Income Taxes

9 Months Ended

Sep. 30, 2016

Income Tax Disclosure [Abstract]

Income Taxes

7. Income Taxes

The following table presents components of income tax expense for the three and nine months ended September 30, 2016 and 2015:

	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2016		2015		2016		2015
Income tax based on income from continuing operations, at estimated tax rates of 37.5% in 2016 and 38.0% in 2015	$7,838		$8,331		$21,545		$15,285
Effect of change in estimated tax rate	(424	)	(1,002	)	-		-
Income tax expense before discrete items	7,414		7,329		21,545		15,285
Discrete tax expense/(benefit):
Provision for/resolution of tax audits and contingencies, net	-		4,521		(825	)	4,505
Adjustments to prior period tax liabilities	(11	)	(581	)	(254	)	(641	)
Other discrete tax adjustments, net	85		968		113		1,152
Enacted tax legislation	-		6		34		97
Total income tax expense	$7,488		$12,243		$20,613		$20,398

The third quarter estimated income tax rate based on continuing operations was 37.5 percent in 2016, compared to 38.0 percent for the same period in 2015.

The Company records the residual U.S. and foreign taxes on certain amounts of current year foreign earnings that have been targeted for repatriation to the U.S. As a result, such amounts are not considered to be permanently reinvested, and the income tax provision before discrete items includes the residual taxes on these earnings to the extent they cannot be repatriated in a tax-free manner. As of September 30, 2016, the Company has recorded a deferred tax liability on $59.0 million of prior year non-U.S. earnings that have been targeted for future repatriation to the U.S.

The Company conducts business globally and, as a result, files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions.  In the normal course of business we are subject to examination by taxing authorities throughout the world and we are currently under audit in various jurisdictions, including Canada, France and Italy. The open tax years range from 2007 to 2015.

It is reasonably possible that over the next twelve months the amount of unrecognized tax benefits may change within a range of $0.0 to a net decrease of $2.3 million, from the reevaluation of uncertain tax positions arising in examinations, in appeals, or in the courts, or from the closure of tax statutes.

In the first quarter of 2016, the Company reached a settlement with the German tax authorities over matters that had been outstanding for many years. The German Tax Authority had denied tax positions taken by the Company related to a 1999 reorganization. In 2009, the Company made a payment of $14.5 million in order to appeal the German Tax Authority decision, and we recorded that payment as an income tax receivable.  As additional information became available in recent years, we wrote down the receivable by $6.3 million in 2014 and $6.4 million in 2015 ($5.8 million in the third quarter and $0.6 million in the fourth quarter). In April 2016, we received $3.7 million representing the final settlement of this matter, and accordingly, we adjusted our income tax receivable as of March 31, 2016 to that amount, and recorded a discrete tax benefit of $0.5 million for the first quarter of 2016.