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Income Taxes | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | Note 16: Income Taxes The Company's geographic sources of income (loss) before income taxes and non-controlling interest are as follows (in millions):
| Year ended December 31,
| 2020 |  | 2019 |  | 2018
United States | $ | (181.2) |  |  | $ | (308.2) |  |  | $ | (181.8) |
Foreign | 357.8 |  |  | 584.8 |  |  | 936.8 |
Income before income taxes | $ | 176.6 |  |  | $ | 276.6 |  |  | $ | 755.0 |
The Company's provision (benefit) for income taxes is as follows (in millions):
| Year ended December 31,
| 2020 |  | 2019 |  | 2018
Current: |  |  |  |  |
Federal | $ | 0.6 |  |  | $ | 1.2 |  |  | $ | (2.0) |
State and local | 0.1 |  |  | — |  |  | (2.2) |
Foreign | 54.0 |  |  | 48.5 |  |  | 55.3 |
| 54.7 |  |  | 49.7 |  |  | 51.1 |
Deferred: |  |  |  |  |
Federal | (69.2) |  |  | (5.0) |  |  | 99.4 |
State and local | (66.4) |  |  | — |  |  | — |
Foreign | 21.1 |  |  | 18.0 |  |  | (25.4) |
| (114.5) |  |  | 13.0 |  |  | 74.0 |
Total provision (benefit) | $ | (59.8) |  |  | $ | 62.7 |  |  | $ | 125.1 |
A reconciliation of the U.S. federal statutory income tax rate to the Company's effective income tax rate is as follows:
|  | Year ended December 31,
|  | 2020 |  | 2019 |  | 2018 |
U.S. federal statutory rate |  | 21.0 | % |  | 21.0 | % |  | 21.0 | % |
Increase (decrease) resulting from: |  |  |  |  |  |  |
State and local taxes, net of federal tax benefit |  | (1.4) |  |  | (2.6) |  |  | (1.0) |  |
Impact of U.S. Tax Reform and related effects (1) |  | — |  |  | — |  |  | 4.7 |  |
Impact of foreign operations |  | 7.6 |  |  | 3.8 |  |  | (1.2) |  |
Impact of U.S. tax method changes (2) |  | — |  |  | — |  |  | (6.4) |  |
Impact of the Domestication (3) |  | (35.7) |  |  | — |  |  | — |  |
Change in valuation allowance and related effects (4) |  | (24.4) |  |  | 1.8 |  |  | 0.6 |  |
Non-deductible share-based compensation costs |  | 1.7 |  |  | (0.5) |  |  | (0.5) |  |
U.S. federal R&D credit |  | (3.6) |  |  | (3.7) |  |  | (1.1) |  |
Nondeductible officer compensation |  | 1.1 |  |  | 1.5 |  |  | 0.4 |  |
Other |  | (0.1) |  |  | 1.4 |  |  | 0.1 |  |
Total |  | (33.8) | % |  | 22.7 | % |  | 16.6 | % |
(1)For the year ended December 31, 2018, this primarily included expense of (i) $31.8 million, or 4.2%, related to the recognition of deferred tax liability for undistributed prior years' earnings of the foreign subsidiaries, (ii) $1.8 million, or 0.3% related to the limitation on deductibility of prior years’ executive compensation, and (iii) $1.5 million, or 0.2% related to the impact of the mandatory repatriation tax. These adjustments were made pursuant to SAB 118. (2)For the year ended December 31, 2018, this included a one-time benefit of $48.2 million, or 6.4%, related to U.S. tax method changes made during the year that impacted the Company’s GILTI inclusion. (3)On July 6, 2020, the Company completed a simplification of its corporate structure by repatriating the economic rights of its non-U.S. IP to the United States via domestication of certain foreign subsidiaries (the "Domestication"). The Domestication more closely aligns the Company's corporate structure with its operating structure in accordance with the OECD’s BEPS conclusions and changes to U.S. and European tax laws. The impact of the Domestication, which is regarded as a change in tax status, resulted in a benefit primarily from recognizing certain deferred tax assets, net of deferred tax liabilities, of $63.0 million, or 35.7%. (4)For the year ended December 31, 2020, this included a benefit of $49.4 million, or 28.0%, for the release of a partial state valuation allowance due to an increase to forecasted domestic income as a result of the Domestication of certain foreign subsidiaries and an expense of $61.8 million, or 35.0%, primarily related to the expiration of Japan net operating losses, netted with the offsetting benefit of $61.8 million, or 35.0%, primarily for the decrease in the related valuation allowance for those same Japan net operating losses. For the year ended December 31, 2019, this included an expense of $11.2 million, or 4.0%, primarily related to the write-off of Hong Kong NOL and expiration of Japan NOL, netted with the offsetting benefit of $11.2 million, or 4.0%, primarily for the decrease in related valuation allowance for those same Hong Kong and Japan NOLs. For the year ended December 31, 2018, this included an expense of $135.2 million, or 17.9%, primarily related to the expiration of Japan NOLs, netted with the offsetting benefit of $135.2 million, or 17.9%, primarily for the decrease in the