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INCOME TAXES | 12 Months Ended
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Dec. 31, 2017
Income Tax Disclosure [Abstract] |
INCOME TAXES | 9. INCOME TAXES The Tax Cuts and Jobs Act of 2017 (the "TCJA”), enacted on December 22, 2017, provides a broad range of tax reform, including changes to the U.S. corporate tax rate, business-related exclusions, deductions and credits, as well as international tax provisions. Most notably, the TCJA permanently reduces the U.S. corporate income tax rate from 35% to 21%, effective January 1, 2018, and imposes a one-time tax on the deemed repatriation of undistributed foreign earnings (the "transition tax"). The TCJA also introduces anti-base erosion provisions, including the global intangible low-taxed income ("GILTI") tax. As a result of the reduction in the U.S. corporate income tax rate, the Company remeasured its U.S. deferred income tax balances as of December 31, 2017 and recorded a provisional deferred income tax benefit of $56.4 million for the year ended December 31, 2017. The Company also recognized provisional current income tax expense for the transition tax under the TCJA of $82.8 million for the year ended December 31, 2017. After the utilization of foreign tax credit carryforwards of $17.8 million, a provisional liability of $65.0 million was accrued for the transition tax as of December 31, 2017 and is payable over a period of eight years. As of December 31, 2017, the Company had not completed its accounting for certain income tax effects of the TCJA and the provisional amounts described above could change materially in future periods. Although the Company made reasonable estimates to determine the effect of the TCJA on its deferred income taxes, the Company must gather and analyze additional information to complete the related accounting. Similarly, the Company's accounting for the income tax effects of the transition tax is incomplete primarily due to the complexity of computing foreign earnings and measuring the portion of such earnings held in cash and cash equivalents, which is subject to a higher tax rate. Further regulatory guidance is expected to be issued regarding the implementation and interpretation of the TCJA provisions, which could affect the Company's analyses and ultimate conclusions. As described in Note 2, future adjustments (if any) will be recognized as discrete income tax expense or benefit in the period the adjustments are determined. The accounting for the income tax effects of the TCJA will be completed within the measurement period defined in Note 2. The following table sets forth the components of income before income taxes by jurisdiction:
| Year Ended December 31,
| 2017 |  | 2016 |  | 2015
|  |  | (In thousands) |  |
United States | $ | 180,957 |  |  | $ | 80,881 |  |  | $ | 288,881 |
Foreign | 71,483 |  |  | 50,670 |  |  | 15,029 |
Income before income taxes | $ | 252,440 |  |  | $ | 131,551 |  |  | $ | 303,910 |
The following table sets forth the components of the provision (benefit) for income taxes:
| Year Ended December 31,
| 2017 |  | 2016 |  | 2015
|  |  | (In thousands) |  |
Current income taxes: |  |  |  |  |
Federal (1) | $ | 122,170 |  |  | $ | 65,614 |  |  | $ | 45,812 |
State | 2,259 |  |  | 6,489 |  |  | 4,565 |
Foreign | 15,274 |  |  | 3,502 |  |  | 2,309 |
Total current income taxes | 139,703 |  |  | 75,605 |  |  | 52,686 |
Deferred income taxes: |  |  |  |  |
Federal | (48,060 | ) |  | (42,835 | ) |  | 29,593 |
State | 4,508 |  |  | (2,938 | ) |  | 3,767 |
Foreign | (6,844 | ) |  | 599 |  |  | 9,491 |
Total deferred income taxes | (50,396 | ) |  | (45,174 | ) |  | 42,851 |
Provision for income taxes | $ | 89,307 |  |  | $ | 30,431 |  |  | $ | 95,537 |
(1) | Income tax (expense) benefit related to stock-based awards and other equity instruments recorded directly to additional paid in capital totaled $(0.1) million and $1.6 million in 2016 and 2015, respectively. Due to the adoption of ASU 2016-09, as described in Note 2, there was no income tax (expense) benefit recorded to additional paid in capital for stock-based awards in 2017.
The following table sets forth the reconciliation between the federal statutory income tax rate and the effective tax rate:
| Year Ended December 31,
| 2017 |  | 2016 |  | 2015
Federal statutory rate | 35.0 | % |  | 35.0 | % |  | 35.0 | %
State income taxes, net of federal income tax benefit | 1.4 |  |  | 1.0 |  |  | 2.2 |
Deemed repatriation of undistributed foreign earnings | 32.8 |  |  | — |  |  | — |
Deferred income tax remeasurement | (22.4 | ) |  | — |  |  | — |
Tax effect of intercompany financing | (10.5 | ) |  | (19.9 | ) |  | (8.8 | )
Foreign tax rate differences | (1.3 | ) |  | (0.4 | ) |  | (1.1 | )
Valuation allowance against deferred tax assets | 0.4 |  |  | 1.1 |  |  | — |
Nondeductible expenses | (0.1 | ) |  | 1.6 |  |  | 1.2 |
Adjustment related to uncertain tax positions | — |  |  | 3.7 |  |  | 2.7 |
Other | 0.1 |  |  | 1.0 |  |  | 0.2 |
Effective tax rate | 35.4 | % |  | 23.1 | % |  | 31.4 | %
As of December 31, 2017, WESCO’s foreign subsidiaries had undistributed earnings of approximately $884.0 million, of which $807.2 million was attributable to the Company's Canadian operations. As described above, WESCO recognized provisional income tax expense of $82.8 million for the year ended December 31, 2017 resulting from the transition tax. Notwithstanding the effects of applying such provisions of the TCJA, WESCO continues to assert that the earnings of its foreign subsidiaries are indefinitely reinvested to fund growth in the foreign markets. However, as a result of the TCJA, the Company is reevaluating its intent and ability to repatriate foreign cash based upon the available liquidity and cash flow needs of its foreign subsidiaries and will disclose in future filings any change in its intention to repatriate undistributed foreign earnings and any resulting income tax impacts. Until the Company completes this reevaluation, it is not practicable to determine the amount of any unrecognized deferred income taxes on these undistributed foreign earnings. The following table sets forth deferred tax assets and liabilities:
