Note 8 - Income Taxes

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Income Tax Disclosure [Text Block]

8 . Income Taxes

Our effective income tax rate was

35.9%

for the

three

months ended

September 30, 2017,

compared to

38.0%

for the

three

months ended

September 30, 2016.

Our effective income tax rate was

33.9%

for the

first

nine

months of

2017,

compared to

38.0%

in

2016.

In determining our quarterly provision for income taxes, we use an estimated annual effective tax rate, adjusted for discrete items. This rate is based on our expected annual income, statutory tax rates, best estimate of nontaxable and nondeductible items of income and expense, and the ultimate outcome of tax audits. Income tax expense for the

first

nine

months of

2017

included a

one

-time after-tax benefit of

$13.6

million for the claiming of federal research and development tax credits and domestic production tax deductions for the

2012

through

2016

tax years, recorded in the

first

quarter of

2017.

In addition, an after-tax benefit of

$4.5

million for stock compensation tax benefits and a

one

-time after-tax cost of

$1.5

million for state income tax rate changes, were both recorded in the

third

quarter

2017.

At

September 30, 2017,

we had a total of

$35.6

million in gross unrecognized tax benefits, which are a component of other long-term liabilities on our Condensed Consolidated Balance Sheets. Of this amount,

$23.2

million represents the amount of unrecognized tax benefits that, if recognized, would impact our effective tax rate. The total amount of accrued interest and penalties for such unrecognized tax benefits was

$5.8

million at

September 30, 2017.