Income Taxes



	Three Months Ended March 31
	2018		2017
			As Restated
Effective tax rate on pre-tax income from continuing operations	20.7	%	24.7	%

In the Company’s first quarter earnings release on April 19, 2018, income tax expense was initially recorded at an effective rate of 23.5%. Since that time, further consideration of information relating to the Company’s unrecognized tax benefits, primarily settlements of U.S. and Canadian returns for open tax years, led to the conclusion that a portion of the Company’s reserve for unrecognized tax benefits should be released in the first quarter 2018, rather than be included in the effective tax rate to be applied over the course of 2018. The impact of these discrete items was to reduce income tax expense for the three months ended March 31, 2018 by $15 million. This reduced the first quarter 2018 effective tax rate to 20.7%.

The effective tax rate for 2017 of 24.7% is lower than the U.S. federal statutory rate primarily due to earnings in foreign jurisdictions which are taxed at rates lower than the U.S. statutory rate and the impact of certain U.S. tax incentives. The effective tax rate for the three months ending March 31, 2017 includes a benefit of $8 million from the settlement of U.S. non-qualified pension plan obligations, as described in Note 12, "Pensions and Other Postretirement Benefits".

In December 2017, the U.S. enacted the Tax Cuts and Jobs Act (“the Act”) which, among other things, lowered the U.S. corporate statutory income tax rate from 35% to 21%, eliminated certain deductible items and added other deductible items for corporations, imposed a tax on unrepatriated foreign earnings and eliminated U.S. taxes on most future foreign earnings. PPG recorded a provisional amount as of December 31, 2017, which represented the Company’s best estimate using information available as of February 1, 2018. The Company anticipates U.S. regulatory agencies will issue further regulations during 2018, which may alter this estimate. The Company is still evaluating among other things, its position with respect to permanent reinvestment of foreign earnings overseas and other related outside basis difference considerations and the amount of tax owed on unrepatriated earnings by subsidiaries. The Company believes its remeasurement of its U.S deferred tax assets and liabilities is complete, except for changes in estimates that can result from finalizing the filing of our 2017 U.S. income tax return, which are not anticipated to be material, and changes that may be a direct impact of other provisional amounts recorded due to the enactment of the Act. The Company will refine its estimates to incorporate new or better information as it comes available through the filing date of its 2017 U.S. income tax returns in the fourth quarter of 2018.

The tax owed by PPG on its unrepatriated foreign earnings is payable over eight years and is subject to a prescriptive calculation to determine the portion payable in 2018 and beyond. PPG’s current estimate, using this prescriptive method, indicates its tax payable will be increased by approximately $1 million to $3 million per year through 2025. As such, the portion of the tax on unrepatriated foreign earnings not payable within the next 12 months is presented within “Other liabilities” on the consolidated balance sheet.

The Company files federal, state and local income tax returns in numerous domestic and foreign jurisdictions. In most tax jurisdictions, returns are subject to examination by the relevant tax authorities for a number of years after the returns have been filed. The Company is no longer subject to examinations by tax authorities in any major tax jurisdiction for years before 2006. In addition, the Internal Revenue Service has completed its examination of the Company’s U.S. federal income tax returns filed for years through 2013.