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Income Taxes | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes |
8. | INCOME TAXES
Our provision for income taxes consisted of the following:
| Year Ended December 31,
($ in millions) | 2018 | 2017 | 2016
U.S. federal: |  |  |
| Current | $ | 39.8 |  | 12.2 |  | 1.3 |
| Noncurrent | 35.7 |  | 122.2 |  | — |
| Deferred | (20.1 | ) | (23.7 | ) | (5.4 | )
|  | $ | 55.4 |  | 110.7 |  | (4.1 | )
State and Local: |  |  |
| Current | $ | 12.5 |  | 5.4 |  | 8.2 |
| Noncurrent | 7.5 |  | 19.1 |  | — |
| Deferred | (5.0 | ) | (5.0 | ) | (0.9 | )
|  | $ | 15.0 |  | 19.5 |  | 7.3 |
International: |  |  |
| Current | $ | 145.3 |  | 141.2 |  | 105.4 |
| Deferred | (1.4 | ) | (15.1 | ) | 9.2 |
|  | $ | 143.9 |  | 126.1 |  | 114.6 |
Total | $ | 214.3 |  | 256.3 |  | 117.8 |
Our 2017 and 2018 income tax expense was significantly impacted by tax legislation enacted in the United States late in 2017 and by interpretive regulatory guidance issued through December 2018. On December 22, 2017, the U.S. government enacted tax reform legislation, commonly known as the Tax Cuts and Jobs Act (the Act). The Act brought 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 foreign subsidiaries be included in U.S. taxable income. Throughout 2018, the U.S. Internal Revenue Service and the U.S. Treasury Department issued notices, proposed regulations, and final regulations which provided interpretive guidance to taxpayers on the Act. Most significantly to our position, proposed regulations issued in November 2018 provided guidance on the application of the foreign tax credit to the transition tax. For U.S. tax purposes, our foreign subsidiaries have a November 30 fiscal year end. Our interpretation of the proposed regulations determined foreign tax credit computations for such subsidiaries was less favorable than we originally concluded. As such, we lowered the foreign tax credit amount in the calculation of our transition tax and, therefore, recognized additional expense in 2018, as noted below. The SEC staff issued guidance on accounting for the tax effects of the Act, including allowing a one-year measurement period for companies to complete the accounting. In accordance with that guidance, we recorded additional income tax expense of $47.0 million within our 2018 income tax provision for the transition tax noted above. This is an increment to the $125.9 million recognized in 2017 income tax expense. In the aggregate, we have recognized $172.9 million of expense associated with the Act, which is composed of (i) a $184.4 million tax liability on deemed repatriation of foreign earnings dating back to 1997, partially offset by (ii) a benefit for the remeasurement of deferred tax liabilities reflecting the new lower U.S. federal tax rate. As of December 31, 2018, we believe our accounting for the effect of the Act is complete. Our provisional expense amount recorded in the fourth quarter of 2017 reflected our estimation of the transition tax based upon the statute and its legislative history, together with an estimation of the deferred income tax consequences of the change in the U.S. federal income tax rate. The additional expense recorded in the fourth quarter of 2018 reflected (i) the additional transition tax made clear by the proposed regulations on foreign tax credits issued in November 2018 and (ii) an adjustment to the deferred tax consequences based upon the filing of our 2017 U.S. income tax return in October 2018. With respect to the Base Erosion Anti-Abuse Tax and Global Intangible Low-Taxed Income Tax, we 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. Accordingly, we have included provisions in 2018 tax expense to reflect the estimated impact of these taxes. In 2018 and 2016, our current tax expense was increased by $22.2 million and $21.8 million, respectively, and our deferred tax expense reduced by a corresponding amount, due to the generation of net operating loss carryovers. In 2017, our current tax expense was decreased by $3.0 million due to the utilization of net operating loss carryovers. Income tax expense differed from the amounts computed by applying the U.S. federal income tax rate of 21% to earnings before provision for income taxes as a result of the following:
| Year Ended December 31,
($ in millions) | 2018 |  | 2017 |  | 2016
Income tax expense at statutory rates | $ | 148.3 |  | 21.0 | % |  | $ | 187.5 |  | 35.0 | % |  | $ | 162.3 |  | 35.0 | %
| Increase (reduction) in income taxes from: |  |  |  |  |  |  |  |
| State and local income taxes, net of federal income tax benefit | 2.8 |  | 0.4 |  |  | (0.1 | ) | — |  |  | 5.9 |  | 1.3 |
| Amortization of goodwill and other intangibles | (3.4 | ) | (0.5 | ) |  | (6.7 | ) | (1.3 | ) |  | (5.7 | ) | (1.2 | )
| Nondeductible expenses | 14.6 |  | 2.1 |  |  | 7.0 |  | 1.3 |  |  | 6.7 |  | 1.4 |
| International earnings taxed at various rates | (21.1 | ) | (3.0 | ) |  | (69.0 | ) | (12.9 | ) |  | (59.8 | ) | (12.9 | )
| Valuation allowances | 12.4 |  | 1.8 |  |  | 5.8 |  | 1.1 |  |  | 8.3 |  | 1.8 |
| Transition tax and deferred tax due to U.S. tax reform | 47.0 |  | 6.7 |  |  | 125.9 |  | 23.5 |  |  | — |  | — |
| Other, net | 13.7 |  | 1.9 |  |  | 5.9 |  | 1.1 |  |  | 0.1 |  | 0.1 |
Total | $ | 214.3 |  | 30.4 | % |  | $ | 256.3 |  | 47.8 | % |  | $ | 117.8 |  | 25.5 | %
With respect to international earnings taxed at varying rates, we have operations which constitute a taxable income presence in 91 countries or other taxable jurisdictions outside of the U.S. which are treated as such by the U.S. Internal Revenue Code. Of those countries or other taxable jurisdictions, 69 had income tax rates lower than the combined U.S. federal and state income tax rate in 2018. 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%) and Saudi Arabia (20%) represent the most significant components of the international earnings line item in our effective tax rate reconciliation. In the aggregate, these very low rate jurisdictions contributed substantially all of the difference between the actual income tax provision for international earnings and the equivalent provision at the U.S. federal and state statutory rate in 2018. 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 2018 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, based upon our historical practice. Effective January 1, 2018, the U.S. federal income tax rate was reduced to 21%. However, factoring in the impact of state income taxes, we do not consider the U.S. to be a very low tax rate jurisdiction. Our income before taxes from domestic (U.S.) and international sources is presented in the following table.
