Income Taxes (Notes)

3 Months Ended

Mar. 31, 2017

Income Taxes [Abstract]

Income Tax Disclosure

Income Taxes

Income tax expense during interim periods is based on our estimated annual effective income tax rate plus any discrete items, which are recorded in the period in which they occur. Discrete items include, among others, such events as changes in estimates due to the finalization of tax returns, tax audit settlements, expiration of statutes of limitation, and increases or decreases in valuation allowances on deferred tax assets. Our effective tax rate was a benefit of 77.4% and expense of 40.5% for the three months ended March 31, 2017 and 2016, respectively. The effective tax rate for the three months endedMarch 31, 2017 is lower than the federal statutory tax rate of 35% primarily due to the recent IRS tax settlement discussed below and a result of tax benefits recognized during the quarter on the settlement of employee share-based awards in accordance with a revised accounting standard for share-based compensation.

Unrecognized Tax Benefits

As of March 31, 2017, the total amount of our unrecognized tax benefits was $79.5 million and the total amount of our accrued interest was $7.3 million.

We reached an agreement with the Internal Revenue Service (“IRS”) to resolve the issues under audit with respect to tax years 1999 through 2005. In March 2017, we received from the IRS Office of Appeals the fully executed Form 870-AD, which, subject to finalization of computations, effectively settles the issues under audit for those years. As a result of this resolution, we recognized a reduction in our unrecognized tax benefits of $143.0 million of which $102.5 million was recognized as income tax benefit for the matters that were effectively settled with an increase in our taxes payable of $40.5 million.

We remain under audit for years 2006 and 2007 as a result of carryback claims. In addition, we are under audit by various state jurisdictions for years 2000 through 2015. There are currently no federal or provincial audits in Canada. It is reasonably possible that the amount of unrecognized tax benefits could significantly decrease over the next 12 months. However, due to the uncertainty regarding the timing of completion and possible outcomes on the outstanding audits, a current estimate of the range of decrease that may occur within the next 12 months cannot be made.