XML 96 R27.htm IDEA: XBRL DOCUMENT
v3.19.3.a.u2

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2019
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES During 2019, the Company recorded an increase to the tax provision of $74.3 million related to the reversal of net tax benefits recognized in previous tax years from federal renewable energy tax credit funds with DC Solar Solutions, Inc. and certain of its affiliates (“DC Solar”). During 2011 and 2013 through 2017, the Company invested in legal entities ("Funds") that purchased mobile solar generators from DC Solar. In December 2018, the Company became aware of an ongoing investigation by federal authorities, which included the seizure of DC Solar's assets. The Company promptly initiated an investigation. During the second quarter of 2019, based on additional information revealed during the course of the investigation, the Company determined that it is more likely than not that the tax benefits expected to be received by the Company related to its investments in the Funds will no longer be ultimately realizable. The facts relating to Company investments in the Funds continue to be developed and there are, and will continue to be, material differences in facts relevant to each Fund, as well as to funds owned by other investors. The ultimate tax results relating to the Company's investments continue to be uncertain. The Company’s management will continue to use its best judgment based upon the facts and circumstances related to the Company's investments in the Funds when determining the scope and timing of disclosures. The Company continues to participate with other fund investors to gather facts and obtain expert advice in assessing its tax position in these investments. On December 22, 2017, the Tax Cuts and Jobs Act (Tax Act) was enacted. The Tax Act significantly revised the U.S. corporate income tax system by, among other things, lowering corporate income tax rates from 35% to 21%, implementing a territorial tax system and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. Staff Accounting Bulletin (SAB) No. 118 provided a measurement period that should not extend beyond one year from the enactment date for companies to complete the accounting under the Tax Act. In accordance with SAB No. 118, based on the information available as of December 31, 2017 the Company recorded a provisional reduction of income taxes of $607.9 million as a result of the Tax Act. The Company’s deferred tax liabilities were reduced by $560.2 million due to the lower income tax rate. The remaining $47.7 million is the effects of the implementation of the territorial tax system and the remeasurement of U.S. deferred tax liabilities on unremitted foreign earnings. During the second quarter of 2018, the Company made purchase accounting adjustments related to the Valspar acquisition which resulted in the reversal of $27.5 million of income tax benefits related to the remeasurement of U.S. deferred tax liabilities. No other material adjustments were made under SAB No. 118 for the 2018 tax year. The Company completed its analysis of the Tax Act and finalized its accounting in the fourth quarter of 2018. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes using the enacted tax rates and laws that are currently in effect. Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2019, 2018 and 2017 were as follows:
| 2019 |  | 2018 |  | 2017
Deferred tax assets: |  |  |  |  |
Exit costs, environmental and other similar items | $ | 83.5 |  |  | $ | 84.5 |  |  | $ | 50.2 |
Employee related and benefit items | 129.3 |  |  | 97.0 |  |  | 104.1 |
Operating lease liabilities | 430.6 |  |  |  |  |
Other items | 204.0 |  |  | 161.6 |  |  | 113.2 |
Total deferred tax assets | 847.4 |  |  | 343.1 |  |  | 267.5 |
Deferred tax liabilities: |  |  |  |  |
Depreciation and amortization | 1,232.6 |  |  | 1,303.6 |  |  | 1,506.7 |
LIFO inventories | 80.5 |  |  | 64.5 |  |  | 66.5 |
Operating lease right-of-use assets | 417.8 |  |  |  |  |
Other items | 28.1 |  |  | 29.5 |  |  | 49.7 |
Total deferred tax liabilities | 1,759.0 |  |  | 1,397.6 |  |  | 1,622.9 |
Net deferred tax liabilities | $ | 911.6 |  |  | $ | 1,054.5 |  |  | $ | 1,355.4 |
As of December 31, 2019, the Company’s net deferred income tax liability relates primarily to deferred tax liabilities recorded for intangible assets acquired through the Valspar acquisition. Netted against the Company’s other deferred tax assets were valuation allowances of $84.6 million, $73.5 million and $44.1 million at December 31, 2019, 2018 and 2017, respectively. The increase in the valuation allowance in 2019 is primarily due to net operating losses of certain foreign subsidiaries, as well as foreign tax credit carryforwards due to uncertainty of their realization. The Company has $21.3 million of domestic net operating loss carryforwards acquired through acquisitions that have expiration dates through the tax year 2037, foreign tax credits of $22.5 million that expire in calendar years 2027 through 2029 and foreign net operating losses of $311.9 million. The foreign net operating losses are related to various jurisdictions that provide for both indefinite carryforward periods and others with carryforward periods that range from the tax years 2019 to 2039. Significant components of the provisions for income taxes were as follows:
| 2019 |  | 2018 |  | 2017
Current: |  |  |  |  |
Federal | $ | 440.1 |  |  | $ | 288.8 |  |  | $ | 269.3 |
Foreign | 71.1 |  |  | 53.2 |  |  | 53.5 |
State and local | 60.4 |  |  | 52.4 |  |  | 39.3 |
Total current | 571.6 |  |  | 394.4 |  |  | 362.1 |
Deferred: |  |  |  |  |
Federal | (83.7 | ) |  | (102.1 | ) |  | (486.6 | )
Foreign | (32.3 | ) |  | (35.3 | ) |  | (42.3 | )
