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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes

 

11.

Income Taxes

The components of income before taxes are as follows:

  

 

 

2021

 

 

2020

 

 

2019

 

Domestic

 

$

958.6

 

 

$

921.6

 

 

$

726.7

 

Foreign

 

 

73.1

 

 

 

52.2

 

 

 

47.0

 

Total

 

$

1,031.7

 

 

$

973.8

 

 

$

773.7

 

 

The following table summarizes the provision for U.S. federal, state and foreign income taxes:

 

 

 

2021

 

 

2020

 

 

2019

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. federal

 

$

130.6

 

 

$

114.2

 

 

$

117.2

 

State

 

 

34.1

 

 

 

32.1

 

 

 

24.9

 

Foreign

 

 

19.2

 

 

 

15.9

 

 

 

10.1

 

 

 

 

183.9

 

 

 

162.2

 

 

 

152.2

 

Deferred:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. federal

 

 

16.5

 

 

 

22.9

 

 

 

3.6

 

State

 

 

4.5

 

 

 

4.2

 

 

 

(0.5

)

Foreign

 

 

(0.7

)

 

 

(1.4

)

 

 

2.5

 

 

 

 

20.3

 

 

 

25.7

 

 

 

5.6

 

Total provision

 

$

204.2

 

 

$

187.9

 

 

$

157.8

 

 

Deferred tax assets (liabilities) consist of the following at December 31:

  

 

 

2021

 

 

2020

 

Deferred tax assets:

 

 

 

 

 

 

 

 

Accounts receivable

 

$

8.6

 

 

$

6.8

 

Deferred compensation

 

 

52.0

 

 

 

48.6

 

Pension, postretirement and postemployment benefits

 

 

6.1

 

 

 

6.3

 

Other

 

 

23.3

 

 

 

19.9

 

Tax credit carryforwards/other tax attributes

 

 

2.9

 

 

 

17.9

 

International operating loss carryforwards

 

 

8.2

 

 

 

8.7

 

Interest rate swaps

 

 

10.3

 

 

 

14.2

 

Total gross deferred tax assets

 

 

111.4

 

 

 

122.4

 

Valuation allowances

 

 

(13.1

)

 

 

(22.6

)

Total deferred tax assets

 

 

98.3

 

 

 

99.8

 

Deferred tax liabilities:

 

 

 

 

 

 

 

 

Goodwill

 

 

(270.2

)

 

 

(226.9

)

Trade names and other intangibles

 

 

(508.5

)

 

 

(520.4

)

Property, plant and equipment

 

 

(55.5

)

 

 

(56.1

)

Total deferred tax liabilities

 

 

(834.2

)

 

 

(803.4

)

Net deferred tax liability

 

$

(735.9

)

 

$

(703.6

)

Long term net deferred tax asset

 

 

9.2

 

 

 

3.7

 

Long term net deferred tax liability

 

 

(745.1

)

 

 

(707.3

)

Net deferred tax liability

 

$

(735.9

)

 

$

(703.6

)

 

 

The difference between tax expense and the tax that would result from the application of the federal statutory rate is as follows:

 

 

 

2021

 

 

2020

 

 

2019

 

Statutory rate

 

 

21

%

 

 

21

%

 

 

21

%

Tax that would result from use of the federal statutory rate

 

$

216.6

 

 

$

204.5

 

 

$

162.4

 

State and local income tax, net of federal effect

 

 

30.5

 

 

 

28.7

 

 

 

19.3

 

Varying tax rates of foreign affiliates

 

 

2.6

 

 

 

2.8

 

 

 

1.8

 

Valuation Allowances

 

 

(8.5

)

 

 

2.9

 

 

 

0.9

 

Stock Options Exercised

 

 

(29.0

)

 

 

(29.4

)

 

 

(16.1

)

Worthless Stock Deduction - Investment in Brazil

 

 

0.0

 

 

 

0.0

 

 

 

(12.0

)

Reserve for Uncertain Tax Position - Investment in Brazil

 

 

0.0

 

 

 

(10.6

)

 

 

12.0

 

Other

 

 

(8.0

)

 

 

(11.0

)

 

 

(10.5

)

Recorded tax expense

 

$

204.2

 

 

$

187.9

 

 

$

157.8

 

Effective tax rate

 

 

19.8

%

 

 

19.3

%

 

 

20.4

%

                   

  

At December 31, 2021, certain foreign subsidiaries of the Company had net operating loss carryforwards of approximately $25.1.  The net operating loss carryforwards are not subject to expiration.     

