INCOME TAXES

U.S. Federal Income Tax Reform

The Tax Act resulted in a number of significant changes to U.S. federal income tax law for U.S. corporations. Most notably, the statutory U.S. federal corporate income tax rate was changed from 35% to 21% for corporations. In addition to the change in the corporate income tax rate, the Tax Act further introduced a number of other changes including a one-time transition tax via a mandatory deemed repatriation of post-1986 undistributed foreign earnings and profits; the introduction of a tax on Global Intangible Low-Taxed Income (“GILTI”) for tax years beginning after December 31, 2017; the limitation of deductible net interest to 30% of adjustable taxable income; the further limitation of the deductibility of share-based compensation of certain highly-compensated employees; the ability to elect to accelerate bonus depreciation on certain qualified assets; and the Base Erosion and Anti-Abuse Tax (“BEAT”).

Income tax expense and effective tax rates were:



	Three Months Ended March 31,
	2018			2017
	(in thousands, except effective tax rate)
Income before income taxes	$	27,212		$	15,948
Income tax expense	10,758			4,938
Effective tax rate	39.5		%	31.0		%

The increase in the effective tax rate for the three months ended March 31, 2018, compared to the same period in 2017, is partially due to the impact of the GILTI provisions included in the Tax Act. The Company has elected to account for GILTI as a period cost, and therefore has included GILTI expense in the effective tax rate calculation. The GILTI provisions require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. The increase in the effective tax rate is also due to operating losses in certain jurisdictions where the Company is unable to record tax benefits because it has determined that it is not more likely than not that such tax benefits will be realized, as well as an increase in profitability in certain jurisdictions for which tax expense is recorded. The Company’s effective income tax rate, for each period presented, also differs from the federal U.S. statutory rate primarily due to differences in income tax rates between U.S. and foreign jurisdictions, the GILTI tax, as well as book losses in certain jurisdictions for which tax benefits cannot be recognized. There were no significant or unusual discrete tax items during the three months ended March 31, 2018. The Company had unrecognized tax benefits of $6.2 million at March 31, 2018 and December 31, 2017, and the Company does not expect any significant changes in tax benefits in the next twelve months.