Income Taxes

6 Months Ended

Jun. 30, 2020

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

In first half 2020, based on the statutory federal tax rate net of discrete federal and state taxes, we had an effective tax rate of 26.9%. The effective tax rate for the first half 2020 was impacted by losses in certain jurisdictions where the Company presently has recorded a valuation allowance against the related tax benefit. Excluding this valuation allowance, the effective tax rate for first half 2020 would have been 12.5%. This is compared to an effective tax rate of 59.5% based on the statutory federal tax rate net of discrete federal and state taxes during first half 2019. During first half 2019, we recorded discrete net expense of $3.0 million primarily related to both the acquisition of the Research & Innovation unit of Technicolor SA and extinguishment of long-term debt. The Company believes that outcomes which are reasonably possible within the next 12 months may result in the reduction in the liability for unrecognized tax benefits of $1.8 million, excluding interest and penalties.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") was signed into law. We are currently evaluating its impact, if any, on us.

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the "Tax Reform Act") was signed into law. The Tax Reform Act imposes a 13.125% tax rate on income that qualifies as Foreign Derived Intangible Income ("FDII"). On July 9, 2020, the IRS issued final regulations for FDII. The Company is currently evaluating and will record the impact, if any, as applicable.

The effective tax rate reported in any given year will continue to be influenced by a variety of factors, including timing differences between the recognition of book and tax revenue, the level of pre-tax income or loss, the foreign vs. domestic classification of the Company’s customers, and any discrete items that may occur. With the FDII regulations being released as final on July 9, 2020, the Company does not believe any proposed or pending regulations will have a significant impact on its tax positions.

During first half 2020 and 2019, we paid approximately $13.4 million and $5.1 million, respectively, of foreign source withholding tax. Additionally, as of each June 30, 2020 and December 31, 2019, we included approximately $0.1 million of foreign source withholding tax within our taxes payable and deferred tax asset balances. These amounts are related to receivables from foreign licensees.