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Income Taxes and Uncertain Tax Positions
3 Months Ended
Mar. 31, 2019
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]

Note 10 – Income Taxes and Uncertain Income Tax Positions

The Company’s effective tax rate for the three months ended March 31, 2019 was 26.8% compared to 29.8% for the three months ended March 31, 2018. These effective tax rates include the impacts of certain non-deductible costs related to the pending Combination. The Company’s lower effective tax rate for the three months ended March 31, 2019 was largely driven by a positive impact from changes in uncertain tax positions and a shift in earnings to entities with lower effective tax rates compared to the three months ended March 31, 2018, which more than offset higher tax expense during the three months ended March 31, 2019 related to the Company recording earnings in one of its subsidiaries at a statutory tax rate of 25% while it awaits recertification of a concessionary 15% tax rate, which was available to the Company during the first three months of 2018.

As previously disclosed in its Annual Report filed on Form 10-K for the year ended December 31, 2018, the Company recognized a deferred tax liability of $7.9 million in the fourth quarter of 2018 related to the Company’s estimate of non-U.S. taxes it will incur to repatriate certain foreign earnings. The Company incurred tax payments related to the repatriation of a portion of these foreign earnings during the first quarter of 2019 and reduced this deferred tax liability by approximately $3.2 million.

As of March 31, 2019, the Company’s cumulative liability for gross unrecognized tax benefits was $7.7 million. As of December 31, 2018, the Company’s cumulative liability for gross unrecognized tax benefits was $7.1 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 (loss) of associated companies in its Condensed Consolidated Statements of Income. The Company recognized an expense of $0.1 million for interest and an expense of less than $0.1 million for penalties in its Condensed Consolidated Statement of Income for the three months ended March 31, 2019, and recognized an expense of $0.1 million for interest and an expense of $0.1 million for penalties in its Condensed Consolidated Statement of Income for the three months ended March 31, 2018. As of March 31, 2019, the Company had accrued $0.7 million for cumulative interest and $0.8 million for cumulative penalties in its Condensed Consolidated Balance Sheets, compared to $0.6 million for cumulative interest and $0.8 million for cumulative penalties accrued at December 31, 2018.

During the three months ended March 31, 2019 and 2018, the Company recognized a decrease of less than $0.1 million and $0.1 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, 2019 it will reduce its cumulative liability for gross unrecognized tax benefits by approximately $1.0 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, 2019.

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 2013, Mexico, Spain and China from 2014, India from fiscal year beginning April 1, 2016 and ending March 31, 2017, the U.S. from 2015, and various U.S. state tax jurisdictions from 2009.

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 (“MAP”) of the Organization for Economic Co-Operation and Development for all years except 2007. During 2018, the Italian tax authorities assessed additional tax due from Quaker Italia, S.r.l., relating to the tax years 2014 and 2015. The Company met with the Italian tax authorities in the fourth quarter of 2018 to discuss these assessments and no resolution was agreed upon, so the Company filed an appeal with the first level of tax court in Italy. If the appeal is not successful in materially reducing the assessed tax, then the Company will further evaluate its options including potentially filing for competent authority relief from these assessments under MAP, consistent with the Company’s previous filings for 2008 through 2013. As of March 31, 2019, the Company believes it has adequate reserves for uncertain tax positions with respect to these and all other audits.