Income Taxes (Notes)

9 Months Ended

Sep. 30, 2016

Income Taxes [Abstract]

Income Tax Disclosure

Income Taxes

Income tax expense during interim periods is based on our estimated annual effective income tax rate plus any discrete items, which are recorded in the period in which they occur. Discrete items include, among others, such events as changes in estimates due to the finalization of tax returns, tax audit settlements, expiration of statutes of limitation, and increases or decreases in valuation allowances on deferred tax assets. Our effective tax rate was 36.6% and 35.3% for the three months ended September 30, 2016 and 2015, respectively. Our effective tax rate was 40.8% and 36.5% for the nine months ended September 30, 2016 and 2015, respectively. The effective tax rate for the three and nine months endedSeptember 30, 2016 is above the 35% federal statutory tax rate primarily due to state tax expense and impairment charges related to the planned divestiture of certain funeral homes in Los Angeles, California, as well as the change in uncertain tax liabilities, partially offset by lower rates on foreign earnings.

Unrecognized Tax Benefits

As of September 30, 2016, the total amount of our unrecognized tax benefits was $178.3 million and the total amount of our accrued interest was $55.8 million. Additional interest expense of $4.1 million was accrued during the nine months ended September 30, 2016.

A number of years may elapse before particular tax matters, for which we have unrecognized tax benefits, are settled. While we have effectively concluded our 2003 through 2005 tax years with respect to our affiliate, SCI Funeral & Cemetery Purchasing Cooperative, Inc., SCI and subsidiaries' tax years 1999 through 2005 remain under review at the IRS Appeals level. The completion of the audit for the amended returns for the tax years 2006 through 2007 is also pending the IRS Appeals finalization of the tax years 1999-2005. Furthermore, SCI and its affiliates are under audit by various state and foreign jurisdictions for years 2010 through 2014. The outcome of each of these audits cannot be predicted at this time. It is reasonably possible that the amount of our unrecognized tax benefits could significantly increase or decrease over the next twelve months either because we prevail on positions or because the tax authorities prevail. Due to the uncertainty regarding the timing of completion of audits and possible outcomes, a current estimate of the range of increases or decreases that may occur within the next twelve months cannot be made.