Income Taxes

6 Months Ended

Jun. 30, 2020

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 June 30,		Six Months Ended June 30,
	2020	2019	2020	2019
Effective Tax Rate	21.5%	23.2%	21.7%	22.2%

Our tax rates for the three and six months ended June 30, 2020 are lower than the prior year’s comparable periods primarily due to the settlement of income tax audits, partially offset by a lower foreign tax credit utilization.

Our tax rate for the three months ended June 30, 2020 is 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 certain expenses that are statutorily non-deductible for income tax purposes, partially offset by the statutory U.S. deduction related to our non-U.S. subsidiaries’ income.

Our tax rates for the six months ended June 30, 2020 is 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 certain expenses that are statutorily non-deductible for income tax purposes, 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 six months ended June 30, 2020, our gross unrecognized tax benefits, excluding interest and penalties, decreased by $1.4 million and $2.7 million respectively, primarily as a result of reductions resulting from the settlements with tax authorities in the current period and expiration of statutes of limitations, partially offset by increases in tax positions taken in the current and prior periods. During the three months and six months ended June 30, 2020, the total amount of unrecognized tax benefits that, if recognized, would affect our effective tax rate decreased by $1.5 million and $2.6 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 six months ended June 30, 2020, we recognized $(0.1) million and $0.3 million, respectively, of interest and penalty expense related to unrecognized tax benefits in our Condensed Consolidated Statement of Operations. At June 30, 2020 and December 31, 2019, the total amount of accrued interest and penalty expense related to unrecognized tax benefits recorded in our Condensed Consolidated Balance Sheets was $8.3 million and $8.0 million, respectively.

During the next twelve months, it is reasonably possible that our unrecognized tax benefits may decrease by $11.8 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.

Income Tax Examinations

During the second quarter of 2020, we settled the 2013-2015 audits of various German subsidiaries.