Income Taxes

9 Months Ended

Sep. 30, 2018

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Our effective income tax rates were 6.9% and (10.8)% for the nine and three months ended September 30, 2018 and 28.5% and 29.9% for the same periods in the prior year. The 2018 tax rates reflect the enactment of the TCJA, which permanently reduced the U.S. corporate statutory rate from 35% to 21% effective January 1, 2018. The 2018 tax rates also reflect net favorable impacts of the TCJA provisions which effectively apply a lower U.S. tax rate to intangible income derived from serving non-U.S. markets and research and development credits. In the third quarter of 2018, $412 of additional tax benefits were recorded related to the settlement of the 2013-2014 federal tax audit. The 2017 tax rates reflect the 35% statutory tax rate reduced by tax benefits for research and development credits and U.S. manufacturing activity.

In 2017, in accordance with U.S. Securities and Exchange Commission Staff Accounting Bulletin No. 118, we recorded provisional amounts related to the TCJA, including the remeasurement of our U.S. net deferred tax liabilities and ancillary state tax effects, as well as the repatriation tax. We continue to refine our computation of the repatriation tax and evaluate regulatory guidance, which may result in changes to our tax estimates.

Federal income tax audits have been settled for all years prior to 2015. The Internal Revenue Service (IRS) is expected to begin the 2015-2017 federal tax audit in the first quarter of 2019. We are also subject to examination in major state and international jurisdictions for the 2001-2016 tax years. We believe appropriate provisions for all outstanding tax issues have been made for all jurisdictions and all open years.

Audit outcomes and the timing of audit settlements are subject to significant uncertainty. It is reasonably possible that within the next 12 months unrecognized tax benefits related to state matters under audit may decrease by up to $445 based on current estimates.