INCOME TAXES

9 Months Ended

Sep. 30, 2018

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The Company’s effective tax rate from continuing operations for the nine months ended September 30, 2018 was 11.9 percent as compared to 15.4 percent for the nine months ended September 30, 2017. The effective tax rate is lower than the U.S. statutory rate of 21 percent primarily due to the recognition of the foreign-derived intangible income (FDII) provisions in the U.S. Tax Cuts and Jobs Act (Tax Act) and certain discrete events. For the third quarter of 2018 the effective tax rate was 16.1 percent as compared to 19.0 percent for the third quarter of 2017.

The decrease in the effective tax rate for the nine months ended September 30, 2018, compared with the same period in 2017, was primarily affected by the Tax Act, which reduced the U.S. federal corporate income tax rate from 35 percent to 21 percent effective January 1, 2018. The Company also reflected an estimated tax benefit of $3 million associated with the FDII provisions of the Tax Act that were effective for the first time during 2018. In addition, during the three months ended March 31, 2018, the Company released a valuation allowance of $5.4 million related to state NOLs and incentives as it is no longer in a three-year cumulative loss position for certain state income tax purposes.

During the nine months ended September 30, 2018, the Company paid $1.6 million related to the one time transition tax liability imposed by the Tax Act, and in accordance with the IRS regulations has applied an estimated $5.8 million of 2017 overpayments against this tax.

The Company’s accounting for certain aspects of the Tax Act remains provisional. As noted at year-end 2017, the Company was able to reasonably estimate certain effects and, therefore, recorded provisional adjustments associated with the deemed repatriation transition tax and the remeasurement of deferred taxes. The Company made additional measurement period adjustments related to these items during the third quarter. The Company recorded additional expense of $0.4 million related to the deemed repatriation transition tax on the domestic federal return as a result of revised earnings and profits and aggregate cash computations that were calculated during the reporting period, additional expense of $0.2 million for the deemed repatriation transition tax on domestic state tax returns as a result of recent state tax legislation passed during the reporting period, and a benefit of $0.4 million related to the remeasurement of deferred taxes resulting from domestic federal return to provision true ups that were calculated during the reporting period. However, the Company is continuing to gather additional information from foreign subsidiaries and tax authorities to complete our accounting for the tax effects of the Tax Act. The accounting will be completed in 2018.