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Income Taxes | 12 Months Ended
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Dec. 31, 2018
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 2018, the statute of limitations for the 2014 U.S. federal tax year lapsed, leaving tax years 2015 through 2018 open to examination. For U.S. state and local jurisdictions, tax years 2014 through 2018 are open to examination. We are also subject to examination in various foreign jurisdictions for tax years 2011 through 2018. A reconciliation of the beginning and ending amount of the liability for unrecognized tax benefits is as follows:
($ in millions) | 2018 |  | 2017
Balance at January 1 | $ | 3.2 |  |  | $ | 6.2 |
Increase due to current year position | 0.8 |  |  | 0.4 |
Increase due to prior year position | 0.4 |  |  | 0.1 |
Reduction for expiration of statute of limitations/audits | (0.5 | ) |  | (3.5 | )
Balance at December 31 | $ | 3.9 |  |  | $ | 3.2 |
In addition, we had balances in accrued liabilities for interest and penalties of $0.2 million and $0.1 million at December 31, 2018 and 2017, respectively. As of December 31, 2018, we had $3.9 million of total gross unrecognized tax benefits, which, 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 $0.4 million during the next twelve months, which would favorably impact our effective tax rate. The components of income before income taxes are:
($ in millions) | 2018 |  | 2017 |  | 2016
U.S. operations | $ | 132.9 |  |  | $ | 96.5 |  |  | $ | 84.5 |
International operations | 107.8 |  |  | 125.9 |  |  | 105.3 |
Total income before income taxes | $ | 240.7 |  |  | $ | 222.4 |  |  | $ | 189.8 |
The related provision for income taxes consists of:
($ in millions) | 2018 |  | 2017 |  | 2016
Current: |  |  |  |  |
Federal | $ | 2.1 |  |  | $ | 2.1 |  |  | $ | 2.5 |
State | 3.3 |  |  | 0.1 |  |  | 1.0 |
International | 35.1 |  |  | 37.0 |  |  | 29.4 |
Current income tax provision | 40.5 |  |  | 39.2 |  |  | 32.9 |
Deferred: |  |  |  |  |
Federal and state | 1.4 |  |  | 41.8 |  |  | 21.8 |
International | (0.5 | ) |  | (0.1 | ) |  | (0.3 | )
Deferred income tax provision | 0.9 |  |  | 41.7 |  |  | 21.5 |
Income tax expense | $ | 41.4 |  |  | $ | 80.9 |  |  | $ | 54.4 |
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) | 2018 |  | 2017
Deferred tax assets |  |  |
Net operating loss carryforwards | $ | 18.4 |  |  | $ | 19.7 |
Tax credit carryforwards | 10.5 |  |  | 13.7 |
Restructuring and impairment charges | — |  |  | 0.1 |
Pension and deferred compensation | 27.2 |  |  | 28.3 |
Other | 11.4 |  |  | 14.3 |
Valuation allowance | (16.0 | ) |  | (20.9 | )
Total deferred tax assets | 51.5 |  |  | 55.2 |
Deferred tax liabilities: |  |  |
Accelerated depreciation | 31.3 |  |  | 26.3 |
Tax on undistributed earnings of subsidiaries | 6.6 |  |  | 9.8 |
Other | 2.0 |  |  | 3.8 |
Total deferred tax liabilities | 39.9 |  |  | 39.9 |
Net deferred tax asset | $ | 11.6 |  |  | $ | 15.3 |
A reconciliation of the U.S. federal corporate tax rate to our effective consolidated tax rate on income before income taxes follows:
| 2018 |  | 2017 |  | 2016
U.S. federal corporate tax rate | 21.0 | % |  | 35.0 | % |  | 35.0 | %
Tax on international operations other than U.S. tax rate | 4.8 |  |  | (4.5 | ) |  | (2.9 | )
Reversal of prior valuation allowance | — |  |  | (0.5 | ) |  | (0.3 | )
Adjustments to reserves for unrecognized tax benefits | 0.2 |  |  | (0.2 | ) |  | (0.6 | )
U.S. tax on international earnings, net of foreign tax credits | (0.2 | ) |  | 0.1 |  |  | (1.3 | )
State income taxes, net of federal tax effect | 2.3 |  |  | 0.2 |  |  | 0.8 |
U.S. research and development credits | (0.9 | ) |  | (0.8 | ) |  | (0.8 | )
Excess tax benefits on share-based payments | (6.0 | ) |  | (14.1 | ) |  | — |
Impact of 2017 Tax Act | (2.9 | ) |  | 15.9 |  |  | — |
Tax on undistributed earnings of subsidiaries | (1.3 | ) |  | 4.4 |  |  | — |
Venezuela deconsolidation | — |  |  | 1.7 |  |  | — |
Other business credits and Section 199 Deduction | — |  |  | (0.6 | ) |  | (1.1 | )
Other | 0.2 |  |  | (0.2 | ) |  | (0.1 | )
Effective tax rate | 17.2 | % |  | 36.4 | % |  | 28.7 | %
