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INCOME TAXES | 12 Months Ended
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Dec. 31, 2016
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The following table sets forth the components of income before income taxes by jurisdiction:
| Year Ended December 31,
| 2016 |  | 2015 |  | 2014
|  |  | (In thousands) |  |
United States | $ | 80,881 |  |  | $ | 288,881 |  |  | $ | 326,934 |
Foreign | 50,670 |  |  | 15,029 |  |  | 57,219 |
Income before income taxes | $ | 131,551 |  |  | $ | 303,910 |  |  | $ | 384,153 |
The following table sets forth the components of the provision (benefit) for income taxes:
| Year Ended December 31,
| 2016 |  | 2015 |  | 2014
|  |  | (In thousands) |  |
Current taxes: |  |  |  |  |
Federal(1) | $ | 65,614 |  |  | $ | 45,812 |  |  | $ | 69,495 |
State | 6,489 |  |  | 4,565 |  |  | 7,161 |
Foreign | 3,502 |  |  | 2,309 |  |  | 27,081 |
Total current taxes | 75,605 |  |  | 52,686 |  |  | 103,737 |
Deferred taxes: |  |  |  |  |
Federal | (42,835 | ) |  | 29,593 |  |  | 14,525 |
State | (2,938 | ) |  | 3,767 |  |  | 2,522 |
Foreign | 599 |  |  | 9,491 |  |  | (12,068 | )
Total deferred taxes | (45,174 | ) |  | 42,851 |  |  | 4,979 |
Provision for income taxes | $ | 30,431 |  |  | $ | 95,537 |  |  | $ | 108,716 |
(1) | Tax (expense) benefits related to stock-based awards and other equity instruments recorded directly to additional paid in capital totaled $(0.1) million, $1.6 million and $5.0 million in 2016, 2015 and 2014, respectively.
The following table sets forth the reconciliation between the federal statutory income tax rate and the effective tax rate:
| Year Ended December 31,
| 2016 |  | 2015 |  | 2014
Federal statutory rate | 35.0 | % |  | 35.0 | % |  | 35.0 | %
State taxes, net of federal tax benefit | 1.0 |  |  | 2.2 |  |  | 1.9 |
Nondeductible expenses | 1.6 |  |  | 1.2 |  |  | 0.7 |
Foreign tax rate differences | (0.4 | ) |  | (1.1 | ) |  | (1.4 | )
Tax effect of intercompany financing | (19.9 | ) |  | (8.8 | ) |  | (7.8 | )
Adjustment related to uncertain tax positions | 3.7 |  |  | 2.7 |  |  | (0.2 | )
Valuation allowance against deferred tax assets | 1.1 |  |  | — |  |  | — |
Other | 1.0 |  |  | 0.2 |  |  | 0.1 |
Effective tax rate | 23.1 | % |  | 31.4 | % |  | 28.3 | %
As of December 31, 2016, WESCO’s foreign subsidiaries had unremitted earnings of approximately $759.9 million, of which $668.0 million was attributable to the Company's Canadian operations. WESCO asserts that these earnings are permanently reinvested to fund growth in the foreign markets and, therefore, has not provided a deferred tax liability on these earnings. Additionally, WESCO’s current plans do not require that these earnings be repatriated to fund liquidity needs in the U.S. It is not practicable for WESCO to determine the deferred tax liability associated with repatriation of these earnings as such determination involves material uncertainties, however, if these earnings were repatriated and taxed at the U.S. statutory rate of 35%, the unrecognized deferred tax liability would be approximately $266.0 million. The following table sets forth deferred tax assets and liabilities:
| As of December 31,
| 2016 |  | 2015
|  |  | (In thousands) |  |
| Assets |  | Liabilities |  | Assets |  | Liabilities
Accounts receivable | $ | 3,484 |  |  | $ | — |  |  | $ | 4,736 |  |  | $ | — |
Inventory | — |  |  | 4,001 |  |  | — |  |  | 5,410 |
Depreciation | — |  |  | 11,487 |  |  | — |  |  | 11,671 |
Amortization of intangible assets | — |  |  | 226,779 |  |  | — |  |  | 240,106 |
Convertible debt interest | — |  |  | — |  |  | — |  |  | 161,700 |
Employee benefits | 18,577 |  |  | — |  |  | 16,702 |  |  | — |
Stock-based compensation | 23,844 |  |  | — |  |  | 27,531 |  |  | — |
Advance payments | 22,056 |  |  | — |  |  | — |  |  | — |
Foreign tax credits | 15,698 |  |  | — |  |  | 11,494 |  |  | — |
Tax loss carryforwards | 18,440 |  |  | — |  |  | 21,095 |  |  | — |
Other | 7,175 |  |  | 7,783 |  |  | 6,768 |  |  | 7,715 |
Deferred taxes before valuation allowance | 109,274 |  |  | 250,050 |  |  | 88,326 |  |  | 426,602 |
Valuation allowance | (1,430 | ) |  | — |  |  | — |  |  | — |
Total deferred taxes | $ | 107,844 |  |  | $ | 250,050 |  |  | $ | 88,326 |  |  | $ | 426,602 |
