NOTE 10. INCOME TAX EXPENSE

On December 22, 2017, the U.S. federal government enacted the Tax Cuts and Jobs Act of 2017 (“2017 Tax Act”), resulting in significant changes from existing U.S. tax laws that impact us, including, but not limited to, reducing the U.S. federal corporate income tax rate from 35% to 21%, allowing immediate 100% deduction for the cost of qualified property, eliminating the domestic production activities deduction, and imposing a one-time transition tax on the cumulative earnings and profits of certain foreign subsidiaries that were previously not repatriated and therefore not taxed for U.S. income tax purposes. Our federal income tax expense for periods beginning in 2018 will be based on the new rate.

In December 2017, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 118 (“SAB 118”), which addresses situations where the accounting is incomplete for the income tax effects of the 2017 Tax Act. SAB 118 directs registrants to consider the impact of the 2017 Tax Act as “provisional” when they do not have the necessary information available, prepared or analyzed (including computations) to finalize the accounting for the change in tax law. Registrants are provided a measurement period of up to one year to obtain, prepare, and analyze information necessary to finalize the accounting for provisional amounts.

During the fourth quarter of 2017, we recorded provisional amounts as a result of the 2017 Tax Act. These amounts are subject to change as we obtain information necessary to complete the calculations. Adjustments were made to the provisional amounts recorded for the one-time transition tax based on the total post-1986 earnings and profits of our foreign subsidiaries (“Transition Tax”) and foreign tax credits (“FTCs”). For the three months and nine months ended September 30, 2018, additional tax expense of $4.2 million, net of available FTCs, was recorded for the Transition Tax, and a reduction to FTC deferred tax assets of $1.0 million was recorded to reflect the decreased future FTC usage resulting from the 2017 Tax Act. The provisional adjustments recorded for the periods ended September 2018 are primarily due to, among other things, changes in our interpretation of the 2017 Tax Act, legislative or administrative actions to clarify the intent of the statutory language provided that differ from our current interpretation, changes in accounting standards for income taxes or related interpretations in response to the 2017 Tax Act, and any updates or changes to estimates utilized to calculate the impacts. We will continue to analyze the effects of the enactment of the 2017 Tax Act and recognize any additional changes to the provisional amounts as they are identified during the measurement period as provided for in SAB 118. We expect to complete our analysis of the provisional items during the fourth quarter of 2018.

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2018			2017			2018			2017
Earnings from continuing operations before income taxes	$	80.6		$	52.8		$	195.3		$	178.7
Income tax expense		16.4			15.5			42.3			62.2
Effective tax rate		20.3	%		29.4	%		21.7	%		34.8	%

The effective tax rate for the third quarter was lower compared to the same period in 2017 due to the changes resulting from the 2017 Tax Act, primarily the reduction in the federal statutory tax rate from 35% to 21%, as well as excess tax benefits from the federal statute closure on the 2014 tax year. The effective tax rate for the first nine months of 2018 was lower compared to the same period in 2017 due to changes resulting from the 2017 Tax Act, primarily the reduction in the federal statutory tax rate from 35% to 21%, as well as excess tax benefits from stock-based compensation, and the excess tax benefits resulting from the federal statute closing on the 2014 tax year.

It is reasonably possible that the amount of unrecognized tax benefits could significantly increase or decrease within the next twelve months. However, an estimate of the range of reasonably possible outcomes cannot be made. Changes to unrecognized tax benefits could result from the completion of ongoing examinations, the expiration of the statute of limitations or other unforeseen circumstances.