(7) 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 nine month periods ended March 31, 2018 and 2017, respectively, is as follows:


	Three months ended March 31,				Nine months ended March 31,
	2018		2017		2018			2017
	(in millions)
Expected provision at the statutory rate	$	12.4	$	9.6	$	30.0	$	24.4
Increase/(decrease) due to:
State income tax expense, net of federal benefit		1.3		0.6		2.8		2.1
Stock-based compensation		1.6		(13.1)		4.1		(12.7)
Transactions costs not deductible for tax purposes		0.4		1.5		0.6		1.8
Change in statutory tax rate, non-U.S.		—		—		0.8		(1.7)
Foreign tax rate differential		(1.0)		(1.8)		(2.7)		(2.1)
Change in valuation allowance		(0.2)		(2.0)		(31.6)		(8.7)
U.S. Tax Reform		4.6		—		48.7		—
Other, net		1.8		5.8		(3.5)		4.3
Provision for income taxes	$	20.9	$	0.6	$	49.2	$	7.4

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.

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 a provisional tax expense in the quarter ending December 31, 2017 of $44.1 million to record the impact of U.S. Tax Reform. During the quarter ending March 31, 2018, the Company recorded an additional provisional tax expense of $4.6 million, resulting in a year to date amount of $48.7 million.

The Company continues to use 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.

Other 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, Base Erosion and Anti-abuse Tax, 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 months ended March 31, 2018:


	Tax Expense		Net Deferred Tax Liability		Tax Receivable
	(in millions)
Change in statutory tax rate, U.S. only (net of refundable AMT credit)	$	0.2	$	0.8	$	0.6
Changes to indefinite reinvestment assertion		(0.4)		(0.4)
Repatriation Tax (offset against net operating loss carryforwards, non-cash)		4.8		4.8
Net discrete impacts of the enactment of U.S. Tax Reform	$	4.6	$	5.2	$	0.6

Provisional amounts recognized due to the U.S. Tax Reform for the nine months ended March 31, 2018:


	Tax Expense		Net Deferred Tax Liability		Tax Receivable
	(in millions)
Change in statutory tax rate, U.S. only (net of refundable AMT credit)	$	1.6	$	12.2	$	10.6
Changes to indefinite reinvestment assertion		7.5		7.5
Repatriation Tax (offset against net operating loss carryforwards, non-cash)		39.6		39.6
Net discrete impacts of the enactment of U.S. Tax Reform	$	48.7	$	59.3	$	10.6

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 nine months ended March 31, 2018 was positively impacted by reversing the valuation allowances of $31.0 million on the deferred tax assets of certain foreign subsidiaries. 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 March 31, 2018, the Company had a $1.8 million current liability for uncertain tax positions related to U.S. state taxing jurisdictions, including $0.2 million of accrued interest and penalties. During the quarter, an additional $1.6 million liability was recognized for prior year tax positions. We recognize interest and penalties related to uncertain tax positions in income tax expense. The entire balance could be settled within the next year and $0.5 million would impact the effective tax rate if recognized because the uncertain tax positions relate to permanent differences.