NOTE 7 – INCOME TAXES

A roll-forward of unrecognized tax benefits is as follows:


(in millions)	March 31, 2018		December 31, 2017
Opening balance at January 1	$	2.2	$	2.2
Additions for tax positions of prior periods		0.4		0.5
Reductions due to lapsed statute of limitations		0.0		(0.5	)

Closing balance	$	2.6	$	2.2

We recognize accrued interest and penalties associated with unrecognized tax benefits as part of income taxes in our condensed consolidated statements of income. Related to the unrecognized tax benefits noted above, we have accrued a net increase in interest and penalties of $0.2 million during 2018 and a net increase in interest and penalties of $0.2 million in 2017. Total accrued interest and penalties at March 31, 2018 on all remaining unrecognized tax benefits amounted to $0.5 million (December 31, 2017 - $0.3 million).

All of the $3.1 million of unrecognized tax benefits, interest and penalties, would impact our effective tax rate if recognized.

The Company or one of its subsidiaries files income tax returns with the U.S. federal government, and various state and foreign jurisdictions. As previously disclosed, the Company and its U.S. subsidiaries were subject to a federal income tax examination in respect of 2015. The examination was completed in the first quarter of 2018 at no additional cost to the Company.

As previously disclosed, tax audits have been opened by the Italian tax authorities in respect of Innospec Performance Chemicals Italia Srl, acquired as part of the Huntsman business in respect of the period 2011 to 2013 inclusive. In the fourth quarter of 2017, the Company recorded an unrecognized tax benefit of $0.5 million, together with associated interest of $0.2 million in relation to the 2011 tax audit. As a consequence of information received in the first quarter of 2018, the Company believes that additional tax of $0.4 million, together with associated interest of $0.1 million, may arise as a result of the 2012 audit. There is insufficient evidence to conclude on the position in relation to 2013 at the current time. As any additional tax arising as a consequence of the tax audit would be reimbursed by the previous owner under the terms of the sale and purchase agreement, the Company has recorded an unrecognized tax benefit inclusive of interest of $0.5 million in the quarter, together with an indemnification asset of the same amount to reflect the fact that the final liability would be reimbursed by the previous owner.

The Company and its U.S. subsidiaries remain open to examination by the IRS for years 2014 onwards under the statute of limitations. The Company’s subsidiaries in foreign tax jurisdictions are open to examination including France (2014 onwards), Germany (2015 onwards), Switzerland (2015 onwards) and the United Kingdom (2016 onwards).