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INCOME TAXES | 12 Months Ended
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Dec. 31, 2017
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Income tax expense (benefit) consisted of the following (in thousands of dollars):
| For the Years Ended December 31,
| 2017 |  | 2016 |  | 2015
Current provision: |  |  |  |  |
U.S. Federal | $ | 248,090 |  |  | $ | 310,582 |  |  | $ | 412,545 |
U.S. State | 28,693 |  |  | 38,249 |  |  | 49,894 |
Foreign | 22,057 |  |  | 25,076 |  |  | 24,087 |
Total current | 298,840 |  |  | 373,907 |  |  | 486,526 |
Deferred tax provision (benefit) | 14,041 |  |  | 12,313 |  |  | (20,995 | )
Total provision | $ | 312,881 |  |  | $ | 386,220 |  |  | $ | 465,531 |
Earnings (losses) before income taxes by geographical area consisted of the following (in thousands of dollars):
| For the Years Ended December 31,
| 2017 |  | 2016 |  | 2015
U.S. | $ | 970,892 |  |  | $ | 1,073,879 |  |  | $ | 1,203,880 |
Foreign | (35,568 | ) |  | (54,821 | ) |  | 46,825 |
| $ | 935,324 |  |  | $ | 1,019,058 |  |  | $ | 1,250,705 |
The income tax effects of temporary differences that gave rise to the net deferred tax (liability) asset as of December 31, 2017 and 2016 were (in thousands of dollars):
| As of December 31,
| 2017 |  | 2016
Deferred tax assets: |  |  |
Inventory | $ | 13,641 |  |  | $ | 30,030 |
Accrued expenses | 43,889 |  |  | 70,021 |
Accrued employment-related benefits | 63,029 |  |  | 124,556 |
Foreign operating loss carryforwards | 72,197 |  |  | 67,350 |
Tax credit carryforward | 20,201 |  |  | 8,625 |
Other | 8,350 |  |  | 13,631 |
Deferred tax assets | 221,307 |  |  | 314,213 |
Less valuation allowance | (83,847 | ) |  | (72,705 | )
Deferred tax assets, net of valuation allowance | $ | 137,460 |  |  | $ | 241,508 |
Deferred tax liabilities: |  |  |
Property, buildings and equipment | (33,342 | ) |  | (75,690 | )
Intangibles | (119,302 | ) |  | (127,292 | )
Software | (19,903 | ) |  | (25,431 | )
Prepaids | (6,109 | ) |  | (11,959 | )
Other | (3,521 | ) |  | (1,067 | )
Deferred tax liabilities | (182,177 | ) |  | (241,439 | )
Net deferred tax (liability) asset | $ | (44,717 | ) |  | $ | 69 |
The net deferred tax (liability) asset is classified as follows: |  |  |
Noncurrent assets | $ | 22,362 |  |  | $ | 64,775 |
Noncurrent liabilities (foreign) | (67,079 | ) |  | (64,706 | )
Net deferred tax (liability) asset | $ | (44,717 | ) |  | $ | 69 |
At December 31, 2017, the Company had $285 million of net operating loss (NOLs) carryforwards related primarily to foreign operations. Some of the operating loss carryforwards may expire at various dates through 2037. The Company has recorded a valuation allowance, which represents a provision for uncertainty as to the realization of the tax benefits of these carryforwards and deferred tax assets that may not be realized. The Company's valuation allowance changed as follows (in thousands of dollars):
| For the Years Ended December 31,
| 2017 |  | 2016
Balance at beginning of period | $ | 72,705 |  |  | $ | 62,333 |
Increases primarily related to foreign NOLs | 12,861 |  |  | 12,174 |
Releases related to foreign NOLs | (8,035 | ) |  | (3,870 | )
Other changes, net | (4,703 | ) |  | (6,557 | )
Increase related to U.S. foreign tax credits | 11,019 |  |  | 8,625 |
Balance at end of period | $ | 83,847 |  |  | $ | 72,705 |
A reconciliation of income tax expense with federal income taxes at the statutory rate follows (in thousands of dollars):
| For the Years Ended December 31,
| 2017 |  | 2016 |  | 2015
Federal income tax | $ | 327,363 |  |  | $ | 356,670 |  |  | $ | 437,746 |
State income taxes, net of federal income tax benefit | 19,850 |  |  | 25,993 |  |  | 29,507 |
Clean energy credit | (37,138 | ) |  | (28,670 | ) |  | (13,358 | )
Foreign rate difference | 9,371 |  |  | 21,077 |  |  | 12,041 |
U.S. tax legislation impact (see note below) | (3,164 | ) |  | — |  |  | — |
Other - net | (3,401 | ) |  | 11,150 |  |  | (405 | )
Income tax expense | $ | 312,881 |  |  | $ | 386,220 |  |  | $ | 465,531 |
Effective tax rate | 33.5 | % |  | 37.9 | % |  | 37.2 | %
Clean Energy Credit In 2015 and 2016, the Company acquired noncontrolling interests in limited liability companies established to produce refined coal. The production and sale of refined coal that results in required emission reductions is eligible for tax credits under Section 45 of the Internal Revenue Code. The Company receives tax credits in proportion to its equity interest. The income tax credits from the investment resulted in a 4.0, 2.8 and a 1.0 percentage point reduction to the overall effective tax rate for 2017, 2016 and 2015, respectively. U.S. Tax Legislation On December 22, 2017, the Tax Cuts and Jobs Act (the Tax Act) was signed into law, which significantly revised the U.S. corporate income tax system by lowering corporate income tax rates from 35% to 21% effective January 1, 2018, allowing accelerated expensing of qualified capital investments for a specific period, limiting net interest expense deductions and transitioning the U.S. international taxation from a worldwide to a territorial tax system that requires a one-time transition tax on unremitted earnings of certain foreign subsidiaries that were previously tax deferred, among other changes. As of December 31, 2017, the Company has not fully completed the accounting for the impact from the Tax Act. However, the Company determined a reasonable estimate of such impact per the guidance in Staff Accounting Bulletin (SAB) 118 issued by the Securities and