XML 26 R15.htm IDEA: XBRL DOCUMENT v3.7.0.1
Income Taxes and Uncertain Tax Positions
6 Months Ended
Jun. 30, 2017
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]

Note 9 – Income Taxes and Uncertain Income Tax Positions

The Company’s effective tax rate for the three months ended June 30, 2017 was 26.2% compared to 32.6% for the three months ended June 30, 2016. The Company’s effective tax rate for the six months ended June 30, 2017 was 37.4% compared to 32.5% for the six months ended June 30, 2016. The Company’s effective tax rates for the three and six months ended June 30, 2017, respectively, include the impact of certain non-deductible Houghton combination-related expenses, as well as tax benefits for deductions in excess of compensation cost associated with stock option exercises and restricted stock vesting. There were no comparable non-deductible combination-related expenses or stock compensation-related tax benefits recorded through tax expense during the three or six months ended June 30, 2016. The Company’s effective tax rates for the three and six months ended June 30, 2016, respectively, reflect earnings taxed at one of the Company’s subsidiaries at a statutory rate of 25% while awaiting recertification of a concessionary 15% tax rate, which the Company received and recorded the full year benefit of during the fourth quarter of 2016. This concessionary tax rate was available to the Company during the three and six months ended June 30, 2017.

As of June 30, 2017, the Company’s cumulative liability for gross unrecognized tax benefits was $6.9 million. As of December 31, 2016, the Company’s cumulative liability for gross unrecognized tax benefits was $6.2 million.

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 Statements of Income. The Company recognized an expense of $0.1 million and a credit of $0.1 million for interest, and an expense of $0.1 million and $0.1 million for penalties in its Condensed Consolidated Statement of Income for the three and six months ended June 30, 2017, respectively. The Company recognized expense of $0.1 million and $0.1 million for interest and expense of $0.2 million and $0.2 million for penalties in its Condensed Consolidated Statement of Income for the three and six months ended June 30, 2016, respectively. As of June 30, 2017, the Company had accrued $0.7 million for cumulative interest and $1.9 million for cumulative penalties in its Condensed Consolidated Balance Sheets, compared to $0.7 million for cumulative interest and $1.6 million for cumulative penalties accrued at December 31, 2016.

During the six months ended June 30, 2017 and 2016, the Company recognized a decrease of $0.4 million and $0.8 million, respectively, in its cumulative liability for gross unrecognized tax benefits due to the expiration of the applicable statutes of limitations for certain tax years.

The Company estimates that during the year ending December 31, 2017 it will reduce its cumulative liability for gross unrecognized tax benefits by approximately $1.2 to $1.3 million 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, 2017.

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, Italy from 2007, the Netherlands and the United Kingdom from 2011, Spain and China from 2012, the United States from 2013, and various domestic state tax jurisdictions from 2007.

As previously reported, the Italian tax authorities have assessed additional tax due from the Company’s subsidiary, Quaker Italia S.r.l., relating to the tax years 2007 through 2013. The Company has filed for competent authority relief from these assessments under the Mutual Agreement Procedures of the Organization for Economic Co-Operation and Development for all years except 2007. As of June 30, 2017, the Company believes it has adequate reserves, where merited, for uncertain tax positions with respect to all of these audits.