| Year Ended December 31,
($ in millions) | 2018 | 2017 | 2016
Domestic | $ | 101.3 |  | 62.7 |  | 73.6 |
International | 604.7 |  | 473.1 |  | 390.1 |
Total | $ | 706.0 |  | 535.8 |  | 463.7 |
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) | 2018 | 2017
Deferred tax assets attributable to: |  |
Accrued expenses | $ | 216.0 |  | 230.6 |
U.S. federal and state loss and credit carryovers | 24.1 |  | 15.2 |
Allowances for uncollectible accounts | 17.5 |  | 16.5 |
International loss carryovers | 142.5 |  | 134.8 |
Pension liabilities | 17.7 |  | 20.4 |
Other | 11.6 |  | — |
Deferred tax assets | 429.4 |  | 417.5 |
Less: valuation allowances | (79.2 | ) | (59.7 | )
Net deferred tax assets | $ | 350.2 |  | 357.8 |
Deferred tax liabilities attributable to: |  |
Property and equipment | $ | 14.2 |  | 17.9 |
Intangible assets | 132.2 |  | 121.6 |
Income deferred for tax purposes | 5.9 |  | 43.4 |
Investment in real estate ventures | 8.0 |  | 2.0 |
Other | 12.6 |  | 7.0 |
Deferred tax liabilities | $ | 172.9 |  | 191.9 |
Net deferred taxes | $ | 177.3 |  | 165.9 |
We have not provided a deferred tax liability on the unremitted foreign earnings of international subsidiaries because it is our intent to permanently reinvest such earnings outside of the U.S. If repatriation of all such earnings were to occur, we would incur withholding taxes, dividend distribution taxes, and potentially an amount of gain taxation which is not presently determinable. As of December 31, 2018, we had an available U.S. federal net operating loss carryover of $49.8 million from an acquired company, for which we have established a full valuation allowance due to significant statutory limitations on its usage, and which will begin to expire in 2020. We have U.S. state net operating loss carryovers with a tax effect of $13.6 million, which expire at various dates through 2038, and international net operating loss carryovers of $646.8 million, which generally do not have expiration dates. The change in deferred tax balances for net operating loss carryovers from 2017 to 2018 included increases from current year losses and decreases from current year estimated utilization. As of December 31, 2018, we believe it is more-likely-than-not the net deferred tax assets of $177.3 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 2018, we reduced valuation allowances by $9.5 million on some jurisdictions' net operating losses due to the utilization or expiration of those losses, and we increased valuation allowances by $32.3 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, 2018 to December 31, 2017 was attributable to the effect of changes in foreign currency exchange rates. As of December 31, 2018, our net current payable for income tax was $59.1 million, consisting of a current receivable of $156.2 million and current payable of $215.3 million, and our net noncurrent liability was $171.2 million, entirely a noncurrent payable. 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 a current payable of $108.8 million, and our net noncurrent liability was $177.6 million, entirely a noncurrent payable. We file income tax returns in the U.S. (including 46 states, 25 cities, the District of Columbia and Puerto Rico), the United Kingdom (including England and Scotland), Australia, Germany, The People's Republic of China (including Hong Kong and Macau), France, Japan, Singapore, India, the Netherlands, Spain and 81 other countries. Generally, the Company's open tax years include those from 2014 to the present, although reviews of taxing authorities for more recent years have been completed or are in process in a number of jurisdictions. As of December 31, 2018, we were under examination in Belgium, the United Kingdom, France, India, Indonesia, the Philippines and Thailand; in the U.S., we were under examination in the states of Massachusetts, Michigan and Minnesota. A reconciliation of the beginning and ending amount of unrecognized tax benefits is presented in the following table.
($ in millions) | 2018 | 2017
Balance as of January 1 | $ | 49.4 |  | 37.6 |
Additions based on tax positions related to the current year | 8.3 |  | 8.0 |
Increase/(Decrease) related to tax positions of prior years | 5.0 |  | 3.8 |
Lapse of statute of limitations | — |  | — |
Balance as of December 31 | $ | 62.7 |  | 49.4 |
We believe it is reasonably possible that matters for which we have recorded $23.4 million of unrecognized tax benefits as of December 31, 2018, will be resolved during 2019. 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, 2018, and 2017, we recognized $1.6 million and $1.1 million, respectively, in interest expense and no penalties. During the year ended December 31, 2016, we recognized no interest expense or penalties. We had approximately $4.4 million and $2.8 million of accrued interest related to income taxes as of December 31, 2018 and 2017, 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://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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