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Income Taxes | 12 Months Ended
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Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Income Taxes |
8. | INCOME TAXES
Our provision for income taxes consisted of the following:
| Year Ended December 31,
($ in millions) | 2017 | 2016 | 2015
U.S. Federal: |  |  |
| Current | $ | 12.2 |  | 1.3 |  | 30.3 |
| Noncurrent | 122.2 |  | — |  | — |
| Deferred | (9.2 | ) | (11.1 | ) | 17.8 |
|  | $ | 125.2 |  | (9.8 | ) | 48.1 |
State and Local: |  |  |
| Current | $ | 5.4 |  | 8.2 |  | 5.3 |
| Noncurrent | 19.1 |  | — |  | — |
| Deferred | (7.4 | ) | (4.0 | ) | 1.9 |
|  | $ | 17.1 |  | 4.2 |  | 7.2 |
International: |  |  |
| Current | $ | 141.2 |  | 105.4 |  | 81.9 |
| Deferred | (15.7 | ) | 8.2 |  | (4.4 | )
|  | $ | 125.5 |  | 113.6 |  | 77.5 |
Total | $ | 267.8 |  | 108.0 |  | 132.8 |
Our 2017 income tax expense was significantly impacted by tax legislation enacted in the United States late in the year. On December 22, 2017, the U.S. government enacted tax reform legislation, commonly known as the Tax Cuts and Jobs Act. The legislation results in significant changes to the U.S. corporate income tax system, including (i) a federal corporate rate reduction from 35% to 21%; (ii) transition of U.S. international taxation from a worldwide tax system to a modified territorial tax system, including a transition tax payable over an eight year period for those foreign earnings not previously taxed in the U.S.; (iii) limitations on the deductibility of interest expense and executive compensation; (iv) creation of a new minimum tax otherwise known as the Base Erosion Anti-Abuse Tax; and (v) a requirement that certain income such as Global Intangible Low-Taxed Income earned by a foreign subsidiaries be included in U.S. taxable income. Of the changes to the U.S. corporate income tax system noted above, the following were reflected in our 2017 income tax provision due to the enactment of the Tax Cuts and Jobs Act in 2017:
1. | The remeasurement of our U.S. deferred tax assets and liabilities as of December 31, 2017 based upon the reduction in the U.S. combined federal and state corporate rate resulting from the U.S. Tax Cuts and Jobs Act. This resulted in an immaterial change to both our U.S. deferred tax assets and liabilities and income tax expense.
2. | We recorded additional income tax expense of $141.3 million within our 2017 income tax provision (noncurrent) representing our provisional estimate of the transition tax. The estimate recorded is provisional as the final liability, which will be paid over an eight-year period beginning in 2019, relies on certain inputs that are currently unable to be finalized. Those inputs include, but are not limited to:
a. | The effect of payments of certain accruals in 2018;
b. | Forthcoming regulatory guidance; and
c. | Final review of historical tax attributes.
The SEC staff issued guidance on accounting for the tax effects of the Tax Cuts and Jobs Act, including allowing a one-year measurement period for companies to complete the accounting. It is expected that all computations will be completed in advance of the expiration of the one-year measurement period. Adjustments to the provisional expense may be made during this period. With respect to Base Erosion Anti-Abuse Tax and Global Intangible Low-Taxed Income, we will treat any associated income tax as a period cost such that we will record an expense provision for any year we are subject to the taxes. In 2017 and 2015, our current tax expense was reduced by $3.0 million and $16.8 million, respectively, and our deferred tax expense increased by a corresponding amount, due to the utilization of net operating loss carryovers. In 2016, our current tax expense was increased by $21.8 million due to the generation of net operating loss carryovers. Income tax expense differed from the amounts computed by applying the U.S. federal income tax rate of 35% to earnings before provision for income taxes as a result of the following:
