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Income Taxes | 12 Months Ended
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Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes: On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35 percent to 21 percent; (2) requiring companies to pay a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) repeal of the domestic production activity deduction; and (6) limitations on the deductibility of certain executive compensation. Our Provision for income taxes from continuing operations consisted of the following (in millions):
| For the Years Ended December 31,
| 2017 |  | 2016 |  | 2015
Current: |  |  |  |  |
Federal | $ | 86.1 |  |  | $ | 106.0 |  |  | $ | 101.0 |
State | 12.5 |  |  | 14.5 |  |  | 13.1 |
Foreign | 15.0 |  |  | 9.7 |  |  | 3.6 |
Total current | 113.6 |  |  | 130.2 |  |  | 117.7 |
Deferred: |  |  |  |  |
Federal | 43.8 |  |  | (4.5 | ) |  | (21.4 | )
State | 0.9 |  |  | (1.2 | ) |  | (0.6 | )
Foreign | (1.4 | ) |  | (0.4 | ) |  | (0.3 | )
Total deferred | 43.3 |  |  | (6.1 | ) |  | (22.3 | )
Total provision for income taxes | $ | 156.9 |  |  | $ | 124.1 |  |  | $ | 95.4 |
Income from continuing operations before income taxes was comprised of the following (in millions):
| For the Years Ended December 31,
| 2017 |  | 2016 |  | 2015
Domestic | $ | 402.5 |  |  | $ | 374.8 |  |  | $ | 276.7 |
Foreign | 61.5 |  |  | 27.9 |  |  | 5.9 |
Total | $ | 464.0 |  |  | $ | 402.7 |  |  | $ | 282.6 |
The difference between the income tax provision from continuing operations computed at the statutory federal income tax rate and the financial statement Provision for income taxes is summarized as follows (in millions):
| For the Years Ended December 31,
| 2017 |  | 2016 |  | 2015
Provision at the U.S. statutory rate of 35% | $ | 162.4 |  |  | $ | 141.0 |  |  | $ | 98.9 |
Increase (reduction) in tax expense resulting from: |  |  |  |  |
State income tax, net of federal income tax benefit | 9.2 |  |  | 12.8 |  |  | 8.0 |
Domestic manufacturing deduction | (9.6 | ) |  | (9.2 | ) |  | (9.9 | )
Tax credits, net of unrecognized tax benefits | (8.6 | ) |  | (27.9 | ) |  | (0.7 | )
Change in unrecognized tax benefits | (0.1 | ) |  | (0.3 | ) |  | (0.9 | )
Change in valuation allowance | 6.4 |  |  | (4.3 | ) |  | (0.6 | )
Foreign taxes at rates other than 35% | (9.0 | ) |  | (1.3 | ) |  | 0.3 |
Deemed inclusions | 0.3 |  |  | 16.9 |  |  | 0.6 |
Change in rates from the Tax Act & other law changes | 31.8 |  |  | (0.6 | ) |  | 0.8 |
Excess tax benefits from stock-based compensation | (23.6 | ) |  | — |  |  | — |
Miscellaneous other | (2.3 | ) |  | (3.0 | ) |  | (1.1 | )
Total provision for income taxes | $ | 156.9 |  |  | $ | 124.1 |  |  | $ | 95.4 |
The SEC staff issued Staff Accounting Bulletin No. 118 ("SAB 118"), which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act. Our accounting for the following elements of the Tax Act is incomplete. However, we were able to make reasonable estimates of certain effects and, therefore, recorded provisional adjustments as follows:
• | The Tax Act reduced the corporate tax rate to 21 percent, effective January 1, 2018. For our net federal deferred tax assets ("DTA"), we have recorded a provisional decrease of $32.1 million, with a corresponding net adjustment to deferred income tax expense of $32.1 million for the year ended December 31, 2017. This adjustment is based on a reasonable estimate of the impact of the reduction in the corporate tax rate on our DTA's as of December 22, 2017. While we are able to make a reasonable estimate of the impact of the reduction in the corporate tax rate, our DTA's may be affected by other analyses related to the Tax Act, including our calculation of deemed repatriation of deferred foreign income and the state tax effect of adjustments made to federal temporary differences.
• | The Deemed Repatriation Transition Tax (Transition Tax) is a tax on previously untaxed accumulated and current earnings and profits (E&P) of certain of our foreign subsidiaries. To assess the amount of the Transition Tax, we must determine, in addition to other factors, the amount of post-1986 E&P of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. We are able to make a reasonable estimate of the Transition Tax and currently estimate that we will not have a Transition Tax obligation. However, we are continuing to review additional information regarding our accumulated E&P and non-U.S. income taxes paid to more precisely compute the amount of the Transition Tax, if any. In addition, based on current state tax law, we estimate the state impact of the Transition Tax to be insignificant. This estimate will be revised based on a calculation of our final Transition Tax as well as any updated guidance on state treatment of the deemed repatriation.
• | We must assess whether our valuation allowance analyses are affected by various aspects of the Tax Act (e.g., deemed repatriation of deferred foreign income, global intangible low-taxed income ("GILTI") inclusions, new categories of foreign tax credits ("FTCs"), and share-based compensation). Since, as discussed herein, we have recorded provisional amounts related to certain portions of the Tax Act, any corresponding determination of the need for or change in a valuation allowance is also provisional. Due to the limitation on the utilization of future foreign tax credits, we recorded a provisional valuation allowance against our FTC carryforwards of $4.3 million. While we believe this is a reasonable estimate, the realizability of deferred tax assets related to share-based compensation may also be impacted by the Tax Act.
