Quarterly report pursuant to Section 13 or 15(d)

Income Taxes

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Income Taxes
9 Months Ended
Sep. 30, 2015
Income Taxes  
Income Taxes

I. INCOME TAXES

 

We file our tax returns as a member of the Masco consolidated group for U.S. Federal and certain state jurisdictions through June 30, 2015, the Effective Date. As a result, certain tax attributes, primarily the net operating loss carryforward, are treated as an asset of the Masco consolidated group and may be utilized by the Masco consolidated group through the end of December 31, 2015, Masco’s tax year end.

 

Our effective tax rate was 42 percent and 40 percent for the three and nine months ended September 30, 2015, respectively, primarily due to (i) the change in the valuation allowance in relation to the amortization of indefinite lived assets, and (ii) the increase in the Company’s current U.S. Federal tax resulting from the use, by the Masco consolidated group, of a large portion of the U.S. Federal net operating losses.

 

For the three and nine months ended September 30, 2014, we incurred a 39 percent and a 33 percent effective tax rate, respectively, primarily due to a decrease in the valuation allowance resulting from the anticipated partial utilization of our U.S. Federal net operating loss carryforward and from a tax benefit recorded in the second quarter of 2014 to adjust certain income tax returns to amounts as filed.

 

Of the $434 million deferred tax assets on net operating loss carryforwards recorded at December 31, 2014, all but $31 million has been, and is anticipated to be, utilized  by the Masco consolidated group by December 31, 2015, which resulted in a reduction in the corresponding deferred tax asset and valuation allowance as of June 30, 2015. 

 

Continued improvements in our operations may result in the objective positive evidence necessary to warrant the reversal of all or a portion of the valuation allowance for U.S. Federal and certain state jurisdictions by the end of 2015.