XML 65 R14.htm IDEA: XBRL DOCUMENT v2.4.0.8
Income Taxes and Uncertain Tax Positions
9 Months Ended
Sep. 30, 2014
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]

Note 8 – Income Taxes and Uncertain Income Tax Positions

The Company's effective tax rate for the first nine months of 2014 of 30.5% was higher than the first nine months of 2013 effective tax rate of 30.0%. Both effective tax rates reflect decreases in reserves for uncertain tax positions due to the expiration of applicable statutes of limitations for certain tax years of approximately $0.06 and $0.13 per diluted share for the nine months ended September 30, 2014 and September 30, 2013, respectively. The earnings per diluted share impact related to changes in uncertain tax positions was lower in the current year. However, this impact was offset by recording tax expense at the statutory tax rate of one of the Company's entities in its Asia/Pacific region, where it was recording tax expense at its statutory tax rate of 25% while it awaited recertification of a concessionary tax rate.

As of September 30, 2014, the Company's cumulative liability for gross unrecognized tax benefits was $11,317. At December 31, 2013, the Company's cumulative liability for gross unrecognized tax benefits was $12,596.

The Company continues to recognize interest and penalties associated with uncertain tax positions as a component of taxes on income before equity in net income of associated companies in its Condensed Consolidated Statement of Income. The Company recognized $(6) and $(64) for interest and $(99) and $(1) for penalties on its Condensed Consolidated Statement of Income for the three and nine months ended September 30, 2014, respectively, and recognized $39 and $(294) for interest and $101 and $342 for penalties on its Condensed Consolidated Statement of Income for the three and nine months ended September 30, 2013, respectively. As of September 30, 2014, the Company had accrued $1,900 for cumulative interest and $1,939 for cumulative penalties, compared to $2,108 for cumulative interest and $2,100 for cumulative penalties at December 31, 2013.

During the three months ended September 30, 2014, the Company recognized a decrease in its cumulative liability for gross unrecognized tax benefits of $802 due to the expiration of the applicable statutes of limitations for certain tax years. During the three months ended September 30, 2013, the Company recognized a decrease in its cumulative liability for gross unrecognized tax benefits of $472 due to the expiration of the applicable statutes of limitations for certain tax years.

During the nine months ended September 30, 2014, the Company recognized a decrease in its cumulative liability for gross unrecognized tax benefits of $1,877 due to the expiration of the applicable statutes of limitations for certain tax years. During the nine months ended September 30, 2013, the Company recognized a decrease in its cumulative liability for gross unrecognized tax benefits of $2,167 due to the expiration of the applicable statutes of limitations for certain tax years.

The Company estimates that during the year ending December 31, 2014 it will reduce its cumulative liability for gross unrecognized tax benefits by approximately $1,900 to $2,000 due to the expiration of the statute of limitations with regard to certain tax positions. This estimated reduction in the cumulative liability for unrecognized tax benefits does not consider any increase in liability for unrecognized tax benefits with regard to existing tax positions or any increase in cumulative liability for unrecognized tax benefits with regard to new tax positions for the year ending December 31, 2014.

The Company and its subsidiaries are subject to U.S. Federal income tax, as well as the income tax of various state and foreign tax jurisdictions. Tax years that remain subject to examination by major tax jurisdictions include Brazil from 2000, the Netherlands from 2008, the United Kingdom from 2009, Spain, China and Italy from 2010, the United States from 2011, and various domestic state tax jurisdictions from 1993.

During the second quarter of 2012, the Italian tax authorities initiated a transfer pricing audit of the Company's Italian subsidiary. On July 7, 2012, the Company received a preliminary tax report related to this transfer pricing audit, which proposed several adjustments to the taxable income of the subsidiary. During the fourth quarter of 2012, the Company's Italian subsidiary received an assessment for the tax year 2007, which the Company appealed during the first quarter of 2013. On September 16, 2013, the Provincial Tax Court of Varese delivered a decision confirming the Italian tax authorities' proposed adjustment to the taxable income of the subsidiary, but denying the proposed assessment of penalties. On January 24, 2014, the Company's Italian subsidiary appealed the decision of the Provincial Tax Court of Varese. On March 7, 2014, the Italian tax authorities appealed the decision of the Provincial Tax Court denying the assessment of penalties.

On November 29, 2013, the Italian tax authorities issued a tax assessment for the tax year 2008, raising identical issues as the assessment for 2007, noted above. On March 28, 2014, the Company filed an appeal with the Provincial Tax Court of Varese. The Company filed a request for competent authority relief between the Italian and Dutch tax authorities, and between the Italian and Spanish tax authorities.

On August 4, 2014, the Italian tax authorities issued a tax assessment for the tax year 2009, raising identical issues as the assessments for 2007 and 2008, noted above.

Related to each of the above events, the Company and outside counsel believe we should prevail on the merits of each case.  Therefore, the Company does not believe it has any exposures warranting an uncertain tax position reserve as of September 30, 2014.