• | While we have not yet completed all of the computations necessary or completed a detailed inventory of our 2017 expenditures that qualify for immediate expensing, we have recorded a provisional benefit of $4.1 million based on our current intent to fully expense all qualifying expenditures. This resulted in a decrease of approximately $1.4 million to our current income tax payable and a corresponding increase in our deferred tax liabilities ("DTLs") of approximately $0.9 million (after considering the effects of the reduction in income tax rates). This provisional benefit will be refined as we complete the detailed analysis of qualifying expenditures.
Because of the complexity of the new GILTI tax rules, we are continuing to evaluate this provision of the Tax Act and the application of ASC 740. Under U.S. GAAP, we are allowed to make an accounting policy choice of either (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”) or (2) factoring such amounts into a company’s measurement of its deferred taxes (the “deferred method”). Our selection of an accounting policy with respect to the new GILTI tax rules will depend, in part, on analyzing our global income to determine whether we expect to have future U.S. inclusions in taxable income related to GILTI and, if so, what the impact is expected to be. We are not currently able to reasonably estimate the effect of the new GILTI tax rules on future U.S. inclusions in taxable income as the expected future impact of this provision of the Tax Act depends on our current structure and business. Therefore, we have not made any adjustments related to potential GILTI tax in our financial statements and have not made a policy decision regarding whether to record deferred taxes on GILTI. The effect of the tax rate change for items originally recognized in other comprehensive income was properly recorded in tax expense from continuing operations. This results in stranded tax effects in accumulated other comprehensive income at December 31, 2017. Companies can make a policy election to reclassify from accumulated other comprehensive income to retained earnings the stranded tax effects directly arising from the change in the federal corporate tax rate. We will determine whether or not to make such a policy election in fiscal 2018. Deferred income taxes reflect the tax consequences on future years of temporary differences between the tax basis of assets and liabilities and their financial reporting basis and depending on the classification of the asset or liability generating the deferred tax. The deferred tax provision for the periods shown represents the effect of changes in the amounts of temporary differences during those periods. Deferred tax assets (liabilities) were comprised of the following (in millions):
| As of December 31,
| 2017 |  | 2016
Gross deferred tax assets: |  |  |
Warranties | $ | 27.3 |  |  | $ | 36.3 |
Loss carryforwards (foreign, U.S. and state) | 21.0 |  |  | 19.8 |
Post-retirement and pension benefits | 23.3 |  |  | 33.9 |
Inventory reserves | 7.5 |  |  | 9.6 |
Receivables allowance | 3.5 |  |  | 4.5 |
Compensation liabilities | 11.1 |  |  | 20.6 |
Deferred income | 0.7 |  |  | 1.5 |
Insurance liabilities | 5.1 |  |  | 6.5 |
Legal reserves | 7.6 |  |  | 12.0 |
Tax credits, net of federal effect | 21.3 |  |  | 18.4 |
Other | 7.5 |  |  | 5.4 |
Total deferred tax assets | 135.9 |  |  | 168.5 |
Valuation allowance | (24.9 | ) |  | (17.1 | )
Total deferred tax assets, net of valuation allowance | 111.0 |  |  | 151.4 |
Gross deferred tax liabilities: |  |  |
Depreciation | (5.9 | ) |  | (3.3 | )
Hedges | (3.6 | ) |  | (3.2 | )
Intangibles | (4.9 | ) |  | (4.9 | )
Other | (2.2 | ) |  | (3.3 | )
Total deferred tax liabilities | (16.6 | ) |  | (14.7 | )
Net deferred tax assets | $ | 94.4 |  |  | $ | 136.7 |
As of December 31, 2017 and 2016, we had $0.8 million and $ 1.6 million in tax-effected state net operating loss carryforwards, respectively, and $19.8 million and $16.8 million in tax-effected foreign net operating loss carryforwards, respectively. The state and foreign net operating loss carryforwards began expiring in 2014. The deferred tax asset valuation allowance relates primarily to the operating loss carryforwards European and Asian tax jurisdictions. The remainder of the valuation allowance relates to state tax credits. In assessing whether a deferred tax asset will be realized, we consider whether it is more likely than not that some portion or all of the deferred tax asset will not be realized. We consider the reversal of existing taxable temporary differences, projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, we believe it is more likely than not we will realize the benefits of these deductible differences, net of the existing valuation allowances, as of December 31, 2017. To realize the net foreign deferred tax asset, we will need to generate future foreign taxable income of approximately $71.3 million during the periods in which those temporary differences become deductible. As of December 31, 2017, we had foreign tax credit carryforwards in U.S. of $10.6 million. Due to the Tax Act, we no longer believe we will realize the full benefit of these credits due to the new limitation of utilizing foreign tax credits to reduce U.S. income tax. Therefore, we recorded a valuation allowance of $4.3 million. No provision was made for income taxes which may become payable upon distribution of our foreign subsidiaries' earnings. These earnings were approximately $87.0 million as of December 31, 2017. An actual repatriation in the future from our non-U.S. subsidiaries could still be subject to foreign withholding taxes and U.S. state taxes. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in millions):
Balance as of December 31, 2015 | $ | 0.5 |
Increases related to prior year tax positions | 1.0 |
Increases related to current year tax positions | 1.4 |
Settlement | (0.5 | )
Balance as of December 31, 2016 | 2.4 |
Increases related to prior year tax positions | 0.1 |
Decreases related to prior year tax positions | (2.5 | )
Balance as of December 31, 2017 | $ | — |
As of December 31, 2017, we no longer had any unrecognized tax benefits. We are currently under examination for our U.S. federal income taxes for 2017 and 2016 and are subject to examination by numerous other taxing authorities in the U.S. and in jurisdictions such as France, Canada, India and Germany. We are generally no longer subject to U.S., state and local or non-U.S. income tax examinations by taxing authorities for years before 2011.

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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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