INCOME TAXES

9 Months Ended

Sep. 30, 2019

The Company provides for income taxes at the end of each interim period based on the estimated effective tax rate (“ETR”) for the full fiscal year. Cumulative adjustments to the Company’s estimate are recorded in the interim period in which a change in the estimated annual ETR is determined. Under the provisions of the Internal Revenue Code of 1986, as amended, the Company may deduct amounts distributed to stockholders against the income generated by its real estate investment trust (“REIT”) operations. The Company continues to be subject to income taxes on the income of its domestic taxable REIT subsidiaries and income taxes in foreign jurisdictions where it conducts operations. In addition, the Company is able to offset certain income by utilizing its net operating losses, subject to specified limitations.

The Company provides valuation allowances if, based on the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Management assesses the available evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets.

The increase in the income tax provision during the three months ended September 30, 2019 was primarily attributable to an increase in foreign earnings subject to taxation in the current period. The change in the income tax provision (benefit) for the nine months ended September 30, 2019 was primarily attributable to an increase in foreign earnings subject to taxation in the current period, as well as the nonrecurrence of certain events during the nine months ended September 30, 2018, including a one-time benefit for merger-related activity in the Company’s Asia property segment and the tax effect of certain impairment charges.

As of September 30, 2019 and December 31, 2018, the total unrecognized tax benefits that would impact the ETR, if recognized, were approximately $93.3 million and $93.7 million, respectively. The amount of unrecognized tax benefits during the three and nine months ended September 30, 2019 includes additions to the Company’s existing tax positions of $1.4 million and $4.4 million, respectively, which were reduced by foreign currency exchange rate fluctuations of $3.7 million and $2.7 million, respectively. Unrecognized tax benefits are expected to change over the next 12 months if certain tax matters ultimately settle with the applicable taxing jurisdiction during this time frame, as described in note 12 to the Company’s consolidated financial statements included in the 2018 Form 10-K. The impact of the amount of these changes to previously recorded uncertain tax positions could range from zero to $27.5 million.

The Company recorded the following penalties and income tax-related interest expense during the three and nine months ended September 30, 2019 and 2018:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Penalties and income tax-related interest expense	$	2.1	$	1.0	$	4.3	$	2.7

As of September 30, 2019 and December 31, 2018, the total amount of accrued income tax related interest and penalties included in the consolidated balance sheets were $22.7 million and $19.1 million, respectively.