Income Taxes

9 Months Ended

Sep. 30, 2018

We determine the interim tax benefit (provision) by applying an estimate of the annual effective tax rate to the year-to-date pretax book income (loss) and adjusting for discrete items during the reporting period, if any. Tax jurisdictions with losses for which tax benefits cannot be realized are excluded.

Our tax rate for the three and nine months ended September 30, 2018 of 22% and 1%, respectively, differed from the federal statutory rate of 21% due primarily to unbenefitted losses experienced in jurisdictions with valuation allowances on deferred tax assets as well as the forecasted mix of earnings in domestic and international jurisdictions, a benefit related to excess stock-based compensation, and uncertain tax positions.

Our tax rate for the three and nine months ended September 30, 2017 of 20% and 36% respectively, differed from the federal statutory rate of 35% due to the forecasted mix of earnings in domestic and international jurisdictions, a benefit related to excess stock-based compensation, and losses experienced in jurisdictions with valuation allowances on deferred tax assets.

The tax provision for December 31, 2017 included the provisional determination of the impact to our deferred tax positions of the Tax Cuts and Jobs Act. We will continue to review any additional guidance issued by the U.S. Department of the Treasury, Internal Revenue Service, Financial Accounting Standards Board, or other regulatory bodies and adjust our provisional amount during the measurement period, which should not extend beyond one year from the enactment date of December 22, 2017. For the three and nine months ended September 30, 2018, no changes to these provisional amounts have been recognized.

We classify interest expense and penalties related to unrecognized tax liabilities and interest income on tax overpayments as components of income tax expense. The net interest and penalties expense recognized were as follows:



	Three Months Ended September 30,					Nine Months Ended September 30,
	2018		2017			2018		2017
	(in thousands)
Net interest and penalties expense (benefit)	$	414	$	(746	)	$	1,152	$	(334	)

Accrued interest and penalties recognized were as follows:



	September 30, 2018		December 31, 2017
	(in thousands)
Accrued interest	$	3,707	$	2,706
Accrued penalties	2,396		2,426

Unrecognized tax benefits related to uncertain tax positions and the amount of unrecognized tax benefits that, if recognized, would affect our effective tax rate were as follows:



	September 30, 2018		December 31, 2017
	(in thousands)
Unrecognized tax benefits related to uncertain tax positions	$	78,332	$	56,702
The amount of unrecognized tax benefits that, if recognized, would affect our effective tax rate	76,958		55,312

The increase in unrecognized tax benefits at September 30, 2018 related primarily to $16.7 million of unrecognized tax benefits recognized through purchase accounting on January 5, 2018 as a result of the acquisition of SSNI.

At September 30, 2018, we are under examination by certain tax authorities for the 2010 to 2016 tax years. The material jurisdictions where we are subject to examination include, among others, the United States, France, Germany, Italy, Brazil and the United Kingdom. No material changes have occurred to previously disclosed assessments. We believe we have appropriately accrued for the expected outcome of all tax matters and do not currently anticipate that the ultimate resolution of these examinations will have a material adverse effect on our financial condition, future results of operations, or liquidity.

Based upon the timing and outcome of examinations, litigation, the impact of legislative, regulatory, and judicial developments, and the impact of these items on the statute of limitations, it is reasonably possible that the related unrecognized tax benefits could change from those recognized within the next twelve months. However, at this time, an estimate of the range of reasonably possible adjustments to the balance of unrecognized tax benefits cannot be made.