Note 13. Income Taxes

The Company’s effective tax rate was 14.2% and 22.5% for the three months ended September 30, 2015 and 2014, respectively. The decrease in the effective tax rate is predominately due to the recognition of a $2.2 million previously unrecognized tax benefit arising from statute of limitations expirations and a $1.3 million reversal of a valuation allowance on deferred tax assets where it is more likely than not the assets will be realized due to cumulative three year profitability. In addition, the change in tax rate was affected by shifts in earnings among the various jurisdictions in which the Company operates, as well as several factors that are not individually material. The difference between the Company’s effective tax rate of 14.2% as compared to the U.S. statutory federal income tax rate of 35.0% was primarily due to the aforementioned factors in conjunction with the recognition of tax benefits resulting from foreign tax rate differentials, income earned in certain tax holiday jurisdictions, changes in uncertain tax positions, adjustments of valuation allowances and tax credits, partially offset by the tax impact of permanent differences and foreign withholding taxes.

The Company’s effective tax rate was 22.1% and 23.4% for the nine months ended September 30, 2015 and 2014, respectively. The decrease in the effective tax rate is due to the $2.2 million recognition of a previously unrecognized tax benefit and a $1.3 million reversal of a valuation allowance on deferred tax assets, as explained above. Additionally, the change in tax rate was affected by several factors, including fluctuations in earnings among the various jurisdictions in which the Company operates, none of which are individually material. The difference between the Company’s effective tax rate of 22.1% as compared to the U.S. statutory federal income tax rate of 35.0% was primarily due to the aforementioned factors in conjunction with the recognition of tax benefits resulting from foreign tax rate differentials, income earned in certain tax holiday jurisdictions, changes in uncertain tax positions, adjustments of valuation allowances and tax credits, partially offset by the tax impact of permanent differences and foreign withholding taxes.

The Company has accrued $8.7 million and $13.3 million as of September 30, 2015 and December 31, 2014, respectively, excluding penalties and interest, for the liability for unrecognized tax benefits. The decrease is primarily due to the recognition of $2.2 million of tax benefits resulting from the expiration of the statute of limitations, as previously mentioned, and the effects of foreign exchange rate adjustments. As of December 31, 2014, $2.7 million of unrecognized tax benefits was recorded to “Deferred charges and other assets” in the accompanying Condensed Consolidated Balance Sheet in accordance with ASU 2013-11 “Income Taxes (Topic 740) – Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.” The $8.7 million and the remaining $10.6 million of the unrecognized tax benefits at September 30, 2015 and December 31, 2014, respectively, are recorded in “Long-term income tax liabilities” in the accompanying Condensed Consolidated Balance Sheets.

Earnings associated with the investments in the Company’s foreign subsidiaries are considered to be indefinitely reinvested outside of the U.S. Therefore, a U.S. provision for income taxes on those earnings or translation adjustments has not been recorded, as permitted by criterion outlined in ASC 740 “Income Taxes.” Determination of any unrecognized deferred tax liability for temporary differences related to investments in foreign subsidiaries that are essentially permanent in duration is not practicable due to the inherent complexity of the multi-national tax environment in which the Company operates.

The Company is currently under audit in several tax jurisdictions. The Company received assessments for the Canadian 2003-2009 audit. Requests for Competent Authority Assistance were filed with both the Canadian Revenue Agency and the U.S. Internal Revenue Service and the Company paid mandatory security deposits to Canada as part of this process. The total amount of deposits, net of the effects of foreign exchange rate adjustments, are $13.9 million and $15.9 million as of September 30, 2015 and December 31, 2014, respectively, and are included in “Deferred charges and other assets” in the accompanying Condensed Consolidated Balance Sheets. Although the outcome of examinations by taxing authorities is always uncertain, the Company believes it is adequately reserved for these audits and resolution is not expected to have a material impact on its financial condition and results of operations.

The significant tax jurisdictions currently under audit are as follows:


Tax Jurisdiction		Tax Year Ended

Canada		2003 to 2009