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Income Taxes | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income Tax Disclosure [Text Block] | 11. INCOME TAXES The components of income (loss) before income taxes are as follows:
| 2018 |  | 2017 |  | 2016
| (in millions)
U.S. income (loss) | $ | (549.4 | ) |  | $ | (37.1 | ) |  | $ | 90.0 |
Non - U.S. income | 435.5 |  |  | 377.1 |  |  | 209.0 |
Total income (loss) before income taxes | $ | (113.9 | ) |  | $ | 340.0 |  |  | $ | 299.0 |
The following is a summary of the components of our provision for income taxes:
| 2018 |  | 2017 |  | 2016
| (in millions)
Current |  |  |  |  |
Federal | $ | (81.5 | ) |  | $ | 87.1 |  |  | $ | 0.4 |
State and local | 3.2 |  |  | (0.7 | ) |  | — |
Foreign | 46.5 |  |  | 62.4 |  |  | 27.5 |
Total current | $ | (31.8 | ) |  | $ | 148.8 |  |  | $ | 27.9 |
Deferred |  |  |  |  |
Federal | $ | (5.1 | ) |  | $ | (122.3 | ) |  | $ | 31.2 |
State and local | (6.7 | ) |  | (17.0 | ) |  | — |
Foreign | (13.5 | ) |  | (7.0 | ) |  | (0.8 | )
Total deferred | (25.3 | ) |  | (146.3 | ) |  | 30.4 |
Total income tax expense (benefit) | $ | (57.1 | ) |  | $ | 2.5 |  |  | $ | 58.3 |
The following is a reconciliation of income taxes calculated at the U.S. federal statutory income tax rate of 21% in 2018 and 35% in 2017 and 2016 to our provision for income taxes:
| 2018 |  | 2017 |  | 2016
Federal statutory | $ | (23.9 | ) |  | $ | 119.0 |  |  | $ | 104.7 |
Foreign income taxes | (39.7 | ) |  | (96.3 | ) |  | (61.3 | )
Change in enacted tax rate | (8.3 | ) |  | (107.6 | ) |  | (0.7 | )
Transition tax | 5.8 |  |  | 108.3 |  |  | — |
State and local | (12.8 | ) |  | (6.3 | ) |  | — |
Tax credits | (20.1 | ) |  | (8.8 | ) |  | (3.3 | )
Valuation allowance | 12.9 |  |  | (6.1 | ) |  | 1.1 |
Goodwill impairment | 21.6 |  |  | — |  |  | — |
Withholding taxes | 6.6 |  |  | 4.7 |  |  | 1.2 |
U.S. tax on unremitted foreign earnings | 4.1 |  |  | (18.6 | ) |  | 0.6 |
Global intangible low-taxed income | 8.0 |  |  | — |  |  | — |
Uncertain tax positions | (9.8 | ) |  | 13.5 |  |  | 1.6 |
Other | (1.5 | ) |  | 0.7 |  |  | 14.4 |
Effective income tax expense (benefit) | $ | (57.1 | ) |  | $ | 2.5 |  |  | $ | 58.3 |
In 2018, our income tax benefit is higher than the tax benefit computed at the U.S. federal statutory rate, and in 2017 and 2016 our income tax expense was lower than tax expense computed at the U.S. federal statutory rate, primarily due to the impact of favorable foreign tax rates, and the impact of income tax credits, partially offset by our inability to realize an income tax benefit for losses incurred in certain foreign and state jurisdictions. In addition, during 2018, we finalized an advance pricing agreement in a foreign jurisdiction and settled various other matters, which resulted in an income tax benefit and a reduction of our liability for unrecognized tax benefits and related interest and penalties of approximately $20 million. We also recorded an income tax benefit of approximately $85 million in 2018 as a result of the goodwill impairment charge, partially offset by a discrete tax expense related to the sale of the aftermarket business associated with our Powertrain segment. Our income tax expense and effective income tax rate for 2017 were lower than our income tax expense and effective income tax rate for 2016 primarily as a result of an increase in the proportionate share of earnings attributable to lower tax rate jurisdictions. In addition, subsequent to the acquisition of MPG, we re-evaluated our valuation allowance position with regard to jurisdictions in which consolidated state tax returns are filed and recorded an income tax benefit for the year ended December 31, 2017. This was partially offset by a discrete tax adjustment related to certain non-deductible transaction and acquisition-related costs. Additionally, we recognized a net tax benefit of approximately $20 million in 2017 related to accounting for the various provisions of the Tax Cuts and Jobs Act (the 2017 Act) under U.S. tax reform. The 2017 Act was enacted on December 22, 2017 in the United States. The following is a summary of the key provisions of the 2017 Act: •Reduces the U.S. federal statutory income tax rate for corporations from 35% to 21%
• | Requires companies to pay a one-time transition tax (Transition Tax) on certain foreign earnings for which U.S. income tax was previously deferred
• | Generally eliminates U.S. federal income taxes on dividends from foreign subsidiaries
• | Requires a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations referred to as global intangible low-taxed income (GILTI)
• | Eliminates the corporate alternative minimum tax (AMT) and changes how existing AMT credits can be realized