| Year Ended December 31,
($ in millions) | 2017 |  | 2016 |  | 2015
Income tax expense at statutory rates | $ | 183.8 |  | 35.0 | % |  | $ | 154.8 |  | 35.0 | % |  | $ | 202.7 |  | 35.0 | %
| Increase (reduction) in income taxes from: |  |  |  |  |  |  |  |
| State and local income taxes, net of federal income tax benefit | (0.4 | ) | (0.1 | ) |  | 2.8 |  | 0.6 |  |  | 5.9 |  | 1.0 |
| Amortization of goodwill and other intangibles | (6.7 | ) | (1.3 | ) |  | (5.7 | ) | (1.3 | ) |  | (5.1 | ) | (0.9 | )
| Nondeductible expenses | 7.0 |  | 1.3 |  |  | 6.7 |  | 1.5 |  |  | 5.4 |  | 0.9 |
| International earnings taxed at various rates | (68.7 | ) | (13.1 | ) |  | (59.1 | ) | (13.4 | ) |  | (57.0 | ) | (9.8 | )
| Valuation allowances | 5.8 |  | 1.1 |  |  | 8.3 |  | 1.9 |  |  | (4.7 | ) | (0.8 | )
| Recognition of tax benefit, net of nondeductible indemnification asset write-off | — |  | — |  |  | — |  | — |  |  | (8.3 | ) | (1.4 | )
| Transition tax due to U.S. tax reform | 141.3 |  | 26.9 |  |  | — |  | — |  |  | — |  | — |
| Other, net | 5.7 |  | 1.2 |  |  | 0.2 |  | 0.1 |  |  | (6.1 | ) | (1.1 | )
Total | $ | 267.8 |  | 51.0 | % |  | $ | 108.0 |  | 24.4 | % |  | $ | 132.8 |  | 22.9 | %
With respect to international earnings taxed at varying rates, we have operations which constitute a taxable income presence in 95 countries or other taxable jurisdictions outside of the U.S. which are treated as such by the U.S. Internal Revenue Code. All of those countries had income tax rates lower than the combined U.S. federal and state income tax rate in 2017. With respect to jurisdictions in which we operate with very low tax rates (those with effective national and local combined tax rates of 25% or lower), income from Hong Kong (16.5%), Singapore (17%), the United Kingdom (19.25%), and the Netherlands (25%) represent the most significant components of the international earnings line item in our effective tax rate reconciliation. Other very low rate tax jurisdictions with meaningful contributions to the international earnings line item in our effective tax rate reconciliation include Cyprus (12.5%), Poland (19%), Switzerland (21.17%), and The People's Republic of China (25%). In the aggregate, these very low rate jurisdictions contributed over two-thirds of the difference between the actual income tax provision for international earnings and the equivalent provision at the U.S. statutory rate in 2017. The remaining difference was contributed by earnings in jurisdictions with effective tax rates above 25% and by earnings of insignificant amounts in very low tax rate jurisdictions other than those noted above. In defining very low tax rate jurisdictions, we consider effective tax rates which applied in 2017 based upon income levels and including national and municipal, state or provincial taxes also based upon income levels, which may cause those effective rates to differ from the maximum national statutory rates for the jurisdictions. We consider jurisdictions with a tax rate of 25% or lower to be very low tax rate jurisdictions, which represents a difference of 10% or more from the U.S. federal statutory income tax rate. Our income before taxes from domestic (U.S.) and international sources is presented in the following table.
| Year Ended December 31,
($ in millions) | 2017 | 2016 | 2015
Domestic | $ | 54.8 |  | 57.2 |  | 132.1 |
International | 470.3 |  | 385.2 |  | 447.0 |
Total | $ | 525.1 |  | 442.4 |  | 579.1 |
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below.
