Income Taxes

9 Months Ended

Jul. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Recent Tax Legislation

Coronavirus Aid, Relief and Economic Security Act

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) was enacted and signed into law in response to the market volatility and instability resulting from the COVID-19 pandemic. It includes a significant number of tax provisions and lifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act of 2017. The changes are mainly related to: (1) the business interest expense disallowance rules for 2019 and 2020; (2) net operating loss rules; (3) charitable contribution limitations; (4) employee retention credit; and (5) the realization of corporate alternative minimum tax credits.

The Company continues to assess the impact and future implications of these provisions; however, it does not anticipate any amounts that could give rise to a material impact to the overall Consolidated Condensed Financial Statements.

Effective Tax Rate

The Company's income tax provision for the three and nine months ended July 31, 2020 and 2019, were as follows:

Periods Ended July 31,	Three Months				Nine Months
(In millions)	2020		2019		2020		2019
Income tax (benefit) provision	$	11.2	$	6.9	$	15.6	$	3.2

The Company's effective tax rates were 16.9% and 5.4% for the third quarter of fiscal 2020 and 2019, respectively, and 9.0% and 0.9% for the nine months ended July 31, 2020 and 2019, respectively. The increase in the effective tax rate for the third quarter of fiscal 2020 compared to fiscal 2019 was primarily due to the significant drop of profit before tax due to market volatility as a result of COVID-19 pandemic, tax expense from prior period tax return filings and a decrease of excess tax benefits from share-based compensation. The Company’s effective tax rate for the nine months ended July 31, 2020 was higher compared to the prior year period, primarily due to settlement of tax audits in fiscal 2019, revisions to the provisional tax charges relating to the 2017 Act in fiscal 2019, a decrease of excess tax benefits from share-based compensation, the significant drop of profit before tax due to market volatility as a result of COVID-19 pandemic and tax expense from prior period tax return filings. The Company’s effective tax rate for the third quarter of fiscal 2020 was lower than the U.S. statutory tax rate primarily due to excess tax benefits from share-based compensation and a favorable mix of income from foreign jurisdictions with preferential tax rates.

We recognize the benefit from a tax position only if it is more likely than not that the position would be sustained upon audit based solely on the technical merits of the tax position. As of July 31, 2020, and October 31, 2019, Cooper had unrecognized tax benefits of $56.8 million and $49.7 million, respectively. The increase is primarily related to additions to current and prior period tax positions, partially offset by lapses of statute of limitations. It is our policy to recognize interest and penalties directly related to income taxes as additional income tax expense. It is reasonably possible that $19.5 million of unrecognized tax benefits could be settled during the next twelve months.

The Company is subject to U.S. Federal income tax examinations for fiscal 2015 through 2019 and the Internal Revenue Service is currently auditing our U.S. Consolidated Corporation Income Tax Returns for fiscal 2015 and 2016. The Company remains subject to income tax examinations in other significant tax jurisdictions including United Kingdom, Japan, France and Australia for the tax years 2014 through 2019. The Company is currently under audit in the United Kingdom for 2015 through 2018.