Income Taxes

6 Months Ended

Apr. 30, 2020

Recent Tax Legislation

Coronavirus Aid, Relief and Economic Security Act

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) was enacted and signed into law in response to the market volatility and instability resulting from the COVID-19 pandemic. It includes a significant number of tax provisions and lifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act of 2017. The changes are mainly related to: (1) the business interest expense disallowance rules for 2019 and 2020; (2) net operating loss rules; (3) charitable contribution limitations; (4) employee retention credit; and (5) the realization of corporate alternative minimum tax credits.

The Company continues to assess the impact and future implications of these provisions; however, it does not anticipate any amounts that could give rise to a material impact to the overall Consolidated Condensed Financial Statements.

Effective Tax Rate

The Company's income tax provision for the three and six months ended April 30, 2020 and 2019, were as follows:



Periods Ended April 30,	Three Months					Six Months
(In millions)	2020			2019		2020		2019
Income tax (benefit) provision	$	(2.5	)	$	5.7	$	4.4	$	(3.6	)

The Company's effective tax rates were a benefit of 27.7% and expense of 4.5% for the second quarter of fiscal 2020 and 2019, respectively and an expense of 4.2% and a benefit of 1.7% for the first six months of fiscal 2020 and 2019, respectively. The decrease in the effective tax rate for the second quarter of fiscal 2020 compared to fiscal 2019 was primarily due to the significant drop of actual quarterly PBT (Profit before tax) due to the market volatility and instability as a result of the COVID-19 pandemic. The Company’s effective tax rate for the first six months of fiscal year 2020 was higher than 2019, mainly due to settlement of tax audits, revisions to the provisional tax charges relating to the 2017 Act and excess tax benefits from share-based compensation that favorably impacted the 2019 effective tax rate. The Company’s effective tax rate for the second quarter of fiscal 2020 was lower than the U.S. statutory tax rate as a result of the discrete tax benefits mainly from stock compensation excess tax benefit and a favorable mix of income from foreign jurisdictions with preferential tax rates.

We recognize the benefit from a tax position only if it is more likely than not that the position would be sustained upon audit based solely on the technical merits of the tax position. As of April 30, 2020, and October 31, 2019, Cooper had unrecognized tax benefits of $54.3 million and $49.7 million, respectively. The increase is primarily related to additions to current and prior period transfer pricing reserves, partially offset by release of reserves due to lapse of statute of limitations. It is our policy to recognize interest and penalties directly related to income taxes as additional income tax expense. It is reasonably possible that $14.5 million of unrecognized tax benefits could be settled during the next twelve months.

The Company is subject to U.S. Federal income tax examinations for fiscal 2015 through 2019 and the Internal Revenue Service is currently auditing our U.S. Consolidated Corporation Income Tax Returns for fiscal 2015 and 2016. The Company remains subject to income tax examinations in other significant tax jurisdictions including Japan, France and Australia for the fiscal years 2014 through 2019. The Company is currently under audit in the United Kingdom for fiscal years 2015 through 2018.