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INCOME TAXES | 12 Months Ended
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Dec. 31, 2017
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The components of income before income taxes for the three years ended December 31, 2017 were as follows:
|  | Year Ended December 31,
|  | 2017 |  | 2016 |  | 2015
U.S. |  | $ | 213,171 |  |  | $ | 209,409 |  |  | $ | 118,037 |
Non-U.S. |  | 153,065 |  |  | 67,979 |  |  | 51,750 |
Total |  | $ | 366,236 |  |  | $ | 277,388 |  |  | $ | 169,787 |
The components of income tax expense (benefit) for the three years ended December 31, 2017 were as follows:
|  | Year Ended December 31,
|  | 2017 |  | 2016 |  | 2015
Current: |  |  |  |  |  |
Federal |  | $ | 89,182 |  |  | $ | 57,090 |  |  | $ | 60,500 |
Non-U.S. |  | 25,746 |  |  | 23,344 |  |  | 28,046 |
State and local |  | 7,640 |  |  | 8,386 |  |  | 9,557 |
|  | 122,568 |  |  | 88,820 |  |  | 98,103 |
Deferred: |  |  |  |  |  |
Federal |  | (4,391 | ) |  | (1,716 | ) |  | (47,902 | )
Non-U.S. |  | (82 | ) |  | (8,261 | ) |  | (3,362 | )
State and local |  | 666 |  |  | 172 |  |  | (4,464 | )
|  | (3,807 | ) |  | (9,805 | ) |  | (55,728 | )
Total |  | $ | 118,761 |  |  | $ | 79,015 |  |  | $ | 42,375 |
The U.S. Tax Cuts and Jobs Act (the "U.S. Tax Act") was enacted on December 22, 2017. The SEC staff issued Staff Accounting Bulletin No. 118 ("SAB 118"), which provides for a one-year measurement period and provides guidance for the application of ASC Topic 740, Income Taxes. In accordance with SAB 118, the Company recognized the income tax effects of the U.S. Tax Act to the extent applicable for the year of enactment. The expense primarily relates to taxes on the Company's unremitted foreign earnings and profits, partially offset by the re-measurement of deferred tax assets and liabilities. The amounts recorded are based on reasonable estimates and may require further adjustments as additional guidance from the U.S. Department of Treasury is provided, the Company's assumptions change or as further information and interpretations become available. The provisional amount recorded for the remeasurement of the Company's deferred tax assets and liabilities is a tax benefit of $14,532. The Company is still analyzing certain aspects of the U.S. Tax Act and refining calculations that could potentially affect the measurement of deferred income tax balances, including law changes surrounding deferred compensation. The one-time transition tax is based on total post-1986 earnings and profits for which the Company had previously deferred from U.S. income taxes. The Company recorded a provisional amount for the one-time transition tax liability of $36,387, resulting in an increase to income tax expense. The transition tax is based partially on the earnings and profits held in cash and partially on the earnings and profits invested in assets. The provisional amount recorded for taxes on the planned repatriation of certain earnings and profits subject to the transition tax is $6,667. This additional tax pertains to foreign withholding taxes associated with the repatriation of earnings that are not indefinitely reinvested in the foreign operations. The net impact of the U.S. Tax Act provisional amounts are included in Income taxes in the accompanying Consolidated Statements of Income. The differences between total income tax expense and the amount computed by applying the statutory federal income tax rate to income before income taxes for the three years ended December 31, 2017 were as follows:
|  | Year Ended December 31,
|  | 2017 |  | 2016 |  | 2015
Statutory rate of 35% applied to pre-tax income |  | $ | 128,182 |  |  | $ | 97,086 |  |  | $ | 59,426 |
State and local income taxes, net of federal tax benefit |  | 5,671 |  |  | 5,554 |  |  | 1,868 |
Excess tax benefits resulting from exercises of stock-based compensation |  | (6,276 | ) |  | — |  |  | — |
Net impact of the U.S. Tax Act |  | 21,949 |  |  | — |  |  | — |
Foreign withholding taxes |  | 6,667 |  |  | — |  |  | — |
Intangible and asset impairments/(write-off) |  | — |  |  | (4,438 | ) |  | 2,184 |
Foreign rate variance |  | (13,929 | ) |  | (8,128 | ) |  | (11,399 | )
Venezuela deconsolidation/devaluation |  | — |  |  | 5,192 |  |  | 11,396 |
Bargain purchase gain |  | (17,556 | ) |  | — |  |  | — |
Valuation allowances |  | 102 |  |  | (8,525 | ) |  | 2,900 |
Manufacturing deduction |  | (5,922 | ) |  | (5,190 | ) |  | (9,207 | )
U.S. tax cost (benefit) of foreign source income |  | 294 |  |  | (489 | ) |  | (8,754 | )
Other |  | (421 | ) |  | (2,047 | ) |  | (6,039 | )
Total |  | $ | 118,761 |  |  | $ | 79,015 |  |  | $ | 42,375 |
Effective tax rate |  | 32.4 | % |  | 28.5 | % |  | 25.0 | %
The 2017 effective tax rate is impacted by the nontaxable bargain purchase gain recorded in connection with the acquisition of Air Liquide Welding, excess tax benefits from the exercise of stock based compensation awards, the net impact of the U.S. Tax Act and income earned in lower tax rate jurisdictions. Total income tax payments, net of refunds, were $81,691 in 2017, $72,965 in 2016 and $101,939 in 2015. Deferred Taxes Significant components of deferred tax assets and liabilities at December 31, 2017 and 2016, were as follows:
