Income Taxes

The provision for income taxes results in effective tax rates that differ from the statutory rates. The following is a reconciliation between the statutory U.S. federal income tax rate and the Company’s effective income tax rate on income before income taxes:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Statutory rate	35.0	%	35.0	%	35.0	%	35.0	%
State taxes	1.4		1.3		1.4		1.2
Noncontrolling interest in partially-owned subsidiaries	(1.4	)	(0.8	)	(0.9	)	(1.0	)
Settlements with tax authorities	—		—		(2.1	)	—
Equity compensation	(0.2	)	—		0.8		—
Other, net	2.1		0.3		1.8		0.4
Effective rate	36.9	%	35.8	%	36.0	%	35.6	%

Our effective tax rate reflects the Company's estimate for 2017 of its state income tax expense, income attributable to the noncontrolling interests in partially-owned leasing subsidiaries for which no income tax expense is provided, excess tax deficiencies related to equity compensation in accordance with ASU 2016-09, and the impact of the completion of income tax audits that resulted in a net tax benefit. See Note 5 Partially-Owned Leasing Subsidiaries for a further explanation of activities with respect to our partially-owned leasing subsidiaries.

Taxing authority examinations

During the nine months ended September 30, 2017, the Internal Revenue Service ("IRS") formally closed its audit of the 2006-2009 tax years and accordingly, we have adjusted unrecognized tax benefits and deferred tax amounts related to these tax years resulting in a $5.8 million tax benefit. The 2013 audit has concluded and all issues have been agreed upon by us and the IRS and the revenue agent report has been sent to The Joint Committee of Taxation for final review. The statute of limitations for this tax year has been extended to June 30, 2018. The 2014 and 2015 tax years have been reviewed by the IRS with no significant adjustments. The 2014-2016 tax years remain open.

We have various subsidiaries in Mexico that file separate tax returns and are subject to examination by taxing authorities at different times. The 2007 tax year of one of our Mexican subsidiaries is still under review for transfer pricing purposes only, and its statute of limitations remains open through the end of October 2017. The remaining entities are generally open for their 2010 tax years and forward.

Unrecognized tax benefits

The change in unrecognized tax benefits for the nine months ended September 30, 2017 and 2016 was as follows:



	Nine Months Ended September 30,
	2017			2016
	(in millions)
Beginning balance	$	28.2		$	65.2
Additions for tax positions related to the current year	—			4.6
Additions for tax positions of prior years	0.2			1.0
Settlements	(23.3		)	—
Expiration of statute of limitations	—			(0.1		)
Ending balance	$	5.1		$	70.7

Additions for tax positions related to the current year in the amount of $4.6 million recorded in the nine months ended September 30, 2016 were amounts provided for tax positions taken for federal and state income tax purposes. Additions for tax positions related to prior years of $0.2 million and $1.0 million recorded in the nine months ended September 30, 2017 and 2016, respectively, are due to foreign and state tax positions. Settlements during the nine months ended September 30, 2017 were due to the resolution of our 2006-2009 income tax years.

The total amount of unrecognized tax benefits including interest and penalties at September 30, 2017 and 2016, that would affect the Company’s overall effective tax rate if recognized was $5.7 million and $15.6 million, respectively. There is a reasonable possibility that unrecognized federal and state tax benefits will decrease by $1.8 million by September 30, 2018, due to settlements and lapses in statutes of limitations for assessing tax for tax years in which an extension was not requested by the taxing authority.

Trinity accounts for interest expense and penalties related to income tax issues as income tax expense. Accordingly, interest expense and penalties associated with an uncertain tax position are included in the income tax provision. The total amount of accrued interest and penalties as of September 30, 2017 and December 31, 2016 was $3.7 million and $8.9 million, respectively. Income tax expense included an increase of $0.1 million and a decrease of $5.2 million in interest expense and penalties related to uncertain tax positions for the three and nine months ended September 30, 2017, respectively. Income tax expense included an increase of $0.6 million and $1.5 million in interest expense and penalties related to uncertain tax positions for the three and nine months ended September 30, 2016, respectively.