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Income Taxes | 12 Months Ended
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Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes As a global organization, we and our subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. During 2017, the statute of limitations for the 2013 U.S. federal tax year lapsed, leaving tax years 2014 through 2017 open to examination. For U.S. state and local jurisdictions, tax years 2013 through 2017 are open to examination. We are also subject to examination in various foreign jurisdictions for tax years 2010 through 2017. A reconciliation of the beginning and ending amount of the liability for unrecognized tax benefits is as follows:
($ in millions) | 2017 |  | 2016
Balance at January 1 | $ | 6.2 |  |  | $ | 5.9 |
Increase due to current year position | 0.4 |  |  | 1.0 |
Increase due to prior year position | 0.1 |  |  | 1.2 |
Reduction for expiration of statute of limitations/audits | (3.5 | ) |  | (0.9 | )
Settlements | — |  |  | (1.0 | )
Balance at December 31 | $ | 3.2 |  |  | $ | 6.2 |
In addition, we had balances in accrued liabilities for interest and penalties of $0.1 million at both December 31, 2017 and 2016. As of December 31, 2017, we had $3.2 million of total gross unrecognized tax benefits, of which $1.0 million, if recognized, would favorably impact the effective income tax rate. It is reasonably possible that, due to the expiration of statutes and the closing of tax audits, the amount of gross unrecognized tax benefits may be reduced by approximately $1.3 million during the next twelve months, which would favorably impact our effective tax rate. The components of income before income taxes are:
($ in millions) | 2017 |  | 2016 |  | 2015
U.S. operations | $ | 96.5 |  |  | $ | 84.5 |  |  | $ | (4.0 | )
International operations | 125.9 |  |  | 105.3 |  |  | 120.1 |
Total income before income taxes | $ | 222.4 |  |  | $ | 189.8 |  |  | $ | 116.1 |
The related provision for income taxes consists of:
($ in millions) | 2017 |  | 2016 |  | 2015
Current: |  |  |  |  |
Federal | $ | 2.1 |  |  | $ | 2.5 |  |  | $ | 1.0 |
State | 0.1 |  |  | 1.0 |  |  | 0.9 |
International | 37.0 |  |  | 29.4 |  |  | 33.3 |
Current income tax provision | 39.2 |  |  | 32.9 |  |  | 35.2 |
Deferred: |  |  |  |  |
Federal and state | 41.8 |  |  | 21.8 |  |  | (13.2 | )
International | (0.1 | ) |  | (0.3 | ) |  | 4.3 |
Deferred income tax provision | 41.7 |  |  | 21.5 |  |  | (8.9 | )
Income tax expense | $ | 80.9 |  |  | $ | 54.4 |  |  | $ | 26.3 |
Deferred income taxes result from temporary differences between the amount of assets and liabilities recognized for financial reporting and tax purposes. The significant components of our deferred tax assets and liabilities at December 31 are:
($ in millions) | 2017 |  | 2016
Deferred tax assets |  |  |
Net operating loss carryforwards | $ | 19.7 |  |  | $ | 15.4 |
Tax credit carryforwards | 13.7 |  |  | 27.9 |
Restructuring and impairment charges | 0.1 |  |  | 2.9 |
Pension and deferred compensation | 28.3 |  |  | 46.4 |
Other | 14.3 |  |  | 19.5 |
Valuation allowance | (20.9 | ) |  | (18.7 | )
Total deferred tax assets | 55.2 |  |  | 93.4 |
Deferred tax liabilities: |  |  |
Accelerated depreciation | 26.3 |  |  | 30.3 |
Tax on undistributed earnings of subsidiaries | 9.8 |  |  | — |
Other | 3.8 |  |  | 6.1 |
Total deferred tax liabilities | 39.9 |  |  | 36.4 |
Net deferred tax asset | $ | 15.3 |  |  | $ | 57.0 |
A reconciliation of the U.S. federal corporate tax rate to our effective consolidated tax rate on income before income taxes follows:
| 2017 |  | 2016 |  | 2015
U.S. federal corporate tax rate | 35.0 | % |  | 35.0 | % |  | 35.0 | %
Tax on international operations less than U.S. tax rate | (4.5 | ) |  | (2.9 | ) |  | (5.1 | )
Reversal of prior valuation allowance | (0.5 | ) |  | (0.3 | ) |  | — |
Reversal of reserves for unrecognized tax benefits | (0.2 | ) |  | (0.6 | ) |  | (1.6 | )
U.S. tax on international earnings, net of foreign tax credits | 0.1 |  |  | (1.3 | ) |  | (4.6 | )
State income taxes, net of federal tax effect | 0.2 |  |  | 0.8 |  |  | 0.3 |
U.S. research and development credits | (0.8 | ) |  | (0.8 | ) |  | (1.3 | )
Excess tax benefits on share-based payments | (14.1 | ) |  | — |  |  | — |
Impact of 2017 Tax Act | 15.9 |  |  | — |  |  | — |
Tax on undistributed earnings of subsidiaries | 4.4 |  |  | — |  |  | — |
Venezuela deconsolidation | 1.7 |  |  | — |  |  | — |
Other business credits and Section 199 Deduction | (0.6 | ) |  | (1.1 | ) |  | (1.3 | )
Other | (0.2 | ) |  | (0.1 | ) |  | 1.2 |
Effective tax rate | 36.4 | % |  | 28.7 | % |  | 22.6 | %