related valuation allowance for those same Japan NOLs. The Company’s effective tax rate for 2020 was a benefit of (33.8)%, which differs from the U.S. federal income tax rate of 21%, primarily due to the Domestication of certain foreign subsidiaries and a partial release of state valuation allowance, partially offset by foreign taxes for which the Company will not receive a U.S. tax credit as well as period costs related to the Company's GILTI inclusion. The Company’s effective tax rate for 2019 was 22.7%, which differs from the U.S. federal income tax rate of 21%, primarily due to foreign taxes for which the Company will not receive a U.S. tax credit as well as period costs related to the Company's GILTI inclusion. The Company's effective tax rate for 2018 was 16.6%, which differs from the U.S. federal statutory income tax rate of 21% primarily due to a one-time benefit of U.S. tax method changes made during the year that impacted the Company's GILTI inclusion. The tax effects of temporary differences in the recognition of income and expense for tax and financial reporting purposes that give rise to significant portions of the net deferred tax asset (liability) are as follows (in millions):
|  | As of December 31,
|  | 2020 |  | 2019
NOL and tax credit carryforwards |  | $ | 471.6 |  |  | $ | 612.9 |
163 (j) interest expense carryforward |  | 65.7 |  |  | 49.3 |
Lease liabilities (1) |  | 32.5 |  |  | 22.1 |
ROU asset (1) |  | (32.5) |  |  | (22.1) |
Tax-deductible goodwill and amortizable intangibles |  | (38.0) |  |  | (48.6) |
Capitalization of research and development expenses |  | 90.7 |  |  | 42.7 |
Reserves and accruals |  | 68.4 |  |  | 27.5 |
Property, plant and equipment |  | (95.8) |  |  | (81.2) |
Inventories |  | 84.3 |  |  | 22.0 |
Undistributed earnings of foreign subsidiaries |  | (57.5) |  |  | (63.7) |
Share-based compensation |  | 7.7 |  |  | 10.3 |
Pension |  | 21.2 |  |  | 26.3 |
Other |  | 3.2 |  |  | 8.0 |
Deferred tax assets and liabilities before valuation allowance |  | 621.5 |  |  | 605.5 |
Valuation allowance |  | (249.9) |  |  | (357.9) |
Net deferred tax asset |  | $ | 371.6 |  |  | $ | 247.6 |
(1)The deferred tax assets and liabilities disclosure as of December 31, 2019 has been adjusted to reflect the gross deferred tax right-of-use asset and related gross deferred lease liability recognized in accordance with the New Leasing Standard. As of December 31, 2020 and 2019, the Company had approximately $99.0 million and $521.9 million, respectively, of federal NOL carryforwards, before reduction for unrecognized tax benefits, which are subject to annual limitations prescribed in Section 382 of the Internal Revenue Code. The decrease is due to current year utilization. If not utilized, a portion of the NOLs will expire in varying amounts from 2028 to 2036; however, a small portion of the NOL that was generated after December 31, 2017 is carried forward indefinitely. As of December 31, 2020 and 2019, the Company had approximately $153.4 million and $134.5 million, respectively, of federal credit carryforwards, before consideration of valuation allowance or reduction for unrecognized tax benefits, which are subject to annual limitations prescribed in Section 383 of the Internal Revenue Code. If not utilized, the credits will expire in varying amounts from 2028 to 2040. As of December 31, 2020 and 2019, the Company had approximately $741.3 million and $825.8 million, respectively, of state NOL carryforwards, before consideration of valuation allowance or reduction for unrecognized tax benefits. The decrease is primarily due to current year utilization. If not utilized, a portion of the NOLs will expire in varying amounts starting in 2021. Certain states have adopted the federal rule allowing unlimited NOL carryover for NOLs generated in tax years beginning after December 31, 2017. Therefore, a portion of the state NOLs generated after 2017 carry forward indefinitely. As of December 31, 2020 and 2019, the Company had $141.1 million and $138.6 million, respectively, of state credit carryforwards before consideration of valuation allowance or reduction for unrecognized tax benefits. If not utilized, a portion of the credits will begin to expire in varying amounts starting in 2021. As of December 31, 2020 and 2019, the Company had approximately $581.6 million and $757.1 million, respectively, of foreign NOL carryforwards, before consideration of valuation allowance. The decrease is primarily due to expiration of Japan NOLs as discussed above. If not utilized, a portion of the NOLs will begin to expire in varying amounts starting in 2021. A significant portion of these NOLs will expire