The Company’s effective income tax rate was and for the quarter of fiscal and fiscal respectively and ()% and for the months of fiscal and fiscal respectively. The changes in the company’s tax rate for the quarter and months of fiscal compared to quarter and months of fiscal are due primarily to recording the items attributable to the new tax legislation in the U.S. as described below. Also included in the effective tax rate is discrete tax benefit of million and million for the quarter and months of fiscal year for the tax benefit of stock option exercises offset by a net discrete tax expense of million for months of fiscal related to the revaluation of contingent consideration, which is tax deductible. Discrete tax expense for the quarter and months of fiscal included million and million related to the revaluation of contingent consideration.

 

On the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code which will impact our fiscal year ended including, but limited to () reducing the U.S. federal corporate tax rate, () requiring a -time transition tax on certain unrepatriated earnings of foreign subsidiaries that electively be paid over years, and () accelerated year expensing of certain capital expenditures. The Tax Act reduces the federal corporate tax rate from  to  effective Internal Revenue Code Section provides that for our fiscal year ended we calculate a blended corporate tax rate of , which is based on a proration of the applicable tax rates before and after effective date of the Tax Act. The statutory tax rate of  will apply for fiscal and beyond.

 

The Tax Act also puts in place new tax laws that will impact our taxable income beginning in fiscal which include, but are limited to () creating a Base Erosion Anti-abuse Tax (BEAT), which is a new minimum tax, () generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries, () a new provision designed to tax currently global intangible low-taxed income (GILTI), which allows for the possibility of utilizing foreign tax credits and a deduction equal to  percent to offset the income tax liability (subject to some limitations), () a provision that could limit the amount of deductible interest expense, () the repeal of the domestic production activity deduction, () limitations on the deductibility of certain executive compensation, and () limitations on the utilization of foreign tax credits to reduce the U.S. income tax liability.

 

Shortly after the Tax Act was enacted, the SEC staff issued Staff Accounting Bulletin Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB ) which provides guidance on accounting for the Tax Act’s impact. SAB provides a measurement period, which in case should extend beyond year from the Tax Act enactment date, during which a company acting in good faith complete the accounting for the impacts of the Tax Act under ASC Topic In accordance with SAB the Company must reflect the income tax effects of the Tax Act in the reporting period in which the accounting under ASC Topic is complete.

 

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete, the Company can determine a reasonable estimate for those effects and record a provisional estimate in the financial statements in the reporting period in which a reasonable estimate can be determined. If a Company cannot determine a provisional estimate to be included in the financial statements, the Company should continue to apply ASC based on the provisions of the tax laws that were in effect immediately prior to the Tax Act being enacted. If a Company is unable to provide a reasonable estimate of the impacts of the Tax Act in a reporting period, a provisional amount must be recorded in the reporting period in which a reasonable estimate can be determined.

 

The Company recorded a provisional net tax benefit of  million related to the Tax Act in the period ended This provisional net benefit primarily consists of a net benefit of  million due to the re-measurement of our deferred tax accounts to reflect the corporate rate reduction impact to our net deferred tax balances and a net expense for the transition tax of  million.  There have been material changes to these estimates during the quarter.

 

Reduction in U.S. Corporate Rate: The Act reduces the U.S. federal statutory corporate tax rate to a blended  in fiscal year ending and  for fiscal year ending and beyond. While we are able to make a reasonable estimate of the impact of the reduction in corporate rate, we are continuing to analyze the temporary differences that existed on the date of enactment, the temporary differences originating in the current fiscal year prior to and the temporary differences we expect will reverse prior to

 

Transition Tax: The transition tax is a tax on the previously untaxed accumulated and current earnings and profits (E&P) of certain of our foreign subsidiaries as of In order to determine the amount of the Transition Tax, we must determine, in addition to other factors, the amount of post- E&P of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. E&P is similar to retained earnings of the subsidiary, but requires other adjustments to conform to U.S. tax rules. We are able to make a reasonable estimate of the transition tax and recorded a provisional transition tax obligation of  million which the Company expects to elect to pay, net of certain tax credit carryforwards, over years beginning in fiscal year Of this liability, million is recorded as a current liability with the remaining million classified as a long-term liability within our balance sheet. However, we are awaiting further interpretative guidance including information regarding state income tax implications and continuing to gather additional information to more precisely compute the amount of the transition tax. We expect that our estimate will be finalized in advance of the filing of our Form -K for fiscal

 

As of our practice and intention was to reinvest the earnings in our subsidiaries outside of the U.S., and U.S. deferred income taxes or foreign withholding taxes were recorded. As of we continue to assert that we plan to reinvest these earnings. The transition tax noted above will result in the previously untaxed foreign earnings being included in the federal and state fiscal taxable income. We are currently analyzing our global working capital requirements and the potential tax liabilities that would be incurred if the non-U.S. subsidiaries distribute cash to the U.S. parent, which include local country withholding tax and potential U.S. state taxation. Therefore, we are yet able to reasonably estimate the effect of this provision of the Tax Act and have recorded any withholding or state tax liabilities.

 

We are also continue to analyze other provisions of the Tax Act that come into effect for tax years starting to determine if these items would impact the effective tax rate. These provisions include Global intangibles low-taxed income (GILTI), Foreign Derived Intangible Income (FDII), Base Erosion Anti-abuse Tax (BEAT), eliminating U.S. federal income taxes on dividends from foreign subsidiaries, the new provision that could limit the amount of deductible interest expense, the limitations on the deductibility of certain executive compensation, and state tax implications of this federal tax legislation.