Income Taxes

9 Months Ended

Sep. 30, 2019

Effective Tax Rates

Our quarterly provision for income taxes is measured using an annual effective tax rate, adjusted for discrete items within the period presented.

Our effective tax rates are as follows:



	Three Months Ended September 30,		Nine Months Ended September 30,
	2019	2018	2019	2018
Effective Tax Rate	22.5%	17.6%	22.3%	19.7%

Our tax rate for both the three and nine months ended September 30, 2019 are higher than the prior year’s comparable periods primarily due to a balance sheet tax account adjustment recorded in 2018 after we finalized certain calculations related to U.S. tax reform enacted December 2017.

Our tax rate for both the three and nine months ended September 30, 2019 are higher than the statutory U.S. federal tax rate of 21% primarily due to earnings in jurisdictions with statutory tax rates higher than the U.S. and U.S. state taxes, partially offset by excess share-based compensation benefits and the statutory U.S. deduction related to our non-U.S. subsidiaries’ income.

Unrecognized Tax Benefits

During the three and nine months ended September 30, 2019, our gross unrecognized tax benefits, excluding interest and penalties, decreased by $1.9 million and $0.2 million, respectively, primarily as a result of reductions resulting from the expiration of statutes of limitations, partially offset by increases in tax positions taken in both the current year and prior periods. During the three and nine months ended September 30, 2019, the total amount of unrecognized tax benefits that, if recognized, would affect our effective tax rate decreased by $2.2 million and increased by $0.3 million, respectively. The difference between these amounts relates to (1) offsetting tax effects from other tax jurisdictions, and (2) interest expense, net of deferred taxes.

During the three and nine months ended September 30, 2019, we recognized $(0.6) million and $0.7 million, respectively, of interest and penalty (income)/expense related to unrecognized tax benefits in our Condensed Consolidated Statement of Operations. At September 30, 2019 and December 31, 2018, the total amount of accrued interest and penalty expense related to unrecognized tax benefits recorded in our Condensed Consolidated Balance Sheets was $7.9 million and $7.2 million, respectively.

During the next twelve months, it is reasonably possible that our unrecognized tax benefits may decrease by $6.6 million due to expiration of statutes of limitations and settlements with tax authorities. However, if the ultimate resolution of income tax examinations results in amounts that differ from this estimate, we will record additional income tax expense or benefit in the period in which such matters are effectively settled.