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Income Taxes
9 Months Ended
Sep. 30, 2014
Income Tax Disclosure [Abstract]  
INCOME TAXES
INCOME TAXES
The effective tax rate on income was 27.0 percent for the three months ended September 30, 2014 and the effective tax rate on the loss was 28.2 percent for the three months ended September 30, 2013. The third quarter 2014 rate was lower than the statutory rate because of earnings in lower-tax jurisdictions and tax benefits from discrete items recorded in the quarter. The reduced third quarter 2013 tax rate differed from the statutory rate mainly as a result of the non-deductible portion of the Company's Brazil goodwill impairment recorded during a quarter with overall losses.
The effective tax rate on income was 31.3 percent for the nine months ended September 30, 2014 and the effective tax rate on the loss was (95.3) percent for the nine months ended September 30, 2013. The tax rate for the nine months ended September 30, 2014 includes a benefit from the release of a valuation allowance against excess capital losses offset by the negative impact of tax on foreign entities not permanently reinvested and the December 31, 2013 expiration of the Federal Research and Development Tax Credit and the Look-Thru Rule for Related Controlled Foreign Corporations under Section 954(c)(6) of the Internal Revenue Code of 1986, as amended. The negative tax rate for 2013 resulted from tax expense related to the repatriation of previously undistributed earnings and the establishment of a valuation allowance on deferred tax assets in the Company’s Brazilian manufacturing facility.
During the second quarter of 2014, the Internal Revenue Service (IRS) completed its examination of the Company’s U.S. federal income tax returns for the years 2008-2010 and issued a Revenue Agent’s Report (RAR) that includes various proposed adjustments, including adjustments related to transfer pricing. The net tax deficiency, excluding interest, associated with the RAR is $6,300 after net operating loss utilization. In May 2014, the Company filed a protest challenging proposed adjustments contained in the RAR and will pursue resolution of these issues with the Appeals Division of the IRS. The Company believes it has adequately provided for any related uncertain tax positions.