(6) INCOME TAXES

A reconciliation of the actual income tax provision and the tax computed by applying the U.S. federal rate to the earnings before income taxes during the three and six month periods ended December 31, 2017 and 2016 is as follows:


	Three months ended December 31,				Six months ended December 31,
	2017		2016		2017			2016
	(in millions)
Expected provision at the statutory rate	$	7.6	$	7.1	$	17.6	$	14.8
Increase/(decrease) due to:
State income tax expense, net of federal benefit		0.9		0.8		1.5		1.5
Stock-based compensation		1.0		(2.9)		2.5		0.4
Transactions costs not deductible for tax purposes		0.1		0.2		0.2		0.3
Change in statutory tax rate, non-U.S.		0.8		—		0.8		(1.7)
Foreign tax rate differential		0.5		0.4		(1.7)		(0.3)
Change in valuation allowance		(25.7)		(4.4)		(31.4)		(6.7)
U.S. Tax Reform		44.1		—		44.1		—
Other, net		(6.4)		(1.0)		(5.3)		(1.5)
Provision for income taxes	$	22.9	$	0.2	$	28.3	$	6.8

On December 22, 2017, the U.S. federal government enacted a tax bill, H.R.1, An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018, previously known as Tax Cuts and Jobs Act of 2017 (“U.S. Tax Reform”). U.S. Tax Reform reduced the U.S. corporate tax rate from 35% to 21%, created a territorial tax system with a one-time mandatory repatriation tax on previously deferred foreign earnings, and changed business-related deductions and credits.

Many of the U.S. Tax Reform provisions are effective January 01, 2018; however, ASC 740, Income Taxes, requires companies to recognize the effect of tax law changes in the period of enactment. The SEC staff issued SAB 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), which will allow registrants to record provisional amounts during a ‘measurement period’. The measurement period is similar to the measurement period used when accounting for business combinations under ASC 805, Business Combinations. SAB 118 allows a registrant to recognize provisional amounts when it does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the change in tax law. The measurement period ends when a registrant has obtained, prepared and analyzed the information necessary to finalize its accounting, but cannot extend beyond one year.

In accordance with SAB 118, the Company has recorded provisional amounts because actual year-end amounts for the following items are not yet known: income, capital expenditures, foreign exchange rates, foreign distributable reserves, foreign earnings and profits, and foreign cash balances. Management is in the process of obtaining and evaluating further information related to the provisional amounts estimated for items including the mandatory repatriation amounts and impacts to deferred tax assets and liabilities. Management has made estimates as it anticipates additional guidance and legislative action from the U.S. Federal and State governments in addition to interpretations and guidance from the SEC and FASB regarding the application of U.S. Tax Reform. Future adjustments to the provisional numbers will be recorded as discrete adjustments to income tax expense in the period in which those adjustments become estimable and/or are finalized.

Some U.S. Tax Reform provisions are effective for years beginning after December 31, 2017, which would be the Company’s Fiscal 2019, including the tax on global intangible low taxed income (“GILTI”), Base Erosion and Anti-abuse Tax” (“BEAT”), interest expense limitations, and executive compensation limitations. We continue to evaluate these and other impacts of U.S. Tax Reform as more information and guidance becomes available.

Provisional amounts recognized due to the U.S. Tax Reform for the three and six months ended December 31, 2017:


	Tax Expense		Deferred Tax Liability		Current Tax Receivable
	(in millions)
Change in statutory tax rate, U.S. only (AMT credit is now refundable)	$	1.4	$	11.4	$	10.0
Changes to indefinite reinvestment assertion		7.9		7.9
Repatriation Tax (offset against net operating loss carryforwards, non-cash)		34.8		34.8
Net discrete impacts of the enactment of U.S. Tax Reform	$	44.1	$	54.1	$	10.0

The interim period effective tax rate is driven from year-to-date and anticipated pre-tax book income for the full fiscal year adjusted for anticipated items that are deductible/non-deductible for tax purposes only (i.e., permanent items). Additionally, the tax expense or benefit related to discrete permanent differences in an interim period are recorded in the period in which they occur. The determination of the effective tax rate is based upon a number of significant estimates and judgments; therefore, there can be significant volatility in interim tax provisions. The following statutory tax rates were used to determine the tax provision.


	Fiscal 2017		Fiscal 2018		Fiscal 2019
Tax Rates
Federal Rate		35%		28%		21%
Blended Federal & State Rate		39%		33%		26%

The interim effective tax rate for the three and six months ended December 31, 2017 was positively impacted by reversing the valuation allowance of $28.5 million on the deferred tax assets of certain Canadian subsidiaries. In addition, the “Other, net” category includes a benefit of $6.9 million for the provision to return adjustment for entities in France. The effective tax rate was negatively impacted by U.S. Tax Reform principally relating to the estimated income tax on the deemed repatriation of previously deferred foreign earnings.

The Company files income tax returns in various federal, state, and local jurisdictions including the United States, Canada, United Kingdom and France. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world. With few exceptions, the Company is no longer subject to income tax examinations by tax authorities in major tax jurisdictions for years before 2012.

As of December 31, 2017, the Company had a $0.2 million current liability for uncertain tax positions related to state taxing jurisdictions, including $0.1 million of accrued interest and penalties. We recognize interest and penalties related to uncertain tax positions in income tax expense. The entire balance is expected to be settled within the next year. Recognition of the uncertain tax positions would impact the effective tax rate because the uncertain tax positions are permanent differences instead of timing differences.

As of December 31, 2017, the Company had reversed its indefinite reinvestment assertion on all its foreign subsidiaries because the Company will be required to pay tax on all the accumulated undistributed earnings of its foreign subsidiaries. In accordance with SAB 118, the Company recorded a provisional amount of $7.9 million as a discrete deferred tax liability for additional estimated tax due upon actual repatriation.