Provision for Income Taxes

6 Months Ended

Jun. 30, 2015

Provision for Income Taxes

Provision for Income Taxes

9.Provision for Income Taxes

The Company accounts for income taxes using the asset and liability approach by recognizing deferred tax assets and liabilities for the expected future tax consequences of differences between the financial statement basis and the tax basis of assets and liabilities, calculated using enacted tax rates in effect for the year in which the differences are expected to be reflected in the tax return. The Company records a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized. In addition, the Company accounts for uncertain tax positions that have reached a minimum recognition threshold.

The income tax provision for the three months ended June 30, 2015 and 2014 was $2.3 million and $16.3 million, respectively, representing effective tax rates of 9.1% and 49.2%, respectively.  The income tax provision for the six months ended June 30, 2015 and 2014 was $7.1 million and $22.0 million, respectively, representing effective tax rates of 19.1% and 45.1%, respectively.  The Company’s effective tax rate may change over time as the amount or mix of income and taxes changes among the jurisdictions in which the Company is subject to tax. The decrease in our effective tax rate was caused primarily by the release of a valuation allowance on net operating loss carryforwards, offset by changes in the expected mix of earnings among tax jurisdictions. Utilization of the loss carryforwards resulted from the move of certain Bruker BioSpin production from the United States to Switzerland.

As of June 30, 2015 and December 31, 2014, the Company has unrecognized tax benefits, excluding penalties and interest, of approximately $30.3 million and $27.0 million, respectively, of which $16.3 million and $12.8 million, if recognized, would result in a reduction of the Company’s effective tax rate. The Company recognizes penalties and interest related to unrecognized tax benefits in the provision for income taxes. As of June 30, 2015 and December 31, 2014, approximately $4.7 million and $3.6 million, respectively, of accrued interest and penalties related to uncertain tax positions was included in other long-term liabilities on the unaudited condensed consolidated balance sheets. Penalties and interest related to unrecognized tax benefits of $0.3 million and $1.1 million were recorded in the provision for income taxes during the three and six months ended June 30, 2015, respectively. No penalties and interest related to unrecognized tax benefits were recorded in the provision for income taxes during the three and six months ended June 30, 2014.

The Company files tax returns in the United States, which include federal, state and local jurisdictions, and many foreign jurisdictions with varying statutes of limitations. The Company considers Germany, the United States and Switzerland to be its significant tax jurisdictions.  The tax years 2009 to 2014 are open tax years in Germany and Switzerland. During the six months ended June 30, 2014, the Company settled a tax audit in the United States for the tax year 2010.  The amount of the settlement was immaterial to the condensed consolidated financial statements.  Tax years 2011 to 2014 remain open for examination in the United States.