|  | December 31,
|  | 2017 |  | 2016
Deferred tax assets: |  |  |  |
Tax loss and credit carry-forwards |  | $ | 65,284 |  |  | $ | 52,270 |
Inventory |  | 2,501 |  |  | 2,080 |
Other accruals |  | 14,873 |  |  | 18,186 |
Employee benefits |  | 18,468 |  |  | 23,596 |
Pension obligations |  | 12,363 |  |  | 2,503 |
Other |  | 4,923 |  |  | 3,020 |
Deferred tax assets, gross |  | 118,412 |  |  | 101,655 |
Valuation allowance |  | (68,694 | ) |  | (47,849 | )
Deferred tax assets, net |  | 49,718 |  |  | 53,806 |
Deferred tax liabilities: |  |  |  |
Property, plant and equipment |  | 21,427 |  |  | 32,210 |
Intangible assets |  | 10,729 |  |  | 17,506 |
Inventory |  | 5,891 |  |  | 10,059 |
Pension obligations |  | 16,137 |  |  | 17,915 |
Other |  | 20,313 |  |  | 9,309 |
Deferred tax liabilities |  | 74,497 |  |  | 86,999 |
Total deferred taxes |  | $ | (24,779 | ) |  | $ | (33,193 | )
At December 31, 2017, certain subsidiaries had tax loss carry-forwards of approximately $80,961 that expire in various years from 2018 through 2033, plus $177,796 for which there is no expiration date. In assessing the realizability of deferred tax assets, the Company assesses whether it is more likely than not that a portion or all of the deferred tax assets will not be realized. The Company considers the scheduled reversal of deferred tax liabilities, tax planning strategies and projected future taxable income in making this assessment. At December 31, 2017, a valuation allowance of $68,694 was recorded against certain deferred tax assets based on this assessment. The Company believes it is more likely than not that the tax benefit of the remaining net deferred tax assets will be realized. The amount of net deferred tax assets considered realizable could be increased or reduced in the future if the Company's assessment of future taxable income or tax planning strategies changes. The Company previously considered the earnings in non-U.S. subsidiaries to be indefinitely reinvested and, accordingly, recorded no deferred income taxes. As a result of the U.S. Tax Act, the Company determined it will repatriate earnings for certain non-U.S. subsidiaries, which are subject to foreign withholding taxes. The Company has estimated the associated tax to be $6,667. The Company considers remaining earnings in all other non-U.S. subsidiaries to be indefinitely reinvested and has not recorded any deferred taxes as such estimate is not practicable. Unrecognized Tax Benefits Liabilities for unrecognized tax benefits are classified as Other liabilities unless expected to be paid in one year, with a portion recorded to Deferred income taxes to offset tax attributes. The Company recognizes interest and penalties related to unrecognized tax benefits in Income taxes. Current income tax expense included expense of $1,079 for the year ended December 31, 2017 and expense of $597 for the year ended December 31, 2016 for interest and penalties. For those same years, the Company's accrual for interest and penalties related to unrecognized tax benefits totaled $8,135 and $6,431, respectively. The following table summarizes the activity related to unrecognized tax benefits:
|  | 2017 |  | 2016
Balance at beginning of year |  | $ | 18,499 |  |  | $ | 14,332 |
Increase related to current year tax provisions |  | 1,448 |  |  | 1,975 |
Increase related to prior years' tax positions |  | 1,460 |  |  | 5,188 |
Increase related to acquisitions |  | 8,223 |  |  | — |
Decrease related to settlements with taxing authorities |  | (522 | ) |  | (265 | )
Resolution of and other decreases in prior years' tax liabilities |  | (1,734 | ) |  | (1,982 | )
Other |  | 1,075 |  |  | (749 | )
Balance at end of year |  | $ | 28,449 |  |  | $ | 18,499 |
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $12,709 at December 31, 2017 and $9,813 at December 31, 2016. The Company files income tax returns in the U.S. and various state, local and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local or non-U.S. income tax examinations by tax authorities for years before 2013. The Company is currently subject to U.S. federal, various state audits and non-U.S. income tax audits. The Company is generally not able to precisely estimate the ultimate settlement amounts or timing until after the close of an audit. The Company evaluates its tax positions and establishes liabilities for uncertain tax positions that may be challenged by local authorities and may not be fully sustained. Unrecognized tax benefits are reviewed on an ongoing basis and are adjusted for changing facts and circumstances, including progress of tax audits and closing of statutes of limitations. Based on information currently available, management believes that additional audit activity could be completed and/or statutes of limitations may close relating to existing unrecognized tax benefits. It is reasonably possible there could be a further reduction of $2,414 in prior years' unrecognized tax benefits in 2018.

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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 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32537-109319 + Details
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