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 March 31,
	2018		2017
Statutory rate	21.0	%	35.0	%
State taxes	1.8		1.4
Noncontrolling interest in partially-owned subsidiaries	—		(0.4	)
Changes in valuation allowance and reserves	3.2		0.2
Settlements with tax authorities	—		(8.0	)
Other, net	0.2		0.5
Effective rate	26.2	%	28.7	%

Our effective tax rate reflects the Company's estimate for its state income tax expense, income attributable to the noncontrolling interests in partially-owned leasing subsidiaries for which no income tax expense is provided, 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.

The Tax Cuts and Jobs Act (the "Act”) was enacted on December 22, 2017. The Act reduces the U.S. federal corporate income tax rate from 35.0% to 21.0%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign-sourced earnings. In December 2017, we recorded a tax benefit after the initial assessment of the tax effects of the Act, and we will continue refining this amount throughout 2018. During the quarter ended March 31, 2018, we adjusted our initial assessment of the tax effects of the Act to record an additional benefit related to the transition tax. We are still analyzing certain aspects of the Act and refining our calculations, which could potentially affect the measurement of our deferred tax balance or give rise to new deferred tax amounts in future periods of 2018.The impact of the Act may differ from our estimate due to changes in the regulations, rulings, guidance, and interpretations issued by the Internal Revenue Service ("IRS") and the FASB as well as interpretations and assumptions made by the Company. For the items for which we were able to determine a reasonable estimate, we recognized an additional provisional net benefit of $0.5 million for the three months ended March 31, 2018, which is included as a component of income tax expense. The calculation of our estimated annual effective tax rate includes the estimated impact of provisions of the Tax Act, such as interest limitations, and foreign limitations or inclusions. These estimates could change as additional information becomes available on these provisions of the Tax Act.

Taxing authority examinations

During the year ended December 31, 2017, the IRS formally closed its audit of the 2006-2009 tax years, and the 2013 tax year.The unrecognized tax benefits and deferred tax amounts related to these tax years were adjusted resulting in a $5.8 million tax benefit. The 2014-2016 tax years have been reviewed by the IRS with no significant adjustments. The 2014-2017 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 entities are generally open for their 2010 tax years and forward.

Unrecognized tax benefits

The change in unrecognized tax benefits for the three months ended March 31, 2018 and 2017 was as follows:



	Three Months Ended March 31,
	2018		2017
	(in millions)
Beginning balance	$	8.2	$	28.2
Additions for tax positions of prior years	1.6		0.1
Settlements	—		(23.3		)
Ending balance	$	9.8	$	5.0

Additions for tax positions related to prior years of $1.6 million and $0.1 million recorded in the three months ended March 31, 2018 and 2017, respectively, are due to a state filing position. Settlements during the three months ended March 31, 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 March 31, 2018 and 2017, that would affect the Company’s overall effective tax rate if recognized was $11.6 million and $5.4 million, respectively. There is a reasonable possibility that unrecognized federal and state tax benefits will decrease by $5.2 million by March 31, 2019, 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 March 31, 2018 and December 31, 2017 was $4.3 million and $4.1 million, respectively. Income tax expense included an increase of $0.2 million and a decrease of $5.4 million in interest expense and penalties related to uncertain tax positions for the three months ended March 31, 2018 and March 31, 2017, respectively.