| December 31,
($ in millions) | 2017 | 2016 | 2015
Deferred tax assets attributable to: |  |  |
Accrued expenses | $ | 230.6 |  | 224.2 |  | 170.5 |
U.S. federal and state loss and credit carryovers | 15.2 |  | 21.7 |  | 6.6 |
Allowances for uncollectible accounts | 16.5 |  | 12.7 |  | 7.1 |
International loss carryovers | 134.8 |  | 118.1 |  | 121.0 |
Investments in real estate ventures | — |  | — |  | 26.9 |
Pension liabilities | 20.4 |  | 18.2 |  | 12.6 |
Other | — |  | 7.4 |  | — |
Deferred tax assets | 417.5 |  | 402.3 |  | 344.7 |
Less: valuation allowances | (59.7 | ) | (51.7 | ) | (51.7 | )
Net deferred tax assets | $ | 357.8 |  | 350.6 |  | 293.0 |
Deferred tax liabilities attributable to: |  |  |
Property and equipment | $ | 17.9 |  | 24.3 |  | 0.6 |
Intangible assets | 121.6 |  | 152.8 |  | 123.9 |
Income deferred for tax purposes | 4.1 |  | 2.1 |  | 2.2 |
Investment in real estate ventures | 2.0 |  | 11.9 |  | — |
Other | 7.0 |  | 0.1 |  | 0.4 |
Deferred tax liabilities | $ | 152.6 |  | 191.2 |  | 127.1 |
Net deferred taxes | $ | 205.2 |  | 159.4 |  | 165.9 |
As of December 31, 2017, we do not have any amount of unremitted foreign earnings of international subsidiaries upon which to provide a deferred tax liability, as we recognized the transition tax enacted by the U.S. in December 2017. We continue to intend to permanently reinvest such earnings outside of the U.S. As of December 31, 2017, we do not have any available U.S. federal net operating loss carryover. We have U.S. state net operating loss carryovers of $15.1 million, which expire at various dates through 2037, and international net operating loss carryovers of $626.4 million, which generally do not have expiration dates. The change in deferred tax balances for net operating loss carryovers from 2016 to 2017 included increases from current year losses and decreases from current year estimated utilization. As of December 31, 2017, we believe it is more-likely-than-not the net deferred tax assets of $205.2 million will be realized based upon our estimates of future income and the consideration of net operating losses, earnings trends, and tax planning strategies. Valuation allowances have been provided with regard to the tax benefit of certain international net operating loss carryovers, for which we have concluded recognition is not yet appropriate. In 2017, we reduced valuation allowances by $8.0 million on some jurisdictions' net operating losses due to the utilization or expiration of those losses, and we increased valuation allowances by $12.1 million for other jurisdictions based upon circumstances that caused us to establish or continue to provide valuation allowances on current or prior year losses in addition to those provided in prior years. The balance of the movement in valuation allowances comparing December 31, 2017 to December 31, 2016 was attributable to the effect of changes in foreign currency exchange rates. As of December 31, 2017, our net current receivable for income tax was $35.9 million, consisting of a current receivable of $144.7 million and current payable of $108.8 million, and our net noncurrent liability was $177.6 million, consisting of a noncurrent payable. As of December 31, 2016, our net current receivable for income tax was $40.7 million, consisting of a current receivable of $121.1 million and a current payable of $80.4 million, and our net noncurrent liability was $24.3 million, consisting of a noncurrent payable. JLL or one or more of our subsidiaries files income tax returns in the U.S. (including 46 states, 25 cities, the District of Columbia, and Puerto Rico), the United Kingdom (including England and Scotland), Australia, Germany, The People's Republic of China (including Hong Kong and Macau), France, Japan, Singapore, India, the Netherlands, Spain, and 81 other countries. Generally, the Company's open tax years include those from 2013 to the present, although reviews of taxing authorities for more recent years have been completed or are in process in a number of jurisdictions. As of December 31, 2017, JLL was under examination in the UK, France, India, Indonesia, the Philippines, and Thailand. In the United States, JLL was under examination by the Internal Revenue Service and in the following states: Massachusetts, Minnesota, New Jersey, and New York. A reconciliation of the beginning and ending amount of unrecognized tax benefits is presented in the following table.
($ in millions) | 2017 | 2016
Balance as of January 1 | $ | 37.6 |  | 28.3 |
Additions based on tax positions related to the current year | 8.0 |  | 10.8 |
Increase/(Decrease) related to tax positions of prior years | 3.8 |  | (1.5 | )
Lapse of statute of limitations | — |  | — |
Balance as of December 31 | $ | 49.4 |  | 37.6 |
We believe it is reasonably possible matters for which we have recorded $2.0 million of unrecognized tax benefits as of December 31, 2017, will be resolved during 2018. The recognition of tax benefits, and other changes to the amounts of our unrecognized tax benefits, may occur as the result of ongoing operations, the outcomes of audits or other examinations by tax authorities, or the passing of statutes of limitations. We do not expect changes to our unrecognized tax benefits to have a significant impact on net income, the financial position, or the cash flows of JLL. We do not believe we have material tax positions for which the ultimate deductibility is highly certain, but there is uncertainty about the timing of such deductibility. We recognize interest accrued and penalties, if any, related to income taxes as a component of income tax expense. During the years ended December 31, 2017, and 2015, we recognized $1.1 million and $0.1 million in interest expense and no penalties. During the year ended December 31, 2016, we recognized no interest expense or penalties. We had approximately $2.8 million and $1.7 million of accrued interest related to income taxes as of December 31, 2017 and 2016, respectively.

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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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