Income Taxes

3 Months Ended

Mar. 31, 2020

(16) Income Taxes

The Company’s income tax (benefit) expense based on income before income taxes for the periods presented was as follows:


		Three Months Ended March 31,
		2020			2019
	(In thousands, excluding percentages)
Income tax (benefit) expense		$	(3,737)		$	3,129
Effective tax rate		(185.7)		%	42.0		%

The Company’s income tax benefit for the three months ended March 31, 2020 totaled $3.7 million resulting in an effective tax rate of (185.7)%, compared to an expense of $3.1 million, and an effective tax rate of 42.0%, for the same period of 2019.

The decrease in the tax expense for the three months ended March 31, 2020, compared to the same period of 2019, was primarily attributable to a non-recurring benefit in the current period from the carry back of net operating losses to prior tax years at the higher 35% U.S. tax rate, compared to the current tax rate of 21%, as a result of recent changes in U.S. tax law. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law in the U.S., which provided for an elective five-year carryback of net operating losses (NOLs) generated in taxable years beginning after December 31, 2017, and before January 1, 2021. As a result of this change in law and because the Company incurred net operating losses in 2018, the Company plans to carry back these losses to prior periods and expects to receive refunds of taxes paid at higher rates in earlier periods. Additionally, lower pretax profits in the current period compared to the prior year period contributed to the lower tax expense, partly offset by other factors.

The Company assesses the need for any deferred tax asset valuation allowances at the end of each reporting period. The determination of whether a valuation allowance for deferred tax assets is needed is subject to considerable judgment and requires an evaluation of all available positive and negative evidence. The Company’s assessment concluded that maintaining valuation allowances on deferred tax assets in Australia, Canada, Mexico, and Spain was appropriate, as the Company currently believes that it is more likely than not that the related deferred tax assets will not be realized.

The deferred tax expenses and benefits associated with the Company’s net unrealized gains and losses on derivative instruments and foreign currency translation adjustments have been recorded in the Accumulated other comprehensive loss, net line in the accompanying Consolidated Balance Sheets.

The Company currently believes that the unremitted earnings of certain of its subsidiaries will be reinvested for an indefinite period of time. Accordingly, no deferred taxes have been provided for the differences between the Company’s book basis and underlying tax basis in these subsidiaries or on the foreign currency translation adjustment amounts.