| As of December 31,
| 2017 |  | 2016
|  |  | (In thousands) |  |
| Assets |  | Liabilities |  | Assets |  | Liabilities
Accounts receivable | $ | 3,496 |  |  | $ | — |  |  | $ | 3,484 |  |  | $ | — |
Inventories | — |  |  | 3,181 |  |  | — |  |  | 4,001 |
Depreciation of property, buildings and equipment | — |  |  | 13,283 |  |  | — |  |  | 11,487 |
Amortization of intangible assets (1) | — |  |  | 159,107 |  |  | — |  |  | 237,015 |
Employee benefits | 14,835 |  |  | — |  |  | 18,577 |  |  | — |
Stock-based compensation (2) | 16,341 |  |  | — |  |  | 23,844 |  |  | — |
Advance payments | 8,456 |  |  | — |  |  | 22,056 |  |  | — |
Foreign tax credits | — |  |  | — |  |  | 15,698 |  |  | — |
Tax loss carryforwards | 19,128 |  |  | — |  |  | 18,440 |  |  | — |
Other | 11,850 |  |  | 8,672 |  |  | 7,175 |  |  | 7,783 |
Deferred income taxes before valuation allowance | 74,106 |  |  | 184,243 |  |  | 109,274 |  |  | 260,286 |
Valuation allowance | (2,518 | ) |  | — |  |  | (1,430 | ) |  | — |
Total deferred income taxes (1) | $ | 71,588 |  |  | $ | 184,243 |  |  | $ | 107,844 |  |  | $ | 260,286 |
(1) | As described in Note 2, the Consolidated Balance Sheet at December 31, 2016 was revised to correct certain financial statement line items, including deferred income taxes.
(2) | The Company does not expect the realizability of the deferred tax asset related to stock-based compensation to be materially impacted by the TCJA's expansion on the limitation of deductions for excessive employee compensation.
As of December 31, 2017 and 2016, WESCO had deferred tax assets of $10.4 million and $10.0 million, respectively, related to Canadian net operating loss carryforwards. The Canadian net operating loss carryforwards expire beginning in 2029 through 2037. Additionally, WESCO had deferred tax assets of $7.0 million and $6.2 million as of December 31, 2017 and 2016, 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, 2017 and 2016, WESCO had deferred tax assets of $3.1 million and $3.2 million, respectively, related to state net operating loss carryforwards. These carryforwards expire beginning in 2022 through 2036. The Company has determined, based upon an evaluation of all available evidence, that it "more-likely-than-not" will utilize all of its net operating loss carryforwards before expiration other than those incurred in a non-Canadian foreign location. Accordingly, the Company recorded a full valuation allowance against the total deferred tax asset related to these non-Canadian foreign net operating loss carryforwards of $2.5 million at December 31, 2017. As of December 31, 2016, WESCO had deferred tax assets of $15.7 million related to foreign tax credit (“FTC”) carryforwards. As described above, the Company fully utilized these FTC carryforwards against the liability recorded for the transition tax imposed by the TCJA. The Company is under examination by tax authorities in the U.S. 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 |  | 2013 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 implementation of the Mutual Agreement Procedure (“MAP”) concluded in the fourth quarter of 2015 between the Competent Authorities of the Internal Revenue Service (the "IRS") and the Canada Revenue Agency (the “CRA”) and the request for MAP assistance filed with the IRS and CRA in 2017 with respect to certain other 2004 to 2007 transfer pricing matters. 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 implementation of the Advance Pricing Agreement (“APA”) concluded in the fourth quarter of 2015 between the IRS and CRA and certain other transfer pricing matters pending with the CRA. The statutes of limitation with respect to the Company’s 2012 and 2013 U.S. federal income tax returns are 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,
| 2017 |  | 2016 |  | 2015
| (In thousands)
Beginning balance January 1 | $ | 6,181 |  |  | $ | 5,436 |  |  | $ | 20,033 |
Additions based on tax positions related to the current year | — |  |  | — |  |  | 46 |
Additions for tax positions of prior years | — |  |  | 3,298 |  |  | 402 |
Reductions for tax positions of prior years | (155 | ) |  | (21 | ) |  | (378 | )
Settlements | (1,025 | ) |  | (1,921 | ) |  | (9,638 | )
Lapse in statute of limitations | (755 | ) |  | (728 | ) |  | (1,497 | )
Foreign currency exchange rate changes | 102 |  |  | 117 |  |  | (3,532 | )
Ending balance December 31 | $ | 4,348 |  |  | $ | 6,181 |  |  | $ | 5,436 |
The total amount of unrecognized tax benefits were $4.3 million, $6.2 million, and $5.4 million as of December 31, 2017, 2016 and 2015, respectively. The amount of unrecognized tax benefits that would affect the effective tax rate if recognized in the consolidated financial statements was $1.7 million, $7.5 million, and $6.2 million, respectively. It is reasonably possible that the amount of unrecognized tax benefits will decrease by approximately $3.0 million within the next twelve months due to the settlement of uncertain tax positions related to IRS 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 $0.1 million and $1.2 million for 2017 and 2016, 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 2014 tax years. As of December 31, 2017 and 2016, WESCO had an accrued liability of $1.8 million and $2.2 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 2017, 2016, and 2015.

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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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