by 2025. As of December 31, 2020 and 2019, the Company had $69.4 million and $76.8 million, respectively, of foreign credit carryforwards before consideration of valuation allowance. If not utilized, the majority of these credits will expire by 2026. The Company continues to maintain a valuation allowance of $128.5 million on a portion of its Japan NOLs, which expire in varying amounts from 2021 to 2024. In addition to the valuation allowance on the Japan NOLs, the Company maintains a partial valuation allowance of $72.5 million on its U.S. state deferred tax assets, and a valuation allowance on foreign net operating losses and tax credits in certain other foreign jurisdictions. At December 31, 2020, 2019 and 2018, respectively, the Company was not indefinitely reinvested with respect to the earnings of its foreign subsidiaries and has therefore accrued withholding taxes that would be owed upon future distributions of such earnings. The Company maintains liabilities for unrecognized tax benefits. These liabilities involve considerable judgment and estimation and are continuously monitored by management based on the best information available, including changes in tax regulations, the outcome of relevant court cases, and other information. The Company is currently under examination by various taxing authorities. Although the outcome of any tax audit is uncertain, the Company believes that it has adequately provided in its consolidated financial statements for any additional taxes that the Company may be required to pay as a result of such examinations. If the payment ultimately proves not to be necessary, the reversal of these tax liabilities would result in tax benefits being recognized in the period the Company determines such liabilities are no longer necessary. However, if an ultimate tax assessment exceeds the Company's estimate of tax liabilities, additional tax expense will be recorded. The impact of such adjustments could have a material impact on the Company's results of operations in future periods. The activity for unrecognized gross tax benefits is as follows (in millions):
| 2020 |  | 2019 |  | 2018
Balance at beginning of year | $ | 130.0 |  |  | $ | 112.2 |  |  | $ | 114.8 |
Acquired balances | — |  |  | 15.5 |  |  | — |
Additions for tax benefits related to the current year | 11.9 |  |  | 9.4 |  |  | 7.4 |
Additions for tax benefits of prior years | 12.3 |  |  | 8.0 |  |  | 2.8 |
Reductions for tax benefits of prior years | (1.4) |  |  | (0.2) |  |  | (1.9) |
Lapse of statute | (1.3) |  |  | (8.2) |  |  | (10.9) |
Settlements | (0.5) |  |  | (6.7) |  |  | — |
Balance at end of year | $ | 151.0 |  |  | $ | 130.0 |  |  | $ | 112.2 |
Included in the December 31, 2020 balance of $151.0 million is $116.0 million related to unrecognized tax benefits that, if recognized, would affect the annual effective tax rate. Also included in the balance of unrecognized tax benefits as of December 31, 2020 is $35.0 million of benefit that, if recognized, would result in adjustments to other tax accounts, primarily deferred taxes. Although the Company cannot predict the timing of resolution with taxing authorities, if any, the Company believes it is reasonably possible that its unrecognized tax benefits will be reduced by $48.8 million in the next 12 months due to settlement with tax authorities or expiration of the applicable statute of limitations. The Company recognized approximately $0.2 million of tax expense for interest and penalties during the year ended December 31, 2020. The Company had approximately $5.3 million, $5.1 million, and $5.1 million of accrued interest and penalties at December 31, 2020, 2019, and 2018, respectively. Tax years prior to 2017 are generally not subject to examination by the IRS except for items involving tax attributes that have been carried forward to tax years whose statute of limitations remains open. The Company is currently under IRS examination for the 2017 tax year. For state tax returns, the Company is generally not subject to income tax examinations for tax years prior to 2016. The Company is also subject to routine examinations by various foreign tax jurisdictions in which it operates. With respect to jurisdictions outside the United States, the Company is generally not subject to examination for tax years prior to 2010. The Company believes that adequate provisions have been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with the Company's expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs.

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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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