Income Taxes

The Company determines the tax provision for interim periods using an estimate of its annual effective tax rate adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, the Company updates its estimate of annual effective tax rate, and if its estimated tax rate changes, the Company makes a cumulative adjustment.

The Company recorded income tax expense of $823 and $7,008 for the three months ended June 30, 2017 and 2016, respectively. The effective tax rate decreased from 30.0% during the three months ended June 30, 2016 to 3.9% as a result of (i) excess tax benefit related to stock awards of $1,624 recognized on adoption of ASU No. 2016-09 during the three months ended June 30, 2017, (ii) conclusion of an uncertain tax position of $3,153 (including interest of $1,433), (iii) the impact of reversal of earn-out liability of $3,810 in other income during the three months ended June 30, 2016 related to the Company's acquisition of RPM Direct LLC and RPM Data Solutions LLC (collectively, "RPM") in 2015, and (iv) higher earnings from foreign subsidiaries and lower domestic profit in the U.S.

The Company recorded income tax expense of $4,383 and $12,903 for the six months ended June 30, 2017 and 2016, respectively. The effective tax rate decreased from 29.9% during the six months ended June 30, 2016 to 10.5% as a result of (i) excess tax benefit related to stock awards of $3,681 recognized on adoption of ASU No. 2016-09 during the six months ended June 30, 2017, (ii) conclusion of an uncertain tax position of $3,153 (including interest of $1,433), (iii) the impact of reversal of earn-out liability of $4,060 in other income during the six months ended June 30, 2016 related to the Company's RPM acquisition in 2015, and (iv) higher earnings from foreign subsidiaries and lower domestic profit in the U.S.

The following table summarizes the activity related to the gross unrecognized tax benefits from January 1, 2017 through June 30, 2017:



Balance as of January 1, 2017	$	3,087
Increases related to prior year tax positions	—
Decreases related to prior year tax positions	(1,720		)
Increases related to current year tax positions	—
Decreases related to current year tax positions	—
Effect of exchange rate changes	85
Balance as of June 30, 2017	$	1,452

The unrecognized tax benefits as of June 30, 2017 of $1,452, if recognized, would impact the effective tax rate.

During the three months ended June 30, 2017 and 2016, the Company has recognized interest of nil and $49, respectively, which are included in the income tax expense in the unaudited consolidated statements of income. As of June 30, 2017 and December 31, 2016, the Company has accrued interest and penalties of $240 and $1,553, relating to unrecognized tax benefits.