10.	INCOME TAXES

The provision for income taxes is based on a current estimate of the annual effective tax rate adjusted to reflect the impact of discrete items. The Company’s effective tax rate may fluctuate from quarter to quarter as a result of a variety of factors, including changes in the Company’s assessment of certain tax contingencies, changes in tax law, outcomes of administrative audits, the impact of discrete items, and the mix of earnings.

Federal Income Tax Reform

The Tax Cuts and Jobs Act (the “Tax Act”) was enacted on December 22, 2017. The Tax Act significantly revises the future ongoing U.S. corporate income tax by, among other things, lowering the U. S. corporate income tax rate from 35% to 21%, full expensing on qualified property, eliminates the domestic manufacturing deduction and implements a territorial tax system. The 21% U.S. corporate income tax rate is effective January 1, 2018. Based on the Company’s fiscal year end of March 31, the U.S. statutory federal rate will be approximately 31.5% for our fiscal year ending March 31, 2018.

The Company’s effective tax rate varied significantly from the statutory Federal income tax rate as a result of the Tax Act and other discrete items during the three and nine months ended December 31, 2017. The following is a reconciliation of the Company’s effective tax rate to the statutory Federal income tax rate.

	Three Months Ended December 31,						Nine Months Ended December 31,
	2017			2016			2017			2016
Federal statutory rate		31.5	%		35.0	%		31.5	%		35.0	%
State and local taxes—net of federal income tax benefit		4.7			4.6			4.7			4.6
Effect of tax rate of foreign subsidiaries		0.1			(0.4	)		(0.1	)		(0.4	)
Uncertain tax position change		1.7			(6.5	)		(0.7	)		(1.3	)
Qualified production activity credit		(2.8	)		(2.9	)		(2.8	)		(2.9	)
Impact of tax reform		(58.2	)		—			(16.2	)		—
ESOP stock appreciation		5.0			3.5			5.0			3.5
Return to provision - federal and state		(12.0	)		—			(3.6	)		—
Other		0.6			0.5			0.8			0.2
Effective rate		(29.4	)%		33.8	%		18.6	%		38.7	%

The Company is currently in the process of evaluating the impacts of the Tax Act on the Company’s deferred income tax attributes and tax on undistributed foreign earnings. As such, the Company has recorded provisional amounts for the revaluing of deferred tax attributes resulting in a tax benefit of $14.7 million and an estimated tax obligation on the Company’s undistributed foreign earnings resulting in a tax expense of $0.9 million.

The Company needs full year activity to be able to appropriately revalue its deferred tax attributes. Also, additional time is needed to fully evaluate the earnings and profit and corresponding measurement periods for the Company’s tax on undistributed foreign earnings.

As of December 31, 2017, the Company had unrecognized tax benefits of $6.6 million, which if resolved favorably, would reduce income tax expense by $6.6 million. A reconciliation of the beginning and ending amounts of unrecognized tax benefits for the nine months ended December 31, 2017 is as follows:

(Amounts in thousands)
Balance as of March 31, 2017	$	6,196
Tax positions taken in the current year		—
Decreases in tax positions for prior years		—
Increases in tax positions for prior years		4,434
Settlements		—
Lapse of statute of limitations		(4,014	)
Balance as of December 31, 2017	$	6,616

The unrecognized tax benefits are primarily recorded in Other Liabilities on the Company’s Condensed Consolidated Balance Sheets. These amounts include potential accrued interest and penalties of $1.8 million at December 31, 2017.

It is reasonably possible that there could be a change in the amount of unrecognized tax benefits within the next twelve months due to activities of the IRS or other taxing authorities, including proposed assessments of additional tax, possible settlement of audit issues, or the expiration of applicable statutes of limitation.