 

The Company believes that it is more likely than not that the benefit from these net operating loss carryforwards will not be realized.  In recognition of this risk, the Company has provided a valuation allowance of $8.1 and $8.7 at December 31, 2021 and 2020, respectively, on the deferred tax asset relating to these net operating loss carryforwards.     

 

The Company also believes that it is more likely than not that the benefit from certain additional deferred tax assets of a foreign subsidiary will not be realized.  In recognition of this risk, the Company maintains a valuation allowance of $0.9 and $1.3 at December 31, 2021 and 2020, respectively, on these deferred tax assets.    

 

As of December 31, 2020 the Company maintained a valuation allowance of $12.6 relating to certain foreign tax credit carryforwards which were determined not more likely than not to be realized.  During 2021, the Company determined that it was able to utilize approximately $8.5 in foreign tax credits in 2018, 2019, and 2020, resulting in a reduction in the valuation allowance, and a corresponding tax benefit.  Accordingly, the Company filed amended returns with the IRS claiming refunds for 2018 and 2019, totaling $6.5, and utilized $2.0 of foreign tax credits in 2020.  The Company determined that it is not more likely than not that the remaining benefit from certain foreign tax credit carryforwards will be realized.  In recognition of this risk, the Company maintained a valuation allowance of $4.1 at December 31, 2021, on the deferred tax asset relating to these foreign tax credit carryforwards.  The Company does not have any undistributed earnings of foreign subsidiaries that are considered to be indefinitely reinvested outside of the U.S.

  

The Company has recorded liabilities in connection with uncertain tax positions, which, although supportable by the Company, may be challenged by tax authorities.  Under applicable accounting guidance, these tax positions do not meet the minimum threshold required for the related tax benefit to be recognized in the income statement.  

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

 

 

 

2021

 

 

2020

 

 

2019

 

Unrecognized tax benefits at January 1

 

$

7.3

 

 

$

18.9

 

 

$

4.7

 

Gross increases - tax positions in current period

 

 

0.3

 

 

 

0.0

 

 

 

13.2

 

Gross increases - tax positions in prior period

 

 

0.8

 

 

 

1.6

 

 

 

1.4

 

Gross decreases - tax positions in prior period

 

 

0.0

 

 

 

(11.8

)

 

 

0.0

 

Decreases due to settlements and payments

 

 

0.0

 

 

 

(1.4

)

 

 

0.0

 

Lapse of statute of limitations

 

 

(3.7

)

 

 

0.0

 

 

 

(0.4

)

Unrecognized tax benefits at December 31

 

$

4.7

 

 

$

7.3

 

 

$

18.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

During 2019 the Company ceased conducting business in Brazil and recorded a $12.0 reserve for an uncertain tax position relating to a worthless stock deduction for its investment in Brazil.  The Company requested a ruling from the IRS in connection with the worthless stock deduction.  During 2020 the Company reached a settlement with the IRS for $1.4 relating to the worthless stock deduction and released the related $12.0 reserve, which resulted in a $10.6 income tax benefit.  

 

Included in the balance of unrecognized tax benefits at December 31, 2021, December 31, 2020 and December 31, 2019 are $4.1, $6.2 and $18.0, respectively, of tax benefits that, if recognized, would affect the effective tax rate. Also included in the balance of unrecognized tax benefits at December 31, 2021, December 31, 2020 and December 31, 2019 are $0.6, $1.1 and $0.9, respectively, of tax benefits that, if recognized, would result in adjustments to deferred taxes.

 

The Company is subject to U.S. federal income tax as well as income tax in multiple state and international jurisdictions.  The Company’s U.S. federal income tax returns are closed for tax years through 2017.  The Company is currently under audit by several state taxing authorities for the years 2016 through 2017.  It is reasonably possible that a decrease of approximately $0.7 in the unrecognized tax benefits may occur within the next twelve months related to the settlement of these audits or the lapse of applicable statutes of limitations.

 

The Company’s policy for recording interest associated with income tax examinations is to record interest as a component of Income before Income Taxes. During the twelve months ended December 31, 2021, December 31, 2020, and December 31, 2019, the Company recognized interest expense associated with uncertain tax positions of approximately $0.5, $0.4 and $0.4, respectively.  As of December 31, 2021, December 31, 2020, and December 31, 2019 the Company had accrued interest expense related to unrecognized tax benefits of $0.5, $1.0 and $0.6, respectively.