Note 13 - Income Taxes

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Income Tax Disclosure [Text Block]

13

. INCOME TAXES

The Company has 

not

 adjusted its provisional tax estimates related to the U.S. Tax Cuts and Jobs Act enacted in 

December 2017 (

the 

“2017

 Tax Act”) that were recorded in the 

fourth

 quarter of 

2017.

 These amounts remained as estimates as of 

June 30, 

2018

 and, as permitted by Staff Accounting Bulletin 

No.

 

118,

 they will be refined through

December 

2018

 based on the Company’s ongoing analysis of data and tax positions along with new guidance from regulators and interpretation of the law.

The income tax provision for the 

three

and

six

 months ended 

June 30, 2018 

was 

$2.9

 million, or 

10.7%

 of pre-tax income, and

$3.5

million, or

7.1%

of pre-tax income, respectively. The effective tax rate differed from the federal statutory rate primarily because foreign income generated by the Company’s subsidiaries in Bermuda and China was taxed at lower rates, and because of certain stock-based compensation deductions. In addition, the effective tax rate was impacted by the inclusion of the global intangible low-taxed income ("GILTI") under the

2017

Tax Act.

For the 

three

and

six

 months ended 

June 30, 2018, 

the Company’s effective tax rate included the estimated impact of 

$15.5

 million and

$27.9

million, respectively, related to the GILTI provisions that was included as additional subpart F income, which was accounted for as a period cost. In addition, during the

first

quarter of

2018,

 the Company paid the 

2018

 installment of 

$1.9

 million related to the deemed repatriation transition tax liability. As of 

June 30, 2018, 

$1.9

million of the remaining transition tax liability was recorded in current accrued liabilities and

$20.1

million was recorded in long-term income tax liabilities on the Condensed Consolidated Balance Sheet.

The income tax provision for the

three

 and

six

months ended

June 30, 2017

was

$1.2

million, or

7.4%

of pre-tax income, and

$1.7

million, or

5.4%

of pre-tax income, respectively. The effective tax rate differed from the federal statutory rate primarily because foreign income generated by the Company’s subsidiaries in Bermuda and China was taxed at lower rates. In addition, the effective tax rate was impacted by changes in the valuation allowance primarily related to stock-based compensation.

As of 

June 30, 2018, 

the Company had 

$17.2

 million of unrecognized tax benefits, 

$10.5

 million of which would affect its effective tax rate if recognized after considering the valuation allowance. At 

December 31, 2017, 

the Company had 

$16.3

 million of unrecognized tax benefits, 

$9.1

 million of which would affect its effective tax rate if recognized after considering the valuation allowance. 

Uncertain tax positions relate to the allocation of income and deductions among the Company’s global entities and to the determination of the research and development tax credit. It is reasonably possible that over the next 

twelve

-month period, the Company 

may 

experience increases or decreases in its unrecognized tax benefits. However, it is 

not

 possible to determine either the magnitude or the range of increases or decreases at this time.

The Company recognizes interest and penalties, if any, related to uncertain tax positions in its income tax provision. As of 

June 30, 2018 

and 

December 31, 

2017,

 the Company has 

$0.7

 million and 

$0.5

 million, respectively, of accrued interest related to uncertain tax positions, which were recorded in long-term income tax liabilities in the Consolidated Balance Sheets.