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Income Taxes
9 Months Ended
Sep. 30, 2018
Income Tax Disclosure [Abstract]  
Income Taxes

6. INCOME TAXES

The effective tax rate in the third quarter of 2018 was 31.1% compared to 29.5% in the same quarter of 2017. Discrete tax items, net in the third quarter of 2018 had a unfavorable impact of 0.2%. In the third quarter of 2017, discrete tax items, net had an unfavorable impact of 2.8%.

The effective tax rate in the first nine months of 2018 was 23.0% compared to 29.2% for the first nine months of 2017. The effective tax rate in the first nine months of 2018 was favorably impacted by 5.3%, due to discrete tax items, principally the reversal of valuation allowances against deferred tax assets recorded in the second quarter. In the first nine months of 2017, the net impact of discrete tax items caused a 3.4% increase to the effective tax rate.

In December 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017.

On December 22, 2017, Staff Accounting Bulletin No. 118 (“SAB 118”) was issued to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act. For the nine months ended September 30, 2018, the Company did not have the necessary information analyzed to revise the provisional amount initially recorded for the transition tax for the year ended December 31, 2017. As a result, the Company did not make any adjustment to the provisional transition tax recorded in December 2017. Additional work is still necessary for a more detailed analysis of the Company's deferred tax assets and liabilities and its historical foreign earnings as well as potential correlative adjustments. Any subsequent adjustment to these amounts will be recorded to current tax expense in the fourth quarter of 2018 when the analysis is complete.

The Company files income tax returns in the United States federal jurisdiction, and various states and non-U.S. jurisdictions. At any given time, the Company is undergoing tax audits in several tax jurisdictions covering multiple years. The Company is no longer subject to income tax examination by the U.S. federal income tax authorities for years prior to 2014. With few exceptions, the Company is no longer subject to income tax examination by U.S. state or local tax authorities or by non-U.S. tax authorities for years before 2009.

As of September 30, 2018, the Company is not aware of any proposed income tax adjustments resulting from tax examinations that would have a material impact on the Company’s condensed consolidated financial statements. The conclusion of such audits could result in additional increases or decreases to unrecognized tax benefits in some future period or periods.

During the third quarter of 2018, the Company recorded a net decrease of $0.2 million to income tax reserves for unrecognized tax benefits based on tax positions related to the current year, including accruing additional interest related to unrecognized tax benefits of prior years. In addition, during the third quarter of 2018, the Company recorded a decrease of $2.2 million to income tax reserves for unrecognized tax benefits of prior years due to settlements with tax authorities. Of the total unrecognized tax benefits of $29.8 million recorded at September 30, 2018, $4.1 million is classified as current tax payable and $25.7 million is classified as non-current tax payable on the Condensed Consolidated Balance Sheet.