16.    Income Taxes

 

The following table includes the Company’s loss before income tax provision (benefit), income tax provision (benefit) and effective tax rate:

 

 

For the three months ended March 31, 2018, our effective tax rate differed from the statutory rate primarily due to the release of the Company’s valuation allowance as a result of additional deferred tax liabilities recorded with the acquisition of FolioDynamix as well as the impact of the Base Erosion and Anti Abuse Tax. For the three months ended March 31, 2017, our effective tax rate differed from the statutory rate primarily due to the valuation allowance the Company had placed on all US deferreds with the exception of indefinite-lived intangibles and unrepatriated foreign earnings and profits, resulting in no benefit being recognized for the tax loss in the US.

 

In December 2017, the Tax Cuts and Jobs Act (“Tax Act”) was enacted into United States law. Beginning in 2018, the Tax Act includes the global intangible low-taxed income (“GILTI”) and base erosion anti-abuse tax (“BEAT”) provisions. We elected to account for GILTI tax in the period in which it is incurred. The GILTI provision requires us to include in our U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. We expect to fully offset any GILTI income with Net Operating Losses (“NOLs”). As a result of our domestic valuation allowance, we do not expect a financial statement impact due to the GILTI provision. Additionally, the Tax Act requires us to calculate a minimum tax on our foreign earnings and profits; BEAT. As a result of the BEAT provision our provision for income taxes for the three months ended March 31, 2018 increased by $2,000.

 

In accordance with Staff Accounting Bulletin 118, we recognized provisional tax impacts related to the deemed repatriated foreign earnings in our consolidated financial statements for the year ended December 31, 2017. The ultimate impact may differ from those provisional amounts, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions we have made, additional regulatory guidance that may be issued, and actions we may take as a result of the Tax Act. During the three months ended March 31, 2018, we did not record any adjustments to our provisional amounts included in our consolidated financial statements for the year ended December 31, 2017. The accounting is expected to be completed when the 2017 U.S. corporate income tax return is filed in October of 2018.

 

The total gross liability for unrecognized tax benefits, exclusive of interest and penalties, was $18,675 and $18,312 at March 31, 2018 and December 31, 2017, respectively. Of this amount, a portion of the unrecognized tax benefits was recorded as a reduction of deferred tax assets instead of a non-current liability. The portion of the unrecognized tax benefits, exclusive of interest and penalties, recorded as a non-current liability is $4,824 and $4,626 at March 31, 2018 and December 31, 2017, respectively.

 

At March 31, 2018, the amount of unrecognized tax benefits, including interest and penalties, that would benefit the Company’s effective tax rate, if recognized, was $10,961.  At this time, the Company estimates that the liability for unrecognized tax benefits will not decrease in the next twelve months as it is not anticipated that reviews by tax authorities will be completed and there will be any expiration of certain statutes of limitations in this time period.

 

The Company recognizes potential interest and penalties related to unrecognized tax benefits in income tax expense. Income tax expense includes $287 and $510 of potential interest and penalties related to unrecognized tax benefits for the three months ended March 31, 2018 and 2017, respectively. The Company had accrued interest and penalties of $6,305 and $6,018 as of March 31, 2018 and December 31, 2017, respectively.