State and local | (15.1 | ) |  | (6.0 | ) |  | (91.8 | )
Total deferred | (131.1 | ) |  | (143.4 | ) |  | (620.7 | )
Total provisions (credits) for income taxes | $ | 440.5 |  |  | $ | 251.0 |  |  | $ | (258.6 | )
Under provisions of the Tax Act, the Company received an income tax benefit of $10.4 million and $8.6 million in 2019 and 2018, respectively, related to foreign derived intangible income and incurred income tax expense of $7.9 million and $5.5 million in 2019 and 2018, respectively, related to Global Intangible Low Taxed Income (GILTI). The Company has made an accounting policy election to record GILTI as a period cost. Significant components of income before income taxes as used for income tax purposes, were as follows:
| 2019 |  | 2018 |  | 2017
Domestic | $ | 1,899.6 |  |  | $ | 1,309.3 |  |  | $ | 1,415.6 |
Foreign | 82.2 |  |  | 50.4 |  |  | 53.7 |
| $ | 1,981.8 |  |  | $ | 1,359.7 |  |  | $ | 1,469.3 |
A reconciliation of the statutory federal income tax rate to the effective tax rate follows:
| 2019 |  | 2018 |  | 2017
Statutory federal income tax rate | 21.0 | % |  | 21.0 | % |  | 35.0 | %
Effect of: |  |  |  |  |
State and local income taxes | 2.3 |  |  | 3.2 |  |  | 2.1 |
Investment vehicles | (1.3 | ) |  | (1.2 | ) |  | (1.4 | )
Domestic production activities |  |  |  |  |  |  | (3.1 | )
Employee share-based payments | (3.3 | ) |  | (3.2 | ) |  | (5.9 | )
Research and development credits | (1.1 | ) |  | (1.3 | ) |  | (0.9 | )
Amended returns and refunds | 0.1 |  |  | (1.6 | ) |  | (0.9 | )
Tax credit reversal | 3.7 |  |  |  |  |
Other - net | 0.8 |  |  | (0.3 | ) |  | (0.4 | )
Subtotal | 22.2 | % |  | 16.6 | % |  | 24.5 | %
Effect of: |  |  |  |  |
Tax Act |  |  |  | 1.9 |  |  | (40.8 | )
Subsidiary mergers |  |  |  |  |  |  | (4.2 | )
Reported effective tax rate | 22.2 | % |  | 18.5 | % |  | (20.5 | )%
The increase in the effective tax rate for 2019 compared to 2018 was primarily due to an increase to the 2019 tax provision of $74.3 million related to the reversal of net tax benefits recognized in previous tax years from federal renewable energy tax credit funds with DC Solar. In addition, the Company had received tax benefits in 2018 from filing amended U.S. income tax returns. The Company did not receive any significant tax benefits in 2019 related to amended returns. Due to the expiration of various state statutes that reduced potential audit exposure, favorable adjustments to 2018 state income tax returns filed in 2019 and the recognition of favorable tax attributes related to state tax credits the negative impact of state and local income taxes decreased in 2019 compared to 2018. The tax benefit related to employee share based payments in 2019 was consistent with the benefit in 2018. There were no significant adjustments recorded in the 2019 tax year related to the Tax Act. The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. The IRS is currently auditing the Company’s 2013, 2014, 2015, and 2016 income tax returns. No significant adjustments have been proposed by the IRS at this point in the audits. As of December 31, 2019, the federal statute of limitations has not expired for the 2013 through 2018 tax years. As of December 31, 2019, the Company is subject to non-U.S. income tax examinations for the tax years of 2013 through 2018. In addition, the Company is subject to state and local income tax examinations for the tax years 1998 through 2019. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| 2019 |  | 2018 |  | 2017
Balance at beginning of year | $ | 89.5 |  |  | $ | 59.0 |  |  | $ | 32.8 |
Additions from the Valspar acquisition |  |  |  | 12.4 |  |  | 18.9 |
Additions based on tax positions related to the current year | 14.9 |  |  | 12.9 |  |  | 6.8 |
Additions for tax positions of prior years | 107.9 |  |  | 11.0 |  |  | 4.0 |
Reductions for tax positions of prior years | (3.6 | ) |  | (2.0 | ) |  | (1.2 | )
Settlements |  |  |  | (1.4 | ) |  | (0.3 | )
Lapses of statutes of limitations | (5.7 | ) |  | (2.4 | ) |  | (2.0 | )
Balance at end of year | $ | 203.0 |  |  | $ | 89.5 |  |  | $ | 59.0 |
The increase in unrecognized tax benefits was primarily due to the reversal of tax benefits recognized in previous tax years from federal renewable energy tax credit funds as discussed above. Other increases in the balance of unrecognized tax benefits at December 31, 2019 were related to a number of positions taken on current and amended income tax returns filed in the U.S. federal, and various state and foreign jurisdictions. At December 31, 2019, 2018 and 2017, the Company had unrecognized tax benefits of $195.3 million, $83.0 million, $49.5 million, respectively, the recognition of which would have an effect on the effective tax rate. Included in the balance of unrecognized tax benefits at December 31, 2019 is $17.3 million related to tax positions for which it is reasonably possible that the total amounts could significantly change during the next twelve months. This amount represents a decrease in unrecognized tax benefits comprised primarily of items related to federal audits of partnership investments and expiring statutes in federal, foreign and state jurisdictions. The Company classifies all income tax related interest and penalties as income tax expense. During the year ended December 31, 2019, there was an increase in income tax interest and penalties of $1.6 million. There was an increase in income tax interest and penalties of $4.9 million and a decrease of $.8 million for the years ended December 31, 2018 and 2017, respectively. The Company accrued $26.2 million, $24.8 million and $14.6 million at December 31, 2019, 2018 and 2017, respectively, for the potential payment of interest and penalties.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration