Income Taxes

3 Months Ended

Mar. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

For interim financial reporting, the Company estimates the annual tax rate based on projected taxable income for the full year and records a quarterly income tax provision in accordance with ASC No. 740-270 "Accounting for Income Taxes in Interim Periods." These interim estimates are subject to variation due to several factors, including the ability of the Company to accurately forecast pre-tax and taxable income and loss by jurisdiction, changes in laws or regulations, and expenses or losses for which tax benefits are not recognized. Jurisdictions with a projected loss for the year or an actual year-to-date loss where no tax benefit can be recognized are excluded from the estimated annual effective tax rate. The impact of including these jurisdictions on the quarterly effective tax rate calculations could result in a higher or lower effective tax rate during a quarter, based upon the mix and timing of actual earnings versus annual projections.

As a result of the Tax Cuts and Jobs Act of 2017, the Company has significant previously taxed earnings and profits (“PTEP”) from its foreign subsidiaries, as a result of transition tax and global intangible low taxed income (“GILTI”), that is generally able to be repatriated free of U. S. federal tax. Further, to the extent that any untaxed earnings and profits are distributed from foreign subsidiaries, such dividends should be eligible for a 100% dividends received deduction. Therefore, the Company does not intend to assert indefinite reinvestment on earnings generated after December 31, 2017. Note, the Company does provide for deferred non-U.S. withholding taxes and U.S. state taxes on hypothetical repatriation of earnings generated after December 31, 2017.

All unrecognized tax positions could impact the Company's effective tax rate if recognized. With respect to penalties and interest incurred from income tax assessments or related to unrecognized tax benefits, the Company’s policy is to classify penalties as provision for income taxes and interest as interest expense in its condensed consolidated statement of income. There were no material income tax penalties or interest accrued during the three months ended March 31, 2020 or 2019.

The Company's effective tax rate from continuing operations was 19.1% and 20.0% for the three months ended March 31, 2020 and 2019, respectively. The decrease was materially due to favorable mix of earnings by jurisdiction, non-US legislative tax rate reductions and discrete items in the current year.