7. Income taxes

We recognized a tax benefit of $2.8 million and a tax provision of $0.1 million on pretax net income of $7.5 and $23.3 million during the three and nine months ended September 30, 2015, respectively, and tax provisions of $2.0 and $8.0 million on pretax net income of $6.9 and $29.8 million during the three and nine months ended September 30, 2014, respectively. The provisions for income taxes before discrete items reflected in the table below were $3.5 and $7.6 million during the three and nine months ended September 30, 2015, respectively, and $4.2 and $13.2 million during the three and nine months ended September 30, 2014, respectively. The decrease in the provision for income taxes before discrete items for the three and nine months ended September 30, 2015, compared with the same periods in the prior year, is primarily due to the decrease in profitability before income taxes and increased income earned in jurisdictions with tax rates lower than the statutory U.S. tax rate of 35%.

Primary differences between our recorded tax provision rate and the U.S. statutory rate of 35% include lower taxes on permanently reinvested foreign earnings and the tax effects of stock-based compensation expense pursuant to ASC 718-740, Stock Compensation – Income Taxes, which are non-deductible for tax purposes. During the three and nine months ended September 30, 2015, we recognized $4.4 and $4.9 million, respectively, of previously unrecognized tax benefits, primarily as a result of the expiration of the U.S. federal statute of limitations, as compared to the recognition of $2.3 and $2.4 million of previously unrecognized tax benefits during the three and nine months ended September 30, 2014, respectively. During the nine months ended September 30, 2014, we recognized a $3.1 million tax benefit related to the increased valuation of intangible assets for Brazilian tax reporting resulting from the merger of our Brazilian subsidiaries.

Our tax provision before discrete items is reconciled to our recorded provision for income taxes for the three and nine months ended September 30, 2015 and 2014 as follows (in millions):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Provision for income taxes before discrete items	$	3.5		$	4.2		$	7.6		$	13.2
Interest related to unrecognized tax benefits		0.1			—			0.3			0.2
Benefit related to merger of Brazilian entities		—			—			—			(3.1	)
Non-deductible stock compensation charge		—			—			—			0.3
Benefit related to U.S. transfer pricing adjustment		—			—			(0.4	)		—
Benefit related to Spanish statutory and tax intangibles write-off		—			—			(0.3	)		—
Deductions related to ESPP dispositions		(0.2	)		(0.3	)		(0.4	)		(0.6	)
Provision (benefit) for reassessment of taxes upon filing tax return		(1.8	)		0.4			(1.8	)		0.4
Benefit from reversals of uncertain tax positions due to statute of limitation expirations		(4.4	)		(2.3	)		(4.9	)		(2.4	)


Provision for (benefit from) income taxes	$	(2.8	)	$	2.0		$	0.1		$	8.0

As of September 30, 2015 and December 31, 2014, gross unrecognized benefits that would affect the effective tax rate if recognized were $31.3 and $32.1 million, respectively. Over the next twelve months, our existing tax positions will continue to generate increased liabilities for unrecognized tax benefits. It is reasonably possible that our gross unrecognized tax benefits will decrease up to $4.2 million in the next twelve months primarily due to the lapse of the statute of limitations for federal and state tax purposes. These adjustments, if recognized, would positively impact our effective tax rate, and would be recognized as additional tax benefits in our Condensed Consolidated Statements of Operations.

In accordance with ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, we recorded $20.5 million of gross unrecognized tax benefits as an offset to deferred tax assets as of September 30, 2015, and the remaining $10.8 million has been recorded as noncurrent income taxes payable.

We recognize potential accrued interest and penalties related to unrecognized tax benefits in income tax expense. As of September 30, 2015 and December 31, 2014, we have accrued $0.5 and $0.9 million, respectively, for potential payments of interest and penalties.

As of September 30, 2015, we were subject to examination by the Internal Revenue Service for the 2012-2014 tax years, state tax jurisdictions for the 2010-2014 tax years, the Netherlands tax authority for the 2013 tax year, the Spanish tax authority for the 2010-2014 tax years, and the Italian tax authority for the 2010-2014 tax years.