During 2018, we recorded a net tax benefit of $2.5 million for the impact of tax law changes, including the 2017 Tax Act, and a tax benefit of $14.3 million associated with our adoption in 2017 of guidance issued by the FASB regarding share-based payment transactions. 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 understanding of the 2017 Tax Act and the guidance available as of the date of that filing. A significant portion of the discrete tax liability was attributable to a one-time mandatory deemed repatriation tax of post-1986 undistributed foreign subsidiary earnings and profits (the “Transition Toll Tax”) of $27.9 million. Additionally, 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. 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 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. As of December 31, 2018, we finalized our calculations and tax positions used in our analysis of the impact of the 2017 Tax Act in consideration of proposed regulations and other guidance issued during 2018. As a result, we recorded a $7.5 million tax benefit related to a reduction of the Transition Toll Tax and an incremental tax expense of $4.0 million related to other adjustments. The final measurement reduced the Transition Toll Tax expense to $20.4 million from $27.9 million. The net impact of these adjustments resulted in a benefit of 1.45% to the 2018 effective tax rate. The 2017 Tax Act created a provision known as global intangible low-tax income (“GILTI”) that imposes a U.S. tax on certain earnings of controlled foreign subsidiaries. We made an accounting policy election to reflect GILTI taxes, if any, as a current income tax expense in the period incurred. 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. As of December 31, 2018, we have fully utilized all of our U.S. federal net operating loss carryforwards. State operating loss carryforwards of $233.5 million created a deferred tax asset of $15.6 million, while foreign operating loss carryforwards of $23.2 million created a deferred tax asset of $2.8 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: $11.6 million in 2019 and $221.9 million thereafter. Foreign loss carryforwards will begin to expire in 2025, while $20.2 million of the total $23.2 million will not expire. As of December 31, 2018, 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 $5.6 million and $2.6 million, respectively. The $5.6 million of U.S. federal research and development credits expire as follows: $1.5 million expire in 2037, $1.8 million expire in 2038, and $2.3 million expire in 2039. The $2.6 million of state research and development credits expire as follows: $0.6 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 $0.1 million which expire in 2020. In response to the 2017 Tax Act, we reevaluated our position regarding permanent reinvestment of foreign subsidiary earnings and profits through 2017 (with the exception of China and Mexico) and decided that those profits were no longer permanently reinvested. As of January 1, 2018, we reasserted indefinite reinvestment related to all post-2017 unremitted earnings in all of our foreign subsidiaries. In general, it is our practice and intention to permanently reinvest the earnings of our foreign subsidiaries and repatriate earnings only when the tax impact is de minimis, and that position has not changed subsequent to the one-time transition tax under the 2017 Tax Act, except as noted above. Accordingly, no deferred taxes have been provided for withholding taxes or other taxes that would result upon repatriation of approximately $79.7 million of undistributed earnings from foreign subsidiaries to the U.S., as those earnings continue to be permanently reinvested. Further, it is impracticable for us to estimate any future tax costs for any unrecognized deferred tax liabilities associated with our indefinite reinvestment assertion, because the actual tax liability, if any, would be dependent on complex analysis and calculations considering various tax laws, exchange rates, circumstances existing when there is a repatriation, sale, or liquidation, or other factors.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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