|3 Months Ended|
Mar. 31, 2018
|Income Tax Disclosure [Abstract]|
14. Income Taxes:
The effective income tax rate for the three months ended March 31, 2018 was (1,959.3)% compared to 55.7% for the three months ended March 31, 2017. The Company’s effective income tax rate fluctuates based primarily on changes in income mix and repatriation of income taxes from foreign subsidiaries.
The difference between the U.S. federal statutory income tax rate and the Company’s effective income tax rate for the three months ended March 31, 2018 was mainly due to the tax effect of permanent differences related to foreign currency exchange loss, inclusion of foreign earnings in the U.S. as a result of recently enacted tax law, pre-tax losses with no associated tax benefit, foreign withholding taxes and state taxes.
The difference between the U.S. federal statutory income tax rate and the Company’s effective income tax rate for the three months ended March 31, 2017 was mainly due to the tax effect of repatriating foreign earnings back to the United States as dividends offset by lower tax rates in foreign jurisdictions as compared to the U.S. tax rate, foreign withholdings taxes, state taxes and non-deductible transaction costs.
On December 22, 2017, the U.S. government enacted tax reform legislation (the Tax Cuts and Jobs Act of 2017, or “TCJA”) that introduced significant changes to the taxation of multination corporations. As a result of the TCJA, at December 31, 2017 the Company recorded a provisional tax benefit of $64,343 related to the corporate rate reduction from 35% to 21%, a provisional tax expense of $43,000 related to the one-time mandatory transition tax and a provisional tax benefit of $25,196 related to undistributed foreign earnings that are no longer intended to be permanently reinvested.
Due to the complexities involved in accounting for the enactment of the TCJA, the SEC staff issued Staff Accounting Bulletin (“SAB”) No. 118, which allowed the Company to record provisional amounts in earnings for the year ended December 31, 2017. SAB No. 118 provides that where reasonable estimates can be made, provisional accounting should be employed with respect to such estimates and when no reasonable estimate can be made, the provisional accounting may be based on the tax law in effect prior to the TCJA. During the three months ended March 31, 2018, there were no changes made to the provisional amounts recognized in 2017. As such, there is no impact to the March 31, 2018 effective tax rate for changes to such provisional amounts. The Company will continue to analyze the effects of the TCJA on its financial statements. Revised impacts with respect to the TCJA will be recorded as they are identified during the allowed measurement period prescribed by SAB No. 118. This measurement period extends up to one year from the enactment date.
The final impact of the TCJA may differ from the provisional amounts that have been recognized, possibly materially, due to, among other items, changes in the Company’s interpretation of the TCJA, legislative or administrative actions taken to clarify the intent of the statutory language which may differ from the Company’s current interpretation, any changes in accounting standards for income taxes made in response to the TCJA or any updates or changes to original estimates used to compute the provisional amounts. Updates to original estimates may include changes to earnings estimates as well as applicable foreign exchange rates. Additionally, the Company’s U.S. tax returns for the 2017 tax year will be filed during the fourth quarter of 2018 and any changes to the tax positions for temporary differences which differ from the provisional estimates used will result in an adjustment of the estimated tax impacts recorded as of December 31, 2017.
The TCJA enacted certain provisions that take effect on January 1, 2018. These provisions include, but are not limited to, the new Global Intangible Low-Taxed Income (“GILTI”) tax rules. Due to the complexity of the new GILTI tax, the Company is continuing to evaluate the GILTI provision of the TCJA and its impact on the financial statements, which is currently uncertain. Per recent guidance issued by the FASB, the Company will be allowed to make an accounting policy election to either (1) treat the taxes incurred as a result of the GILTI provision as a current-period expense when incurred or (2) factor such amounts into our measurement of deferred taxes. The Company’s selection of an accounting policy election will depend, in part, on analyzing its specific facts to determine the expected impact under each method. However, at this time the Company expects to treat any expense incurred as a current-period expense.
With respect to operating results for the three months ended March 31, 2018, the Company has incorporated a reasonable estimate of the GILTI income inclusion when estimating its GAAP annual effective tax rate. The Company expects this inclusion to be included in its 2018 U.S. taxable income. However, this estimated 2018 GILTI income inclusion may change materially as the Company evaluates future legislative or administrative guidance that is put forth, any updates to assumptions and figures used for the current reasonable estimate or as a result of future tax planning or changes to the Company’s current structure and business.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://www.xbrl.org/2003/role/presentationRef