As of December 31, 2016 and 2015, WESCO had deferred tax assets of $10.0 million and $12.6 million, respectively, related to Canadian net operating loss carryforwards. The Canadian net operating loss carryforwards expire beginning in 2029 through 2036. Additionally, WESCO had deferred tax assets of $6.2 million and $5.3 million as of December 31, 2016 and 2015, respectively, related to non-Canadian foreign net operating loss carryforwards. These net operating loss carryforwards expire beginning in 2019, while some may be carried forward indefinitely. As of December 31, 2016 and 2015, WESCO had deferred tax assets of $3.2 million related to state net operating loss carryforwards. These carryforwards expire beginning in 2022 through 2035. The Company has determined, based upon an evaluation of all available positive and negative evidence, that it "more-likely-than-not" will utilize all of its net operating loss carryforwards before expiration other than those recently incurred in a non-Canadian foreign location. Accordingly, the Company recorded a partial valuation allowance of $1.4 million against the total deferred tax asset related to the non-Canadian foreign net operating loss carryforwards of $2.2 million at December 31, 2016. As of December 31, 2016 and 2015, WESCO had deferred tax assets of $15.7 million and $11.5 million, respectively, related to U.S. foreign tax credit (“FTC”) carryforwards. These FTC carryforwards expire beginning in 2019 through 2025. The Company has determined that prudent and feasible tax planning strategies exist and it intends to implement these tax planning strategies to prevent these FTC carryforwards from expiring unused. Accordingly, a valuation allowance has not been recorded. The Company is under examination by tax authorities in the United States and Canada and remains subject to examination until the applicable statutes of limitation expire. The statutes of limitation for the material jurisdictions in which the Company files income tax returns remain open as follows:
United States — Federal |  | 2004 and forward
United States — Material States |  | 2012 and forward
Canada |  | 2004 and forward
The statutes of limitation with respect to the Company’s 2004 to 2007 U.S. federal income tax returns are open by waiver only in connection with the Mutual Agreement Procedure (“MAP”) concluded in the fourth quarter of 2015 between the Competent Authorities of the Internal Revenue Service (“IRS”) and Canada Revenue Agency (“CRA”) with respect to transfer pricing matters and matters pending before the Appeals Division of Canada Revenue Agency. The statutes of limitation with respect to the Company’s 2008 to 2011 U.S. federal income tax returns are open by waiver only in connection with the Advance Pricing Agreement (“APA”) concluded in the fourth quarter of 2015 between the IRS and CRA. The APA resolves certain transfer pricing matters for the 2008 to 2018 tax years. The statute of limitation with respect to the Company’s 2012 U.S. federal income tax return is open by waiver only in connection with the IRS examination of the 2012 and 2013 years and the APA. The following table sets forth the reconciliation of gross unrecognized tax benefits:
| As of December 31,
| 2016 |  | 2015 |  | 2014
| (In thousands)
Beginning balance January 1 | $ | 5,436 |  |  | $ | 20,033 |  |  | $ | 25,548 |
Additions based on tax positions related to the current year | — |  |  | 46 |  |  | 69 |
Additions for tax positions of prior years | 3,298 |  |  | 402 |  |  | 191 |
Additions for acquired tax positions | — |  |  | — |  |  | 308 |
Reductions for tax positions of prior years | (21 | ) |  | (378 | ) |  | (5,608 | )
Settlements | (1,921 | ) |  | (9,638 | ) |  | (209 | )
Lapse in statute of limitations | (728 | ) |  | (1,497 | ) |  | (40 | )
Foreign currency exchange rate changes | 117 |  |  | (3,532 | ) |  | (226 | )
Ending balance December 31 | $ | 6,181 |  |  | $ | 5,436 |  |  | $ | 20,033 |
The total amount of unrecognized tax benefits were $6.2 million, $5.4 million, and $20.0 million as of December 31, 2016, 2015 and 2014, respectively. The amount of unrecognized tax benefits that would affect the effective tax rate if recognized in the consolidated financial statements was $7.5 million, $6.2 million, and $20.4 million, respectively. The amount for 2014 primarily related to transfer pricing adjustments made by Canada Revenue Agency, which were subject to MAP and APA proceedings under the U.S./Canada income tax treaty. These proceedings concluded in the fourth quarter of 2015. It is reasonably possible that the amount of unrecognized tax benefits will decrease by approximately $0.9 million within the next twelve months due to the settlement of uncertain tax positions related to Internal Revenue Service audits or the expiration of statutes of limitation. Of this amount, approximately $0.3 million could impact the effective tax rate. The Company classifies interest related to unrecognized tax benefits as interest income or expense. Interest expense on unrecognized tax benefits was $1.2 million and $1.0 million for 2016 and 2014, respectively. In 2015, interest income of $8.7 million was recognized as a result of the conclusion of the MAP and APA proceedings for the 2004 to 2015 tax years. As of December 31, 2016 and 2015, WESCO had an accrued liability of $2.2 million and $2.1 million, respectively, for interest expense related to unrecognized tax benefits. The Company classifies penalties related to unrecognized tax benefits as part of income tax expense. Penalties recorded in income tax expense were immaterial in 2016, 2015, and 2014.

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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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