Income Taxes

3 Months Ended

Mar. 31, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The provision for income taxes consists of provisions for federal, state, and foreign incomes taxes. The effective tax rates for the periods ended March 31, 2019, and March 31, 2018, reflect the Company’s expected tax rate on reported income from continuing operations before income tax and tax adjustments. The Company operates in a global environment with significant operations in the U.S. and various other jurisdictions outside the U.S. Accordingly, the consolidated income tax rate is a composite rate reflecting the Company’s earnings and the applicable tax rates in the various jurisdictions where the Company operates.

On December 22, 2017, the Tax Cuts and Jobs Act (“TCJA”) was enacted in the U.S. The TCJA represents sweeping changes in U.S. tax law. Among other changes in tax law, the TCJA permanently reduced the U.S. corporate income tax rate to 21% beginning in 2018, imposed a one-time repatriation tax on deferred foreign earnings, established a participation exemption system by allowing a 100% dividends received deduction on qualifying dividends paid by foreign subsidiaries, limited deductions for net interest expense, and expanded the U.S. taxation of foreign earned income to include “global intangible low-taxed income” (“GILTI”).

The Company's effective tax rate for the three months ended March 31, 2019 was 4.5% compared to the effective tax rate for the three months ended March 31, 2018 of (38.4)%.

The effective tax rate for the three months ended March 31, 2019 differs from the U.S. statutory tax rate of 21%, due to a change in the valuation allowance related to deferred tax assets that are not able to be realized and other unbenefited losses. The cumulative unbenefited losses related to the elimination of intercompany profit in inventory, and the changes in the valuation allowance related to the Japan, Netherlands, and Turkey jurisdictions where there is not sufficient evidence to support future taxable income. In addition to the changes in valuation allowances, the effective tax rate is impacted by certain provisions of the TCJA. The limitation and deductibility of U.S. interest expense, and the inclusion of GILTI reduced the overall tax benefit for the Company. The Company has elected to account for GILTI tax in the period in which it is incurred, and therefore did not provide any deferred taxes in the consolidated financial statements at March 31, 2019.