During 2017, we recorded a discrete tax charge of $48.8 million related to the 2017 Tax Act and the impact of changes in enacted international tax rates on previously-recorded deferred tax asset and liability balances, as well as a tax benefit of $33.1 million associated with our adoption of the guidance issued by the FASB regarding share-based payment transactions. The 2017 Tax Act, which was signed into law on December 22, 2017, has resulted in significant changes to the U.S. corporate income tax system. These changes include, but are not limited to, a federal statutory rate reduction from 35.0% to 21.0% effective for tax years beginning after December 31, 2017. Changes in tax rates and tax laws are accounted for in the period of enactment. As a result, during the year ended December 31, 2017, we recorded a discrete charge based upon our current understanding of the 2017 Tax Act and the guidance available as of the date of this filing. A significant portion of the discrete tax liability is attributable to an one-time mandatory deemed repatriation tax of post-1986 undistributed foreign subsidiary earnings and profits (the “Transition Toll Tax”) of $27.9 million. The net Transition Toll Tax is estimated to be $2.0 million after utilization of credit carryforwards and other tax attributes and is payable over eight years. Furthermore, due to the reduction of the federal statutory rate, we revalued our deferred assets and liabilities and recorded a provisional $11.4 million federal tax expense, net of state tax impact, during the year ended December 31, 2017. In response to the 2017 Tax Act, we also reevaluated our position regarding permanent reinvestment of foreign subsidiary earnings and profits through 2017 (with the exception of China and Mexico, both of which will remain permanently reinvested) and elected to include in our provision for income taxes for the year ended December 31, 2017 an estimated liability of $9.8 million related to foreign withholding taxes and state income taxes that will be incurred upon the distribution of those foreign earnings and profits to the U.S. at a future date. On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the 2017 Tax Act. We have recognized the provisional tax impacts related to deemed repatriated earnings and the revaluation of deferred tax assets and liabilities and included these amounts in our consolidated financial statements for the year ended December 31, 2017. The ultimate impact may differ from these provisional amounts, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions we have made, additional regulatory guidance that may be issued, and actions we may take as a result of the 2017 Tax Act. During 2016, we recorded a tax benefit of $9.0 million in connection with restructuring and related charges of $26.4 million, a discrete tax charge of $0.8 million related to the pension curtailment gain of $2.1 million, and a discrete tax charge of $1.0 million resulting from the impact of changes in enacted tax rates on our previously-recorded deferred tax asset and liability balances. During 2015, we recorded a discrete tax benefit of $4.0 million related to executive retirement and related costs. In addition, we recorded a discrete tax benefit of $18.4 million for a pension settlement charge. In 2015, we also recorded a discrete tax charge of $0.8 million resulting from the impact of a change in the enacted tax rate in the United Kingdom on our previously-recorded deferred tax asset balances. At December 31, 2017, we have fully utilized all of our U.S. federal net operating loss carryforwards. State operating loss carryforwards of $258.4 million created a deferred tax asset of $17.2 million, while foreign operating loss carryforwards of $17.5 million created a deferred tax asset of $2.5 million. Management estimates that certain state and foreign operating loss carryforwards are unlikely to be utilized and the associated deferred tax assets have been fully reserved. State loss carryforwards expire as follows: $11.4 million in 2018 and $247.0 million thereafter. Foreign loss carryforwards will begin to expire in 2025, while $14.0 million of the total $17.5 million will not expire. As of December 31, 2017, we have utilized all available foreign tax credit carryforwards against the Transition Toll Tax. We have U.S. federal and state research and development credit carryforwards of $6.9 million and $3.0 million, respectively. The $6.9 million of U.S. federal research and development credits expire as follows: $1.5 million expire in 2035, $1.8 million expire in 2036, $1.8 million expire in 2037, and $1.8 million expire in 2038. The $3.0 million of state research and development credits expire as follows: $0.2 million expire in 2021, $0.8 million expire in 2022, $0.5 million expire in 2023 and $1.5 million expire after 2023. Additionally, we have available other state tax credits of $0.9 million which expire in 2020. Undistributed earnings of our China and Mexico entities amounted to an estimated $17.3 million at December 31, 2017, on which deferred income taxes have not been provided because such earnings are intended to be reinvested indefinitely outside of the U.S.

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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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