Note 9. Income Taxes

Reliance and its subsidiaries file numerous consolidated and separate income tax returns in the United States federal jurisdiction and in many state and foreign jurisdictions. We are no longer subject to U.S. federal tax examinations for years before 2014 and state and local tax examinations before 2013. Significant components of the provision for income taxes attributable to continuing operations were as follows:

Reliance and its subsidiaries file numerous consolidated and separate income tax returns in the United States federal jurisdiction and in many state and foreign jurisdictions. We are no longer subject to U.S. federal tax examinations for years before 2014 and state and local tax examinations before 2013. Significant components of the provision for income taxes attributable to continuing operations were as follows:Reliance and its subsidiaries file numerous consolidated and separate income tax returns in the United States federal jurisdiction and in many state and foreign jurisdictions. We are no longer subject to U.S. federal tax examinations for years before 2014 and state and local tax examinations before 2013. Significant components of the provision for income taxes attributable to continuing operations were as follows:
	Year Ended December 31,
	2017		2016		2015
	(in millions)
Current:
Federal	$	117.8	$	91.1	$	129.5
State		21.5		18.9		21.3
Foreign		16.1		10.6		8.8
		155.4		120.6		159.6
Deferred:
Federal		(202.8)		3.0		(11.7)
State		11.1		1.0		(4.5)
Foreign		(0.9)		(4.5)		(0.9)
		(192.6)		(0.5)		(17.1)
	$	(37.2)	$	120.1	$	142.5

Components of U.S. and international income before income taxes were as follows:


	Year Ended December 31,
	2017		2016		2015
	(in millions)

U.S.	$	524.6	$	411.0	$	427.3
International		59.2		18.2		31.4
Income before income taxes	$	583.8	$	429.2	$	458.7

The reconciliation of income tax at the U.S. federal statutory tax rate to income tax expense is as follows:


	Year Ended December 31,
	2017		2016		2015
Income tax at U.S. federal statutory tax rate	35.0	%	35.0	%	35.0	%
Tax reform	(35.5)		—		—
State income tax, net of federal tax effect	3.8		3.1		2.0
Foreign earnings taxed at lower rates	(0.7)		(0.8)		(0.8)
Net effect of life insurance policies	(3.6)		(4.2)		(3.6)
Net effect of changes in unrecognized tax benefits	(0.2)		(4.3)		0.7
Domestic production activity deduction	(1.6)		(1.7)		(2.0)
Loss on sale of assets	(0.8)		—		—
Other, net	(2.8)		0.9		(0.2)
Effective tax rate	(6.4)	%	28.0	%	31.1	%

Significant components of our deferred tax assets and liabilities are as follows:


	December 31,
	2017		2016
	(in millions)
Deferred tax assets:
Accrued expenses not currently deductible for tax	$	34.8	$	77.6
Inventory costs capitalized for tax purposes		23.1		29.2
Stock-based compensation		10.5		12.0
Allowance for doubtful accounts		3.4		5.3
Tax credits carryforwards		1.3		1.3
Net operating loss carryforwards		5.6		4.7
Total deferred tax assets		78.7		130.1
Deferred tax liabilities:
Property, plant and equipment, net		(159.7)		(238.6)
Goodwill and other intangible assets		(307.3)		(451.2)
LIFO inventories		(39.5)		(54.1)
Deferred income		(0.8)		(7.1)
Other		(12.2)		(6.0)
Total deferred tax liabilities		(519.5)		(757.0)
Net deferred tax liabilities	$	(440.8)	$	(626.9)

As of December 31, 2017, we had available state net operating loss carryforwards (“NOL”) of $6.3 million to offset future income taxes expiring in years 2018 through 2037. We believe that it is more likely than not that we will be able to realize these NOLs within their respective carryforward periods.

The Company believes it is more likely than not that it will generate sufficient future taxable income to realize its deferred tax assets.

Tax Cuts and Jobs Act of 2017

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (“Tax Reform”) was enacted, which included significant changes to the taxation of U.S. corporations. These changes include, among other things, a reduction of the U.S. federal statutory rate from 35% to 21% effective in 2018, the implementation of a territorial tax system, a one-time tax in 2017 on accumulated foreign profits that have not been previously subject to U.S. tax (deemed repatriation), the repeal of the corporate alternative minimum tax and changes to business deductions, including the repeal of the deduction for domestic production activities.

We recognized a provisional net tax benefit in 2017 relating to Tax Reform of $207.3 million. The components of our preliminary assessment of the impact of Tax Reform on our 2017 provision for income taxes were as follows:


	(in millions)
Effect of tax rate changes on deferred tax assets and liabilities	$	216.7
Repatriation and related liabilities		(9.4)
Tax benefit, net	$	207.3

Our accounting of the repatriation and related liabilities included in our preliminary assessment of the impact of Tax Reform is incomplete; however we were able to record a provisional amount based on our estimates. Furthermore, Tax Reform created a minimum tax on global intangible low-taxed income (“GILTI”) that is earned by certain foreign affiliates owned by a U.S. shareholder. Due to the complexity of the new GILTI tax rules, we are not yet able to reasonably estimate its effects and therefore have not included any amount relating to GILTI in our preliminary assessment of the impact of Tax Reform. We are continuing to gather additional information to enable us to more precisely compute our repatriation and related liabilities and determine the impact, if any, of GILTI and will update our provisional amounts during 2018. Given the substantial changes to the Internal Revenue Code as a result of Tax Reform, our estimated financial impacts from Tax Reform are subject to further analysis, interpretation and clarification of the new tax law, which could result in changes to our estimates in 2018.

Unrecognized Tax Benefits

We are under audit by various state jurisdictions but do not anticipate any material adjustments from these examinations. Reconciliation of the beginning and ending balances of the total amounts of unrecognized tax benefits is as follows:


	Year Ended December 31,
	2017		2016		2015
	(in millions)
Unrecognized tax benefits at January 1	$	5.2	$	22.9	$	20.2
Increases in tax positions for prior years		—		0.4		0.3
Decreases in tax positions for prior years		(0.1)		(0.6)		(1.7)
Increases in tax positions for current year		—		0.1		4.2
Settlements		(0.2)		(17.6)		(0.1)
Lapses in statutes-of-limitation periods		(0.8)		—		—
Unrecognized tax benefits at December 31	$	4.1	$	5.2	$	22.9

As of December 31, 2017, $4.1 million of unrecognized tax benefits would impact the effective tax rate if recognized. Accrued interest and penalties, net of applicable tax effect, related to uncertain tax positions were $0.5 million and $0.7 million as of December 31, 2017 and 2016, respectively.