Income Taxes

9 Months Ended

Sep. 30, 2020

The gross liability for unrecognized tax benefits at September 30, 2020 and December 31, 2019 was $16,348 and $15,356, respectively, exclusive of interest and penalties, of which $16,104 and $15,194 would affect the effective tax rate if the Company were to recognize the tax benefit.

The Company classifies interest and penalties on unrecognized tax benefits as income tax expense. As of September 30, 2020 and December 31, 2019, the combined amount of accrued interest and penalties related to tax positions taken on tax returns was $2,212 and $1,962, respectively.


	September 30, 2020		December 31, 2019
Gross liability for unrecognized tax benefits, exclusive of interest and penalties	$	16,348	$	15,356
Interest and penalties on unrecognized benefits	2,212		1,962
Total gross uncertain tax positions	$	18,560	$	17,318
Amount included in Current liabilities	$	3,986	$	4,896
Amount included in Other long-term liabilities	14,574		12,422
	$	18,560	$	17,318

The Company's effective income tax rate for the three and nine months ended September 30, 2020 and 2019 differs from the federal income tax statutory rate due to the following:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2020		2019		2020		2019
Statutory rate	21.0	%	21.0	%	21.0	%	21.0	%
State taxes, net of federal tax benefit	3.3		2.6		3.2		2.6
Foreign tax expense and tax rate differential	(0.2)		(0.3)		(0.1)		(0.2)
Tax benefit from stock option exercises	(0.4)		(2.2)		(1.0)		(1.5)
Expiration of the statute of limitations	(1.3)		(1.2)		(0.5)		(0.4)
Provision-to-return adjustment	(0.4)		(0.6)		(0.1)		(0.2)
Other, net	(0.6)		(0.4)		(0.5)		(0.3)
	21.4	%	18.9	%	22.0	%	21.0	%

The increase in the Company's effective tax rate for the three and nine months ended September 30, 2020 was primarily due to decreased tax benefits related to the lower volume of stock option exercises in 2020 compared to the prior year periods as well as an increase in the state effective tax rate.

The Company files income tax returns in the United States on a consolidated basis and in many U.S. state and foreign jurisdictions. The Company is subject to examination of income tax returns by the Internal Revenue Service (IRS) and other domestic and foreign tax authorities. The Company is no longer subject to U.S. federal income tax examination for years before 2017 and is no longer subject to state, local or foreign income tax examinations by authorities for years before 2015.

The Company estimates it will recognize $3,986 of gross unrecognized tax benefits. This amount is expected to be paid within one year or to be removed at the expiration of the statute of limitations and resolution of income tax audits and is netted against the current payable account. These unrecognized tax benefits are related to tax positions taken on certain federal, state, and foreign tax returns. However, the timing of the resolution of income tax examinations is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year. While it is reasonably possible that some issues under examination could be resolved in the next twelve months, based upon the current facts and circumstances, the Company cannot reasonably estimate the timing of such resolution or the total range of potential changes as it relates to the current unrecognized tax benefits that are recorded as part of the Company’s financial statements.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References + Details