Income Taxes

The provision for income taxes was as follows:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Income tax provision	$	12,267		$	21,004		$	39,077		$	46,124
Effective tax rate	14.4		%	24.8		%	17.5		%	22.6		%

The effective tax rate for the three and nine months ended September 30, 2018, is lower than the United States Federal tax rate of 21.0 percent mainly due to excess tax benefits from stock compensation and a reduction in the accrual for the U.S. transition tax, offset partially by state taxes, higher tax rates applied to income earned in certain foreign jurisdictions, and other discrete items.


Note 17.	Income Taxes - (Continued)

New tax legislation, commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”), was enacted on December 22, 2017. In connection with the Company's initial analysis of the impact of the Tax Act, the Company recorded provisional net tax expense of $94.4 million for the period ended December 31, 2017. This amount consists of net expense of $66.5 million for the transition tax and net expense of $12.8 million for the remeasurement of the Company's net deferred tax assets using the reduced United States tax rate. In addition, the Company also recorded net tax expense of $15.1 million for state income and foreign taxes estimated to be due upon distribution of approximately $1.0 billion of previously undistributed foreign earnings no longer permanently reinvested as of December 31, 2017.

The Company has not completed the accounting for the tax effects of the Tax Act, primarily related to computations of earnings and profits, available foreign tax credits, and state conformity to federal tax changes. However, during the quarter ending September 30, 2018, the Company recognized a measurement period adjustment resulting in a $9.9 million reduction of tax expense. In addition, the Company reduced by $0.6 million the estimated state and foreign liability for tax due upon distribution of approximately $902.0 million of previously undistributed foreign earnings no longer permanently reinvested as of December 31, 2017. The Company continues to gather additional information and expects to complete the accounting for the Tax Act within the measurement period prescribed in Staff Accounting Bulletin No. 118.

As of September 30, 2018, the Company had approximately $63.1 million of unrecognized tax benefits, all of which would affect the Company’s effective tax rate if recognized. The Company anticipates approximately $46.7 million of its net unrecognized tax benefits will be recognized within 12 months as the result of settlements or effective settlements with various tax authorities, the closure of certain audits and the lapse of the applicable statute of limitations.

The Company classifies interest and penalties related to unrecognized tax benefits in the income tax provision. As of September 30, 2018, the Company had $6.8 million of accrued interest and penalties related to unrecognized tax benefits that are recorded as current and non-current accrued income taxes on the Consolidated Balance Sheet.

In 2016, the Company, in accordance with FASB ASC Topic 740, "Income Taxes," recorded discrete tax charges totaling $39.6 million related to the January 11, 2016 announcement from the European Commission of a decision concluding that certain rules under Belgian tax legislation were deemed to be incompatible with European Union regulations on state aid. As a result of this decision, the European Commission directed the Belgian Government to recover past taxes from certain entities, reflective of disallowed state aid, which impacts one of the Company’s international subsidiaries. The Belgian Government announced they have appealed this decision and filed action for an annulment in the General Court of the European Union, and in July 2016 the Company filed a separate appeal with the General Court of the European Union. On January 10, 2017, the Company received tax assessments from the Belgium government approximating the discrete tax charge recorded during 2016, which the Company has classified as current taxes payable on the Consolidated Balance Sheet as of September 30, 2018. The Company filed a complaint against the Belgian tax assessments, and on October 23, 2018 the Belgian government canceled $33.0 million of the tax assessments. As a result, the Company expects to reverse a similar amount of previously accrued income tax plus interest associated with the assessments during the three-month period ending December 31, 2018. In addition, the Company expects the euro equivalent of $35.7 million held in a restricted cash account as of September 30, 2018 to become unrestricted during the three-month period ending December 31, 2018. The appeal with the General Court of the European Union or other future events may cause the remaining income tax provision associated with the European Commission decision to be entirely or partially reversed.

During the quarter ending September 30, 2018, the Swedish Tax Authority (“STA”) issued a proposed tax assessment for the tax year ending December 31, 2012 to one of the Company's non-operating subsidiaries in Sweden. The proposed assessment concerns the use of tax credits applied against capital gains pursuant to European Union Council Directive 2009/133/EC, commonly referred to as the EU Merger Directive, and indicates a suggested decision to assess taxes and penalties totaling approximately $$300.0 million (Swedish kroner 2.8 billion). The Company believes the STA’s assertions in the proposed assessment are not in accordance with Swedish tax regulations and plans to defend the Company's positions with the STA and through the Swedish court system, as necessary. Consequently, no adjustment to the Company's unrecognized tax benefits has been recorded in relation to this matter. Management believes that the Company's recorded tax liabilities are adequate in the aggregate for its income tax exposures.


Note 17.	Income Taxes - (Continued)

The Company currently has the following tax years open to examination by major taxing jurisdictions:



	Tax Years:
United States Federal	2015 - 2016
State of California	2013 - 2016
State of Massachusetts	2013 - 2016
State of Oregon	2014 - 2016
Sweden	2012 - 2016
United Kingdom	2013 - 2016
Belgium	2011 - 2016