Income Taxes

3 Months Ended

Mar. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

For the three months ended March 31, 2020, we reported an effective tax rate of 23.1%, which was higher than the 21.0% U.S. federal statutory rate due primarily to $16.2 million of various foreign, federal and state tax impacts and $2.1 million valuation allowance for foreign tax credit reserves due to decreased foreign source income, partially offset by $16.2 million of excess tax benefits on stock-based compensation. We periodically assess the recoverability of our deferred tax assets, and a valuation allowance is recorded against deferred tax assets if it is more likely than not that some portion of the deferred tax assets will not be realized. COVID-19 had no material impact on our assessment of the recoverability of our deferred tax assets at March 31, 2020. As additional information becomes available to us, our future assessment of the recoverability of our deferred tax assets could materially and adversely impact our consolidated financial statements in future reporting periods.

For the three months ended March 31, 2019, we reported an effective tax rate of 0.8%, which was lower than the 21.0% U.S. federal statutory rate due primarily to $21.0 million of excess tax benefits on stock-based compensation and $7.9 million of valuation allowance releases on foreign tax credit carryforwards, partially offset by $13.7 million of various foreign, state and federal tax impacts.

The total amount of unrecognized tax benefits was $34.7 million as of March 31, 2020, and $32.8 million as of December 31, 2019. The amounts that would affect the effective tax rate if recognized are $14.1 million and $13.6 million, respectively. We classify interest and penalties, which are not significant, as income tax expense in the consolidated statements of income and their associated liabilities, which are also not significant, as other liabilities in the consolidated balance sheets. We are regularly audited by federal, state and foreign taxing authorities. Given the uncertainties inherent in the audit process, it is reasonably possible that certain audits could result in a significant increase or decrease in the total amounts of unrecognized tax benefits. An estimate of the range of the increase or decrease in unrecognized tax benefits due to audit results cannot be made at this time. Generally, tax years 2010 and forward remain open for examination in some foreign jurisdictions, 2011 and forward in some state jurisdictions, and tax years 2012 and forward remain open for examination for U.S. federal income tax purposes.