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Income Taxes
9 Months Ended
Sep. 30, 2018
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
The income tax provision is calculated using an estimated annual effective tax rate, based upon expected annual income, permanent items, statutory rates and planned tax strategies in the various jurisdictions in which the Company operates. However, losses in certain jurisdictions and discrete items, such as the resolution of uncertain tax positions, are treated separately.
On December 22, 2017, the Tax Act was enacted. The Tax Act significantly revised the U.S. corporate income tax by, among other things, lowering corporate income tax rates, implementing the territorial tax system and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. As a result of the Tax Act, Teledyne incurred provisional charges of $4.7 million in the fourth quarter of 2017 primarily due to the repatriation tax and the remeasurement of U.S. deferred tax assets and liabilities. The impacts of the Tax Act may differ from this estimate, possibly materially (and the amount of the provisional charge may accordingly be adjusted over the course of 2018), due to changes in interpretations and assumptions Teledyne has made, guidance that may be issued, and actions Teledyne may take as a result of the Tax Act. In the first quarter of 2018, the provisional charge was adjusted by an additional $0.6 million. In the third quarter of 2018, this additional provisional charge was reversed, following guidance issued by the Internal Revenue Service in the third quarter of 2018. The Company will evaluate new guidance as it is issued and will finalize the computation of the charge in the fourth quarter of 2018.
The Company’s effective income tax rate for the third quarter and first nine months of 2018 was 9.9% and 15.4%, respectively. The Company’s effective income tax rate for the third quarter and first nine months of 2017 was 15.6% and 19.7%, respectively. The third quarter and first nine months of 2018 include net discrete income tax benefits of $11.4 million and $16.9 million, respectively. The 2018 third quarter and first nine months net discrete tax benefits includes $5.0 million and $12.7 million, respectively, related to share-based accounting. The third quarter and first nine months of 2017 included net discrete income tax benefits of $9.9 million and $15.9 million, respectively. The 2017 first nine months net discrete tax benefits includes a $7.7 million income tax benefit as a result of the remeasurement of uncertain tax positions due to expiration of statute of limitation, of which $7.4 million was recorded in the third quarter of 2017. The first nine months of 2017 also includes an $8.5 million income tax benefit related to the release of valuation allowance for which the deferred tax assets were determined more-likely-than-not to be realizable, of which $0.4 million was recorded in the third quarter. The first nine months of 2017 includes a $4.6 million income tax expense related to adjustments for uncertain tax positions. The 2017 third quarter and first nine months net discrete tax benefits includes $2.3 million and $5.1 million, respectively, related to share-based accounting. Excluding the net discrete income tax benefits in both 2018 periods, the effective tax rates would have been 21.3% for both the third quarter and first nine months of 2018. Excluding net discrete income tax benefits in both 2017 periods, the effective tax rates would have been 27.7% for both the third quarter and first nine months of 2017. The decrease in the effective tax rate in both 2018 periods, primarily reflects the lower corporate income tax rates as part of the Tax Act.