Income Taxes

Income tax expense for income from continuing operations remained the same at $13.5 million during the three months ended June 30, 2017 and 2016. Income tax expense for income from continuing operations was $25.6 million and $23.6 million during the six months ended June 30, 2017 and 2016, respectively.

The effective tax rates for the respective periods are shown below:



	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Federal provision	35.0	%	35.0	%	35.0	%	35.0	%
State provision	3.2	%	4.0	%	3.2	%	4.0	%
International provision (benefit)⁽¹⁾	2.9	%	(9.1	)%	3.7	%	(10.1	)%
Permanent items	0.3	%	0.4	%	0.4	%	0.5	%
Other⁽²⁾	0.1	%	0.1	%	0.5	%	(1.4	)%
Effective rate	41.5	%	30.4	%	42.8	%	28.0	%

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(1)	Relates primarily to lower tax rates on income or loss attributable to international operations. Effective January 1, 2017, there was a change to U.K. tax law that resulted in an unfavorable deductibility on interest expenses as compared to the prior period.


(2)	Includes the effect of discrete items.

The effective tax rates fluctuated significantly during the periods presented due to the following factors.

In accordance with the authoritative guidance for income taxes, each interim period is considered an integral part of the annual period and tax expense or benefit is measured using an estimated annual effective income tax rate. The estimated annual effective income tax rate for the full year is applied to the respective interim period, taking into account year-to-date amounts and projected amounts for the year. Since the Company operates in foreign countries with varying tax rates that are much lower than the tax rate in the United States, the magnitude of the impact of the results from the international operations have on the Company’s quarterly effective tax rate is dependent on the level of income or loss from the international operations in the period.

The Company’s subsidiary in Costa Rica is operating under a 100% tax holiday through December 31, 2018 and a 50% tax holiday for the subsequent four years. The impact of the tax holiday in Costa Rica for the three and six months ended June 30, 2017 and 2016, was immaterial.

The Company had gross unrecognized tax benefits, inclusive of penalties and interest, of $21.2 million at June 30, 2017. These unrecognized tax benefits, if recognized, would result in a net tax benefit of $7.1 million as of June 30, 2017. The gross unrecognized tax benefits did not change from December 31, 2016.

During the three and six months ended June 30, 2017, the Company did not provide for U.S. income taxes or foreign withholding taxes on the quarterly undistributed earnings from operations of its subsidiaries operating outside of the United States. Undistributed pre-tax income of these subsidiaries was approximately zero and $11.5 million during the three and six months ended June 30, 2017, respectively.