Income Taxes

9 Months Ended

Sep. 30, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The provision for income taxes for the three months ended September 30, 2019 and 2018 was an expense of $11.7 million and $26.2 million, respectively. The provision for income taxes for the nine months ended September 30, 2019 was a benefit of $0.4 million compared to an expense of $31.7 million for the nine months ended September 30, 2018.

The effective income tax rate was an expense of 22.1% and 69.0% for the three months ended September 30, 2019 and 2018, respectively. The quarter-over-quarter decrease in the effective income tax rate was primarily attributable to the taxable third quarter 2018 divestiture of the Company’s CEB Challenger training business, which resulted in a greater tax than book gain.

The effective income tax rate was a benefit of 0.3% for the nine months ended September 30, 2019 compared to an expense of 45.2% for the nine months ended September 30, 2018. The effective income tax rate for the 2019 nine-month period included a significant benefit from an intercompany sale of certain intellectual property, as discussed below. The favorable impact of that transaction compared to the unfavorable impact from the CEB Challenger training business divestiture during the 2018 nine-month period drove the year-over-year change in the effective income tax rates for the nine-month periods.

In April 2019, we completed an intercompany sale of certain intellectual property. As a result, the Company recorded a net tax benefit of approximately $38.1 million during the nine months ended September 30, 2019, which represents the benefits of future tax deductions for amortization of the assets in the acquiring jurisdiction. Our tax planning related to our intellectual property is ongoing and may result in tax rate volatility in the future.

The Company had gross unrecognized tax benefits of $87.3 million at September 30, 2019 and $90.3 million at December 31, 2018. It is reasonably possible that gross unrecognized tax benefits will decrease by approximately $2.8 million within the next 12 months due to the anticipated closure of audits and the expiration of certain statutes of limitation.

In connection with the Company’s adoption of ASU No. 2016-02 on January 1, 2019, operating leases were recorded on the accompanying Condensed Consolidated Balance Sheet as of September 30, 2019, including the recognition of operating lease liabilities and corresponding right-of-use assets. The corresponding deferred tax assets and deferred tax liabilities were also recorded. The net deferred tax impact was zero. Note 1 — Business and Basis of Presentation provides additional information regarding our leases and the adoption of ASU No. 2016-02.