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Income Taxes
9 Months Ended
Sep. 30, 2019
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income tax attributable to continuing operations during the three months ended September 30, 2019 and 2018 was an income tax provision of $5.5 million and $7.6 million, respectively, representing effective tax rates of 24.3% and 51.0%. The difference in income tax at the U.S. federal income tax rate of 21.0% and GCP’s overall income tax rate for the three months ended September 30, 2019 was primarily attributable to a benefit from Brazilian income tax refunds as discussed below, partially offset by a tax provision on non-deductible expenses and the effect of tax rates in foreign jurisdictions. The difference between the provision for income taxes at the U.S. federal income tax rate of 21.0% and GCP’s overall income tax rate for the three months ended September 30, 2018 was primarily attributable to valuation allowance charges, the effect of tax rates in foreign jurisdictions and non-deductible expenses.

Income tax attributable to continuing operations during the nine months ended September 30, 2019 and 2018 was an income tax benefit of $5.2 million and an income tax provision of $15.8 million, respectively, representing effective tax rates of 17.4% and 80.2%. The difference between the provision for income taxes at the U.S. federal income tax rate of 21.0% and GCP’s overall income tax rate for the nine months ended September 30, 2019 was primarily due to the finalization of the Transition Tax regulations issued in January 2019, resulting in a tax benefit from the release of an uncertain tax position in the amount of $20.2 million. The difference from the statutory rate is also due to the benefit of certain Brazilian income tax refunds of $3.0 million accrued during the three months ended September 30, 2019, partially offset by a tax provision of $3.6 million on changes to GCP’s 2017 income tax liability and Transition Tax, as well as non-deductible expenses and the effect of tax rates in foreign jurisdictions. The difference in income tax at the U.S. federal income tax rate of 21.0% and GCP's overall income tax rate for the nine months ended September 30, 2018 was primarily due to first quarter tax provision for the change in estimates related to the 2017 Tax Act in the amount of $12.5 million, as well as a tax provision due to the effect of valuation allowances, non-deductible expenses and the effect of tax rates in foreign jurisdictions.

As a result of a favorable ruling by the Superior Judicial Court of Brazil, the Company recorded an income tax benefit, inclusive of interest, and a corresponding long-term income tax receivable of $3.0 million. Additionally, the Company recorded $0.3 million of the associated legal fees and indirect taxes within the accompanying unaudited Consolidated Financial Statements in the three months ended September 30, 2019.

During the three months ended September 30, 2018, GCP recorded an income tax provision of $6.1 million due to discontinued operations. No income tax provision or benefit related to discontinued operations was recorded during the three months ended September 30, 2019. During the nine months ended September 30, 2019 and 2018, GCP recorded an income tax provision attributable to discontinued operations of $2.2 million and $14.0 million, respectively. Please refer to Note 19, "Discontinued Operations," to the accompanying unaudited Consolidated Financial Statements for further details regarding the Darex transaction.
Tax Reform
During the year ended December 31, 2018, GCP recorded a $20.2 million liability for an unrecognized tax benefit related to certain capital gains recognized as a result of the application of the Transition Tax. As a result of clarifications issued in January 2019 by the Internal Revenue Service (IRS) in the final treasury regulations under Code Section 965, GCP decreased its liability for unrecognized tax benefits by $20.2 million during the nine months ended September 30, 2019. Upon filing of GCP's 2018 federal income tax return, an increase of $0.3 million in an income tax provision was recognized during the three months ended September 30, 2019 increasing the outstanding transition tax liability. GCP has elected to pay the Transition Tax over the eight-year period as provided in the 2017 Tax Act. As of September 30, 2019, the unpaid balance of the Transition Tax obligation is $41.4 million, net of overpayments and foreign tax credits. After considering overpayments, the outstanding payable is due between April 2021 and April 2025.
For additional information related to the 2017 Tax Act, please refer to Note 7, "Income Taxes," to the Company's Consolidated Financial Statements included in the 2018 Annual Report on Form 10-K.
Repatriation
In general, it is GCP's practice and intention to permanently reinvest the earnings of its foreign subsidiaries and repatriate earnings only when the tax impact is efficient. This position has not changed subsequent to the one-time transition tax under the Tax Act.
Valuation Allowance
In evaluating GCP's ability to realize its deferred tax assets, GCP considers all reasonably available positive and negative evidence, including recent earnings experience, expectations of future taxable income and the tax character of that income, the period of time over which temporary differences become deductible and the carryforward and/or carryback periods available to GCP for tax reporting purposes in the related jurisdiction. In estimating future taxable income, GCP relies upon assumptions and estimates about future activities, including the amount of future federal, state and foreign pretax operating income that GCP will generate; the reversal of temporary differences; and the implementation of feasible and prudent tax planning strategies. GCP records a valuation allowance to reduce deferred tax assets to the amount that it believes is more likely than not to be realized.
During the three months ended September 30, 2019 and 2018, GCP incurred an income tax benefit for a valuation allowance of $0.1 million and an income tax provision for a valuation allowance of $3.6 million. During the nine months ended September 30, 2019 and 2018, GCP incurred an income tax provision for valuation allowances of $0.4 million and $4.7 million, respectively. These valuation allowance adjustments result from losses generated in certain countries, primarily India in 2019 and India and France in 2018.
In connection with the Separation, GCP and Grace entered into various agreements that govern the relationship between the parties going forward, including a tax matters agreement (the "Tax Sharing Agreement"). Under the Tax Sharing Agreement, GCP and Grace will indemnify and hold each other harmless in accordance with the principles outlined therein.