Income Taxes - Level 1 Tag

6 Months Ended

Jun. 30, 2020

Income Tax Disclosure [Abstract]

Income Tax Disclosure

Income Taxes

For the three months ended June 30, 2020, we reported an effective tax rate of 24.7%, which was higher than the 21.0% U.S. federal statutory rate due primarily to state taxes, foreign tax rate differences and accrued withholding taxes on unrepatriated foreign earnings, partially offset by $4.7 million of excess tax benefits on stock-based compensation.

For the six months ended June 30, 2020, we reported an effective tax rate of 23.9%, which was higher than the 21.0% U.S. federal statutory rate due primarily to state taxes, foreign tax rate differences, accrued withholding taxes on unrepatriated foreign earnings and changes in valuation allowances for foreign tax credits, partially offset by $21.0 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 June 30, 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 June 30, 2019, we reported an effective tax rate of 26.9%, which was higher than the 21.0% U.S. federal statutory rate due primarily to $4.9 million in state taxes, $7.8 million in foreign taxes resulting from jurisdictions which have effective tax rates higher than the U.S. federal statutory rate, and $2.2 million in other discrete tax items, partially offset by $6.3 million of excess tax benefits on stock-based compensation.

For the six months ended June 30, 2019, we reported an effective tax rate of 18.0%, which was lower than the 21.0% U.S. federal statutory rate due primarily to $27.3 million of excess tax benefits on stock-based compensation, partially offset by $12.1 million in foreign taxes for the same reasons as stated above, $7.0 million in state taxes and $1.5 million in other discrete items.

The gross amount of unrecognized tax benefits which excludes indirect tax effects was $38.8 million as of June 30, 2020, and $32.8 million as of December 31, 2019. The amounts that would affect the effective tax rate if recognized are $17.9 million and $13.6 million, respectively. We classify interest and penalties as income tax expense in the consolidated statements of income and their associated liabilities 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 2009 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.