Exchange Commission (SEC) on December 22, 2017 and recognized a net provisional benefit amount of $3.2 million included as a component of income tax expense for the year ended December 31, 2017 and primarily related to deferred tax balances revaluations and one-time transition tax. The Company remeasured deferred assets and liabilities based on the rates at which they are expected to reverse in the future in consideration of the reduced income tax rates and recognized a net provisional benefit of $5.2 million for the year ended December 31, 2017. Certain aspects of the Tax Act cannot be fully completed at this time, mainly the full determination of assets placed in service in September 2017 or after for tax expensing purposes, the comprehensive evaluation of executive compensation contracts for tax deductibility purposes and the understanding of state tax implications. The Company expects to complete this analysis in 2018, which may potentially affect the remeasurement of the related deferred tax amounts. The Company estimated the one-time transition tax and recognized a net provisional expense of $2 million for the year ended December 31, 2017. The one-time transition tax calculation includes a $47 million estimated tax obligation related to the Company’s estimated total gross post-1986 earnings and profits (E&P) of $472 million that were previously deferred from U.S. income taxes, net of estimated foreign tax credits of $45 million. As of December 31, 2017, the Company has not completed its final calculation of the total post-1986 E&P for all foreign subsidiaries and any state tax impact. The amounts may change when the Company finalizes these calculations in 2018. Foreign Undistributed Earnings Estimated gross undistributed earnings of foreign subsidiaries at December 31, 2017, amounted to $472 million. These gross earnings are included in the U.S. one-time transition tax calculation in 2017 as aforementioned. The Company considers these undistributed earnings permanently reinvested in its foreign operations and is not recording a deferred tax liability for any foreign withholding taxes on such amounts. If at some future date the Company ceases to be permanently reinvested in its foreign subsidiaries, the Company may be subject to foreign withholding and other taxes on these undistributed earnings and may need to record a deferred tax liability for any outside basis difference in its investments in its foreign subsidiaries. Tax Uncertainties The Company recognizes in the financial statements a provision for tax uncertainties, resulting from application of complex tax regulations in multiple tax jurisdictions. The changes in the liability for tax uncertainties, excluding interest, are as follows (in thousands of dollars):
| For the Years Ended December 31,
| 2017 |  | 2016 |  | 2015
Balance at beginning of year | $ | 58,681 |  |  | $ | 60,576 |  |  | $ | 45,126 |
Additions for tax positions related to the current year | 3,930 |  |  | 14,119 |  |  | 14,916 |
Additions for tax positions of prior years | 4,786 |  |  | 13,215 |  |  | 2,653 |
Reductions for tax positions of prior years | (12,417 | ) |  | (14,774 | ) |  | (1,616 | )
Reductions due to statute lapse | (5,098 | ) |  | (1,527 | ) |  | (402 | )
Settlements, audit payments, refunds - net | (5,215 | ) |  | (12,928 | ) |  | (101 | )
Balance at end of year | $ | 44,667 |  |  | $ | 58,681 |  |  | $ | 60,576 |
The Company classifies the liability for tax uncertainties in deferred income taxes and tax uncertainties. Included in this amount are $21 million and $22 million at December 31, 2017 and 2016, respectively, of tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Any changes in the timing of deductibility of these items would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authorities to an earlier period. Excluding the timing items, the remaining amounts would affect the annual tax rate. The changes to tax positions of prior years in 2017 related generally to the impact of expiring statutes, conclusion of audits and audit settlements. The changes to tax positions of prior years in 2016 related generally to the impact of conclusion of audits and audit settlements. The Company regularly undergoes examination of its federal income tax returns by the Internal Revenue Service (IRS). In 2017, the Company settled the 2011 and 2012 federal audits with the IRS Appeals Office. The statute of limitations expired for the Company's 2013 federal tax return. The tax years 2014 through 2017 are open. The Company is also subject to audit by state, local and foreign taxing authorities. Tax years 2002-2017 remain subject to state and local audits and 2006-2017 remain subject to foreign audits. The amount of liability associated with the Company's tax uncertainties may change within the next 12 months due to the pending audit activity, expiring statutes or tax payments. A reasonable estimate of such change cannot be made. The Company recognizes interest expense and penalties related to its tax uncertainties in the provision for income taxes. For the years ended December 31, 2017, 2016 and 2015, the Company recognized an expense of approximately $1 million for each year. Total accrued interest and penalties related to tax uncertainties as of December 31, 2017, 2016 and 2015, were approximately $5 million, $4 million and $5 million, respectively.

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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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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