• | Creates a new limitation on deductible net interest expense incurred by U.S. corporations
• | Allows for immediate expensing of certain capital investments in the U.S. for the period September 27, 2017 through December 31, 2022
• | Creates a new base erosion anti-abuse minimum tax (BEAT)
• | Allows for a current deduction for a portion of foreign derived intangible income (FDII)
Following the enactment of the 2017 Act, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) 118 to provide guidance on the accounting and reporting impacts of the 2017 Act. SAB 118 stated that companies should have accounted for changes related to the 2017 Act in the period of enactment if all information was available and the accounting could have been completed. In situations where companies did not have enough information to complete the accounting in the period of enactment, the company either 1) recorded an estimated provisional amount if the impact of the change was reasonably estimable; or 2) continued to apply the accounting guidance that was in effect immediately prior to the 2017 Act if the impact of the change could not be reasonably estimated. If estimated provisional amounts were recorded, SAB 118 provided a measurement period of no longer than one year during which companies should adjust those amounts as additional information became available. In connection with our analysis of the impacts of the 2017 Act, we recorded estimated provisional amounts under SAB 118, resulting in a discrete net tax benefit of approximately $20 million for the year ended December 31, 2017. This net benefit primarily consisted of a benefit of approximately $110 million for the remeasurement of our net deferred tax liabilities as a result of the change in tax rate and a benefit of $18 million related to the reduction of a previously recorded deferred tax liability on certain foreign earnings, partially offset by expense of approximately $108 million related to the Transition Tax. These were provisional amounts at December 31, 2017 under SAB 118 because we had not yet completed our accounting for all of the enactment-date income tax effects of the 2017 Act. As of December 31, 2018, we have now completed our accounting for all of the enactment-date income tax effects of the 2017 Act. Upon further analysis of the 2017 Act, and based on notices and regulations issued and proposed by the U.S. Department of Treasury and the Internal Revenue Service, we finalized our calculations of the Transition Tax liability during 2018 and adjusted our December 31, 2017 provisional amount by an additional tax expense of $5.8 million. Also, based on finalizing our calculations during 2018 related to the remeasurement of certain deferred tax assets and liabilities, we adjusted our December 31, 2017 provisional amount by an additional tax benefit of $8.3 million. These adjustments to our provisional amounts resulted in a net income tax benefit of $2.5 million, which is included as a component of Income tax expense (benefit) in our Consolidated Statement of Operations for the year ended December 31, 2018. Also as part of the completion of our SAB 118 analysis, the balance of the 2018 Transition Tax liability was determined to be satisfied with existing U.S. tax attributes resulting in no current income tax payable. Finally, the 2017 Act subjects a U.S. shareholder to tax on GILTI earned by certain foreign subsidiaries. Under GAAP, we must make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years, or to provide for the tax expense related to GILTI in the year the tax is incurred as period expense. As we were evaluating the provisions of GILTI at December 31, 2017, we recorded no deferred amounts related to GILTI in 2017. We have elected to account for GILTI in the year the tax is incurred. As of December 31, 2018, we have refundable income taxes of $9.8 million classified as Prepaid expenses and other on our Consolidated Balance Sheet. At December 31, 2017, we had refundable income taxes of $30.0 million, of which $9.6 million was classified as Prepaid expenses and other, and $20.4 million was classified as Other assets and deferred charges on our Consolidated Balance Sheet. We also have income taxes payable of $10.0 million and $11.6 million classified as Accrued expenses and other on our Consolidated Balance Sheets as of December 31, 2018 and 2017, respectively. The approximate tax effect of each significant type of temporary difference and carryforward that results in a deferred tax asset or liability is as follows:
| December 31,
| 2018 |  | 2017
| (in millions)
Deferred tax assets |  |  |
Employee benefits | $ | 152.9 |  |  | $ | 155.9 |
Inventory | 22.9 |  |  | 20.8 |
Net operating loss (NOL) carryforwards | 166.0 |  |  | 172.4 |
Tax credit carryforwards | 44.3 |  |  | 96.4 |
Capital allowance carryforwards | 10.0 |  |  | 11.2 |
Fixed assets | 4.7 |  |  | 5.1 |
Deferred revenue | 7.4 |  |  | 14.7 |
Capitalized expenditures | 25.9 |  |  | 35.4 |
Other | 35.2 |  |  | 26.9 |
Valuation allowances | (183.3 | ) |  | (180.4 | )
Deferred tax assets | $ | 286.0 |  |  | $ | 358.4 |
Deferred tax liabilities |  |  |
U.S. tax on unremitted foreign earnings | (6.5 | ) |  | (2.4 | )
Other intangible assets | (176.0 | ) |  | (281.6 | )
Fixed assets | (141.9 | ) |  | (120.3 | )
Other | (8.7 | ) |  | (18.7 | )
Deferred tax liabilities | $ | (333.1 | ) |  | $ | (423.0 | )
Deferred tax asset (liability), net | $ | (47.1 | ) |  | $ | (64.6 | )
Deferred tax assets and liabilities recognized in our Consolidated Balance Sheets are as follows:
| December 31,
| 2018 |  | 2017
| (in millions)
U.S. federal and state deferred tax liability, net | $ | (76.6 | ) |  | $ | (79.4 | )
Other foreign deferred tax asset, net | 29.5 |  |  | 14.8 |
Deferred tax liability, net | $ | (47.1 | ) |  | $ | (64.6 | )
DEFERRED INCOME TAX ASSETS AND LIABILITIES AND VALUATION ALLOWANCES The deferred income tax assets and liabilities summarized above reflect the impact of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the basis of such assets and liabilities as measured by tax laws. ASC 740 - Income Taxes states that companies must measure deferred tax amounts at the rate at which they are expected to be realized. As of December 31, 2018 and December 31, 2017, we had deferred tax assets from domestic and foreign net operating loss and tax credit carryforwards of $220.3 million and $280.0 million, respectively. Approximately $106.0 million of the deferred tax assets at December 31, 2018 relate to NOL and tax credits that can be carried forward indefinitely with the remainder expiring between 2019 and 2038. Accounting guidance for income taxes requires a deferred tax liability to be established for the U.S. tax impact of undistributed earnings of foreign subsidiaries unless it can be shown that these earnings will be permanently reinvested outside the U.S. We have provided deferred income taxes for the estimated U.S. federal income tax, foreign income tax, and applicable withholding taxes on earnings of subsidiaries expected to be distributed. As a result of the enactment of the 2017 Act in the fourth quarter of 2017, we recognized a one-time transition tax expense related to certain foreign earnings for which U.S. tax had been previously deferred, and remeasured our deferred tax liability related to foreign earnings. In general, the 2017 Act allows for a dividends received deduction for the repatriation of foreign earnings to the U.S. and, as such, no additional U.S. federal income tax is expected. In accordance with the accounting guidance for income taxes, we review the likelihood that we will realize the benefit of deferred tax assets and estimate whether recoverability of our deferred tax assets is “more likely than not,” based on forecasts of taxable income in the related tax jurisdictions. In determining the requirement for a valuation allowance, the historical results, projected future operating results based upon approved business plans, eligible carry forward periods, and tax planning opportunities are considered, along with other relevant positive and negative evidence. If, based upon available evidence, it is more likely than not the deferred tax assets will not be realized, a valuation allowance is recorded. During 2018, we recorded a net tax expense of $16.0 million resulting from net losses in certain foreign and U.S. state and local jurisdictions with no corresponding tax benefit due to increases in our valuation allowance. This was partially offset by a net tax benefit of $3.1 million resulting from changes in determinations relating to the potential realization of deferred tax assets and the resulting reversal of a valuation allowance in a foreign jurisdiction. In 2016, we released a valuation allowance in China resulting in a $5.4 million tax benefit in our provision for income taxes. As of December 31, 2018 and December 31, 2017, we have a valuation allowance of $183.3 million and $180.4 million, respectively, related to net deferred tax assets in several foreign jurisdictions and U.S. state and local jurisdictions. UNRECOGNIZED INCOME TAX BENEFITS To the extent that we have uncertain tax positions, a determination is made as to whether such positions meet the “more likely than not” threshold. This threshold must be met in order to record any tax benefit and, to the extent that an uncertain tax position meets the "more likely than not" threshold, we have measured and recorded the highest probable benefit, and have established appropriate reserves for benefits that exceed the amount likely to be sustained upon examination. A reconciliation of the beginning and ending amounts of unrecognized income tax benefits is as follows:
| Unrecognized Income Tax |  | Interest and
| Benefits |  | Penalties
| (in millions)
Balance at January 1, 2016 | $ | 41.6 |  |  | $ | 6.9 |
Increase in prior year tax positions | 0.4 |  |  | 2.0 |
Decrease in prior year tax positions | (2.5 | ) |  | (0.5 | )
Increase in current year tax positions | 9.3 |  |  | — |
Settlement | (17.3 | ) |  | (5.6 | )
Foreign currency remeasurement adjustment | (3.3 | ) |  | (0.3 | )
Balance at December 31, 2016 | $ | 28.2 |  |  | $ | 2.5 |
Increase in prior year tax positions | 1.5 |  |  | 3.1 |
Decrease in prior year tax positions | (0.4 | ) |  | — |
Increase in current year tax positions | 10.5 |  |  | — |
Increase from acquisitions | 8.3 |  |  | 1.9 |
Settlement | (1.2 | ) |  | (0.1 | )
Foreign currency remeasurement adjustment | 0.8 |  |  | 0.1 |
Balance at December 31, 2017 | $ | 47.7 |  |  | $ | 7.5 |
Increase in prior year tax positions | 5.6 |  |  | 3.5 |
Decrease in prior year tax positions | (16.9 | ) |  | (2.5 | )
Increase in current year tax positions | 6.0 |  |  | — |
Settlement | (3.7 | ) |  | (1.6 | )
Balance at December 31, 2018 | $ | 38.7 |  |  | $ | 6.9 |
At December 31, 2018 and December 31, 2017, we had $38.7 million and $47.7 million of gross unrecognized income tax benefits, respectively. The decrease in unrecognized income tax benefits at December 31, 2018, as compared to December 31, 2017, is primarily attributable to finalizing an advance pricing agreement in a foreign jurisdiction, which resulted in a reduction of our liability for unrecognized tax benefits and related interest and penalties of approximately $20.0 million. In January 2016, we completed negotiations with the Mexican tax authorities to settle 2007 through 2009 transfer pricing audits. We made a payment of $22.9 million in January 2016 that fully satisfied our obligations for transfer pricing issues for tax years 2007 through 2013. Including these settlements, we made payments of approximately $28 million in 2016 to the Mexican tax authorities related to transfer pricing matters. In 2018, 2017, and 2016, we recognized expense of $1.0 million, $3.1 million and $1.5 million, respectively, related to interest and penalties in Income tax expense (benefit) on our Consolidated Statements of Operations. We have a liability of $6.9 million and $7.5 million related to the estimated future payment of interest and penalties at December 31, 2018 and 2017, respectively. The amount of the unrecognized income tax benefits, including interest and penalties, as of December 31, 2018 that, if recognized, would affect the effective tax rate is $42.4 million. We operate in multiple jurisdictions throughout the world and the income tax returns of several subsidiaries in various tax jurisdictions are currently under examination. We are currently under a U.S. federal income tax examination for our legacy AAM business for the years 2014 and 2015, and are under a U.S. federal income tax examination for our legacy MPG business for 2015. U.S. federal income tax examinations for the years 2012 and 2013 were settled in January 2017, resulting in no cash payment or reduction in our liability for unrecognized income tax benefits. We are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years prior to 2012. During the next 12 months, we may finalize another advance pricing agreement in a foreign jurisdiction, which could result in a cash payment to the relevant tax authorities and a reduction of our liability for unrecognized tax benefits and related interest and penalties. Although it is difficult to estimate with certainty the amount of any audit settlement, we do not expect any potential settlement to be materially different from what we have recorded in unrecognized tax benefits. Based on the status of ongoing tax audits, and the protocol of finalizing audits by the relevant tax authorities, it is not possible to estimate the impact of changes, if any, to previously recorded uncertain tax positions. We will continue to monitor the progress and conclusions of all ongoing audits and other communications with tax authorities and will adjust our estimated liability as necessary.

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- Definition 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. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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