million in the financial statements during the fourth quarter of 2017 related to the favorable resolution of tax audits. Finally, during the second and third quarters of 2018, the Company recorded benefits of $1.0 million and $1.1 million, respectively, related to the release of uncertain tax positions due to the closing of statutes of limitations. 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, 2018 and 2017 was approximately $1.9 million and $2.8 million, respectively, which had a favorable impact on diluted net income per share of $0.04 and $0.06, respectively. The aggregate effect on income tax expense for the nine months ended September 30, 2018 and 2017 was approximately $5.7 million and $8.9 million, respectively, which had a favorable impact on diluted net income per share of $0.12 and $0.19, respectively. Subsequent to the financial reporting date, but prior to the date of the filing of the financial statements for the third quarter, the Company paid a dividend from its foreign operations to its U.S. parent in the amount of $280 million. The payment is consistent with the Company’s assertion regarding earnings permanently invested offshore and is expected to have a state tax expense impact in the range of $1 million to $3 million which will be recorded during the quarter ended December 31, 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://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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