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Income Taxes
9 Months Ended
Sep. 30, 2020
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES
The Company’s effective income tax rates were 56.0% and 20.2% for the three months ended September 30, 2020 and 2019, respectively, and (44.2)% and 20.0% for the nine months ended September 30, 2020 and 2019, respectively. For the three and nine months ended September 30, 2020, the Company’s annual effective tax rate was highly sensitive to changes in estimates of total ordinary income (loss), and therefore a reliable estimate could not be made. Accordingly, the actual effective tax rate for the year-to-date period has been used. The effective income tax rate may fluctuate from quarter to quarter for various reasons, including changes to income (loss) before income tax, jurisdictional mix of income (loss) before income tax, valuation allowances, jurisdictional income tax rate changes, as well as discrete items such as the settlement of foreign, federal and state tax issues and the effects of excess tax benefits associated with the exercise of stock options and vesting of restricted stock, which is included as a reduction of tax expense. During the three and nine months ended September 30, 2020, the excess tax benefit from stock-based compensation expense decreased tax expense by $2.0 million and $10.6 million, respectively. During the three and nine months ended September 30, 2019, the excess tax benefit from stock-based compensation expense decreased tax expense by $2.8 million and $10.2 million, respectively. For the three and nine months ended September 30, 2020, prior to the inclusion of the excess tax benefit and other discrete items, the effective income tax rate approximated 38%. For the three and nine months ended September 30, 2019, prior to the inclusion of the excess tax benefit and other discrete items, the effective income tax rate approximated 26%.
The Company’s unrecognized tax benefits were $3.8 million at September 30, 2020 and $4.3 million at December 31, 2019, inclusive of interest. The Company expects the unrecognized tax benefits to change over the next twelve months if certain tax matters settle with the applicable taxing jurisdiction during this time frame, or, if the applicable statute of limitations lapses. The impact of the amount of such changes to previously recorded uncertain tax positions could range from zero to $0.3 million.
The Company and its domestic subsidiaries are subject to audit for U.S. federal income tax as well as multiple state jurisdictions. U.S. federal income tax returns are typically subject to examination by the Internal Revenue Service (“IRS”) and the statute of limitations for federal tax returns is three years. The Company’s filings for the tax years 2017 through 2019 are subject to audit based upon the federal statute of limitations.
State income tax returns are generally subject to examination for a period of three to four years after filing of the respective return. The state impact of any federal changes remains subject to examination by various states for a period of up to one year after formal notification to the states. The Company’s filings for the tax years from 2015 to 2019 are subject to audit and, as of September 30, 2020, there was one state audit in process.
The Company is also subject to corporate income tax at its subsidiaries located in the United Kingdom, the Netherlands, India, Ireland, and Puerto Rico. The tax returns for the Company’s subsidiaries located in foreign jurisdictions are subject to examination for periods ranging from one to five years.