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INCOME TAXES | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXESThe Company is responsible for filing consolidated U.S., foreign and combined, unitary or separate state income tax returns. The Company is responsible for paying the taxes relating to such returns, including any subsequent adjustments resulting from the redetermination of such tax liabilities by the applicable taxing authorities. The components of the income before income taxes for the Company’s domestic and foreign operations for the years ended December 31 are provided below:
|  | For the year ended December 31,
In millions |  | 2020 |  | 2019 |  | 2018
Domestic |  | $ | 78.0 |  |  | $ | 117.9 |  |  | $ | 145.1 |
Foreign |  | 479.2 |  |  | 328.9 |  |  | 222.5 |
Income before income taxes |  | $ | 557.2 |  |  | $ | 446.8 |  |  | $ | 367.6 |
The consolidated provision for income taxes included in the Consolidated Statement of Income consisted of the following:
|  | For the year ended December 31,
In millions |  | 2020 |  | 2019 |  | 2018
Current taxes |  |  |  |  |  |
Federal |  | $ | 6.1 |  |  | $ | 5.7 |  |  | $ | 6.9 |
State |  | 17.0 |  |  | 0.5 |  |  | 5.8 |
Foreign |  | 92.4 |  |  | 141.4 |  |  | 68.5 |
|  | 115.5 |  |  | 147.6 |  |  | 81.2 |
Deferred taxes |  |  |  |  |  |
Federal |  | 36.1 |  |  | 19.8 |  |  | 4.7 |
State |  | (1.4) |  |  | 2.9 |  |  | 1.3 |
Foreign |  | (5.3) |  |  | (50.0) |  |  | (11.3) |
|  | 29.4 |  |  | (27.3) |  |  | (5.3) |
Total provision |  | $ | 144.9 |  |  | $ | 120.3 |  |  | $ | 75.9 |
A reconciliation of the United States federal statutory income tax rate to the effective income tax rate on operations for the years ended December 31 is provided below:
|  | For the year ended December 31,
In millions |  | 2020 |  | 2019 |  | 2018
U.S. federal statutory rate |  | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State taxes |  | 2.6 |  |  | 0.7 |  |  | 1.6 |
Foreign |  | 2.4 |  |  | 3.2 |  |  | 0.7 |
Research and development credit |  | (1.3) |  |  | (1.7) |  |  | (1.1) |
U.S. tax rate change |  | — |  |  | — |  |  | (0.6) |
U.S. tax reform provision (benefit) |  | 1.3 |  |  | 2.0 |  |  | (1.4) |
Transaction costs related to acquisitions |  | — |  |  | 1.0 |  |  | — |
Other, net |  | — |  |  | 0.7 |  |  | 0.4 |
Effective rate |  | 26.0 | % |  | 26.9 | % |  | 20.6 | %
The decrease in the effective tax rate in 2020 is primarily the result of non-deductible transaction related expenses incurred during 2019 as a result of the GE Transportation acquisition that did not recur in 2020, a decrease in the estimated liabilities resulting from provisions of the Tax Cuts and Jobs Act that were recognized in 2019 and a decrease in foreign tax expense primarily due to favorable changes in the mix of foreign earnings, partially offset by an increase in state income tax expense recognized in 2020. Components of deferred tax assets and liabilities were as follows:
|  | December 31,
In millions |  | 2020 |  | 2019
Deferred income tax assets: |  |  |  |
Accrued expenses and reserves |  | $ | 38.5 |  |  | $ | 35.8 |
Warranty reserve |  | 51.2 |  |  | 46.6 |
Deferred compensation/employee benefits |  | 42.6 |  |  | 32.3 |
Right-of-use asset |  | 70.0 |  |  | 63.1 |
Pension and postretirement obligations |  | 26.4 |  |  | 28.1 |
Property, plant & equipment |  | 47.8 |  |  | — |
Inventory |  | 45.0 |  |  | 25.8 |
Net operating loss carry forwards |  | 82.6 |  |  | 95.6 |
Other |  | 46.6 |  |  | 18.8 |
Gross deferred income tax assets |  | 450.7 |  |  | 346.1 |
Valuation allowance |  | 41.7 |  |  | 58.0 |
Total deferred income tax assets |  | 409.0 |  |  | 288.1 |
Deferred income tax liabilities: |  |  |  |
Property, plant & equipment |  | — |  |  | 42.7 |
Right-of-use liability |  | 69.3 |  |  | 63.1 |
Intangibles |  | 443.5 |  |  | 235.6 |
Total deferred income tax liabilities |  | 512.8 |  |  | 341.4 |
Net deferred income tax liability |  | $ | (103.8) |  |  | $ | (53.3) |
A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. As of December 31, 2020, the valuation allowance for certain foreign deferred tax asset carryforwards was $41.7 million primarily in Brazil, China, Denmark, France, the Netherlands and South Africa. Net operating loss carry-forwards in the amount of $312.6 million expire in various periods from December 31, 2021 to December 31, 2040. As of December 31, 2020, the liability for income taxes associated with unrecognized tax benefits was $16.4 million, of which $14.8 million, if recognized, would favorably affect the Company’s effective income tax rate. As of December 31, 2019, the liability for income taxes associated with unrecognized tax benefits was $17.2 million, all of which, if recognized, would favorably affect the Company’s effective tax rate. A reconciliation of the beginning and ending amount of the liability for income taxes associated with unrecognized tax benefits follows:
In millions |  | 2020 |  | 2019 |  | 2018
Gross liability for unrecognized tax benefits at beginning of year |  | $ | 17.2 |  |  | $ | 9.5 |  |  | $ | 6.9 |
Gross increases - unrecognized tax benefits in prior periods |  | 3.8 |  |  | 9.7 |  |  | 5.4 |
Gross decreases - audit settlement during year |  | (4.6) |  |  | — |  |  | — |
Gross decreases - expiration of audit statute of limitations |  | — |  |  | (2.0) |  |  | (2.8) |
Gross liability for unrecognized tax benefits at end of year |  | $ | 16.4 |  |  | $ | 17.2 |  |  | $ | 9.5 |
The Company includes interest and penalties related to unrecognized tax benefits in income tax expense. As of December 31, 2020, the total interest and penalties accrued was approximately $4.5 million. As of December 31, 2019, the total interest and penalties accrued was approximately $4.0 million. With limited exception, the Company is no longer subject to examination by various U.S. and foreign taxing authorities for years before 2015. At this time, the Company believes that it is reasonably possible that unrecognized tax benefits of approximately $6.2 million may change within the next 12 months due to the expiration of statutory review periods and current examinations.

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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