XML 27 R17.htm IDEA: XBRL DOCUMENT v3.5.0.2
Income Taxes
6 Months Ended
Jun. 30, 2016
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
The Company provide for income taxes for each interim period based on the estimated annual effective tax rate for the year, adjusting for discrete items in the quarter in which they arise. The annual effective tax rate before discrete items was 38.3% and 38.5% for the six months ended June 30, 2016 and 2015, respectively. The 2016 annual effective tax rate differed from the statutory rate of 35% primarily due to the unfavorable impact of state income taxes, non-deductible equity charges, and other non-deductible expenditures, which were partially offset by the domestic production activities deduction and the Federal Research & Development credit, which was permanently reinstated on December 18, 2015. The 2015 annual effective tax rate differed from the statutory rate of 35% primarily due to the unfavorable impact of state income taxes, non-deductible equity charges, and other non-deductible expenditures, which were partially offset by the domestic production activities deduction.
For the six months ended June 2015, the Company had recorded a gain of $3.4 million attributable to the increase in the fair value of Omnicell's 15% minority interest in Avantec which was revalued in conjunction with our purchase of the remaining 85% of Avantec shares. This gain was treated as a discrete item and excluded from profit-before-tax in calculating the annual effective tax rate for the six months ended June 30, 2015.
As of June 30, 2016 and December 31, 2015, the Company had gross unrecognized tax benefits of $10.1 million and $7.2 million, respectively. The increase is largely due to unrecognized tax benefits recorded as part of the acquisition of Aesynt. It is the Company’s policy to classify accrued interest and penalties as part of the unrecognized tax benefits, but to record interest and penalties in operating expense. As of June 30, 2016 and December 31, 2015, the amount of accrued interest and penalties was $1.1 million and $0.2 million, respectively. The increase is attributable to the interest related to Aesynt's reserves.
As of June 30, 2016, calendar years 2011 and thereafter are open and subject to potential examination in one or more jurisdictions. However, because all of the net operating loss and research credit carryforwards that may be used in future years are subject to adjustment, if and when utilized, the Company's federal and California tax years remain open from 1996 and 1992, respectively. The Company is currently under examination by the Internal Revenue Service for the 2011 through 2014 tax years.
Although the Company believes it has adequately provided for uncertain tax positions, the provisions on these positions may change as revised estimates are made or the underlying matters are settled or otherwise resolved. It is not possible at this time to reasonably estimate changes in the unrecognized tax benefits within the next twelve months.