Note J – Income Taxes

The Company’s provision for income taxes for the three and nine months ended September 30, 2018 and 2017, respectively, is based on the estimated annual effective tax rate, plus discrete items. The following table presents the provision for income taxes and the effective tax rates for the three and nine months ended September 30, 2018 and 2017:



	Three months ended September 30,						Nine months ended September 30,
	2018			2017			2018			2017
Income before provision for income taxes	$	71,076		$	66,007		$	150,847		$	140,074
Provision for income taxes	$	14,757		$	21,181		$	32,885		$	45,703
Effective tax rate	20.8		%	32.1		%	21.8		%	32.6		%

The primary difference between the Company’s effective tax rates for the three and nine months ended September 30, 2018 and 2017 is due to the reduction of the US statutory tax rate from 35% to 21%, which was a result of the Tax Cuts and Jobs Act (the “Tax Cuts Act”). The effective tax rate may vary significantly due to fluctuations in the amount and source, including both foreign and domestic, of pretax income and changes in amounts of non-deductible expenses and other items that could impact the effective tax rate.

Note J – Income Taxes (continued)

Provisional amounts in effective rate

The Tax Cuts Act, which was enacted on December 22, 2017, reduces the U.S. federal corporate income tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, creates new taxes on certain foreign sourced earnings, and repeals certain performance based compensation exceptions. We are applying the guidance in Staff Accounting Bulletin 118 when accounting for the enactment-date effects of the Tax Cuts Act. At September 30, 2018, we have not completed our accounting for all of the tax effects of the Tax Cuts Act. The Company expects to complete its assessment of these items within the measurement period, and any adjustments to the provisional amounts initially recorded will be included as an adjustment to income tax expense or benefit in the period in which the amounts are determined.

Foreign tax effects

Transition Tax: The one-time transition tax is based on our total post-1986 earnings and profits ("E&P") which we had deferred from U.S. income taxes under previous U.S. law. We originally recorded a provisional amount for our one-time transition tax liability attributable to our foreign subsidiaries, resulting in a transition tax liability of $21,994 recorded in other liabilities at December 31, 2017. At this time, we are further analyzing the current estimate of our transition tax calculation to finalize it no later than the fourth quarter of 2018. As of September 30, 2018, the Company continues to have provisional amounts recorded for the one-time transition tax liability for which overpayments of 2017 tax payments have been offset against the one-time transition tax liability at September 30, 2018. As we continue to refine our E&P analysis, we will refine our calculations of the one-time transition tax, which could affect the measurement of this liability. No additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the transition tax, or any additional outside basis difference inherent in these entities, as these amounts continue to be indefinitely reinvested in foreign operations.