Income Taxes (Tables)

12 Months Ended

Dec. 31, 2017

Income Tax Disclosure [Abstract]

Income Before Income Taxes

Polaris’ income from continuing operations before income taxes was generated from its United States and foreign operations as follows (in thousands):

	For the Years Ended December 31,
	2017		2016		2015
United States	$	264,207	$	262,403	$	640,604
Foreign	54,584		50,848		45,133
Income from continuing operations before income taxes	$	318,791	$	313,251	$	685,737

Components of Provision for Income Taxes

Components of Polaris’ provision for income taxes for continuing operations are as follows (in thousands):

	For the Years Ended December 31,
	2017		2016			2015
Current:
Federal	$	41,134	$	103,717		$	211,017
State	7,264		4,780			16,609
Foreign	22,267		17,367			20,733
Deferred	75,634		(25,561		)	(17,983		)
Total provision for income taxes for continuing operations	$	146,299	$	100,303		$	230,376

Reconciliation of Federal Statutory Income Tax Rate to Effective Tax Rate

Reconciliation of the Federal statutory income tax rate to the effective tax rate is as follows:

	For the Years Ended December 31,
	2017		2016		2015
Federal statutory rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal benefit	1.4		1.4		1.5
Domestic manufacturing deduction	(0.5	)	(2.1	)	(0.8	)
Research and development tax credit	(5.6	)	(4.3	)	(3.1	)
Stock based compensation	(4.4	)	—		—
Valuation allowance for foreign subsidiaries net operating losses	1.2		—		0.2
Tax rate changes	17.4		—		—
Non-deductible expenses	2.0		2.4		0.4
Other permanent differences	(0.6	)	(0.4	)	0.4
Effective income tax rate for continuing operations	45.9	%	32.0	%	33.6	%

Net Deferred Income Taxes

The net deferred income taxes consist of the following (in thousands):

	December 31,
	2017			2016
Deferred income taxes:
Inventories	$	11,072		$	13,252
Accrued expenses	102,308			152,798
Derivative instruments	10			(175		)
Cost in excess of net assets of business acquired	(15,171		)	(10,257		)
Property and equipment	(52,757		)	(56,240		)
Compensation payable in common stock	55,350			73,297
Net operating loss carryforwards and impairments	13,628			13,650
Valuation allowance	(9,057		)	(6,981		)
Total net deferred income tax asset	$	105,383		$	179,344

Reconciliation of Beginning and Ending Amount of Unrecognized Tax Benefits

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows (in thousands):

	For the Years Ended December 31,
	2017			2016
Balance at January 1,	$	25,001		$	22,509
Gross increases for tax positions of prior years	1,935			3,065
Gross increases for tax positions of current year	2,397			4,672
Decreases due to settlements and other prior year tax positions	(10,338		)	(3,424		)
Decreases for lapse of statute of limitations	—			(1,782		)
Currency translation effect on foreign balances	101			(39		)
Balance at December 31,	19,096			25,001
Reserves related to potential interest at December 31,	1,018			1,389
Unrecognized tax benefits at December 31,	$	20,114		$	26,390