INCOME TAXES

The following table accounts for the difference between the actual tax provision and the amounts obtained by applying the statutory U.S. federal income tax rate of 35.0% to income before taxes.



	Three Months Ended June 30,				Six Months Ended June 30,
Effective Tax Rate Reconciliation (Percent)	2017		2016		2017		2016
Statutory federal tax rate	35.0	%	35.0	%	35.0	%	35.0	%
Salt depletion	(9.6	)	40.1		(10.2	)	9.6
Stock-based compensation	3.9		—		61.0		—
Foreign rate differential	(3.2	)	14.0		(3.7	)	1.5
U.S. tax on foreign earnings	3.2		(13.7	)	3.7		(1.4	)
Dividends paid to CEOP	(0.4	)	3.4		(0.4	)	0.6
State income taxes, net	0.4		21.8		(0.3	)	5.6
Change in valuation allowance	—		(1.0	)	—		(0.3	)
Change in tax contingencies	45.7		(20.6	)	251.3		(5.1	)
Return to provision	(2.3	)	18.9		(42.6	)	5.7
Other, net	0.2		(2.1	)	(1.5	)	(0.4	)
Effective tax rate	72.9	%	95.8	%	292.3	%	50.8	%

Under ASC 740 “Income Taxes” (ASC 740), companies are required to apply their estimated annual tax rate on a year-to-date basis in each interim period. Under ASC 740, companies should not apply the estimated annual tax rate to interim financial results if the estimated annual tax rate is not reliably predictable. In this situation, the interim tax rate should be based on the actual year-to-date results. Based on the losses for the six months ended June 30, 2016 and the full year pretax projections as of June 30, 2016, as well as the existence of large favorable permanent book-tax differences for 2016, a reliable projection of our annual effective tax rate as of June 30, 2016 was difficult to determine, producing significant variations in the customary relationship between income tax expense and pretax book income in interim periods, as a small change in forecasted pretax income could cause a significant change in the estimated annual effective tax rate. Consequently, the effective tax rates for the three and six months ended June 30, 2016 were determined based on year-to-date results rather than utilizing the method of calculating an estimated annual effective tax rate which was used up until the period ended March 31, 2016 and for the three and six months ended June 30, 2017. The year-to-date actual discrete method was applied for the remainder of 2016.

The effective tax rates for both the three and six months ended June 30, 2017 included a benefit of $9.5 million related to an agreement reached with the Internal Revenue Service (IRS) for the years 2008, 2010 to 2012 tax examinations and a benefit of $0.9 million and $2.4 million, respectively, associated with stock-based compensation. The effective tax rate for the six months ended June 30, 2017 also included $1.0 million of tax expense associated with prior year tax positions.

The effective tax rates for both the the three and six months ended June 30, 2016 included a benefit of $4.5 million associated with a return to provision adjustment for the finalization of our prior years’ U.S. federal and state income tax returns. The June 30, 2016 return to provision adjustment included $14.2 million of benefit primarily associated with a change in estimate related to the calculation of salt depletion and $9.7 million of expense associated with the correction of an immaterial error related to non-deductible acquisition costs. The effective tax rates for the three and six months ended June 30, 2016 also included an expense of $4.9 million and $4.0 million, respectively, related to changes in uncertain tax positions for prior tax years.

As of June 30, 2017, we had $34.3 million of gross unrecognized tax benefits, which would have a net $32.8 million impact on the effective tax rate, if recognized. As of June 30, 2016, we had $37.5 million of gross unrecognized tax benefits, of which $35.8 million would have impacted the effective tax rate, if recognized. The amount of unrecognized tax benefits was as follows:



	June 30,
	2017			2016
	($ in millions)
Balance at beginning of year	$	38.4		$	35.1
Increases for prior year tax positions	4.9			5.7
Decreases for prior year tax positions	(9.2		)	(1.8		)
Increases for current year tax positions	1.4			0.9
Settlement with taxing authorities	(1.0		)	(2.1		)
Reductions due to statute of limitations	(0.2		)	(0.3		)
Balance at end of period	$	34.3		$	37.5

In May 2017, we reached an agreement in principle with the IRS regarding their examination of our U.S. income tax returns for 2008, 2010 to 2012. The settlement resulted in a reduction of income tax expense of $9.5 million related primarily to favorable adjustments in uncertain tax positions for prior tax years.

As of June 30, 2017, we believe it is reasonably possible that our total amount of unrecognized tax benefits will decrease by approximately $1.4 million over the next twelve months. The anticipated reduction primarily relates to settlements with taxing authorities and the expiration of federal, state and foreign statutes of limitation.

We operate globally and file income tax returns in numerous jurisdictions. Our tax returns are subject to examination by various federal, state and local tax authorities. None of our U.S. federal income tax returns are currently under examination by the IRS. In connection with the Acquisition, TDCC retained liabilities relating to taxes to the extent arising prior to the Closing Date. We believe we have adequately provided for all tax positions; however, amounts asserted by taxing authorities could be greater than our accrued position. For our primary tax jurisdictions, the tax years that remain subject to examination are as follows:



	Tax Years
U.S. federal income tax	2013 - 2016
U.S. state income tax	2006 - 2016
Canadian federal income tax	2012 - 2016
Brazil	2014 - 2016
Germany	2015 - 2016
China	2014 - 2016
The Netherlands	2014 - 2016
South Korea	2014 - 2016