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INCOME TAXES | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
INCOME TAXES | . INCOME TAXES The Tax Cuts and Jobs Act of 2017 (the "TCJA”), enacted on December 22, 2017, made significant changes to U.S. corporate tax law, including with respect to the U.S. corporate income tax rate, new business-related exclusions, deductions and credits, as well as international tax provisions. Most notably, the TCJA permanently reduced the U.S. corporate income tax rate from 35% to 21%, effective January 1, 2018, and imposed a one-time tax on the deemed repatriation of undistributed foreign earnings (the "transition tax"). The TCJA also introduced anti-base erosion provisions, including the global intangible low-taxed income 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 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, which is payable over a period of eight years. During the year ended December 31, 2018, the Company completed its accounting for the income tax effects of the TCJA, which resulted in an additional deferred income tax benefit of $0.9 million and a discrete benefit of $3.4 million. During the year ended December 31, 2019, the Company further adjusted its transition tax liability based upon guidance issued by the Internal Revenue Service ("IRS"), which resulted in a discrete benefit of $3.7 million. As of December 31, 2019 and 2018, a liability of $36.8 million and $43.2 million, respectively, was recorded as components of other current and noncurrent liabilities in the Consolidated Balance Sheets for transition tax. The transition tax will be paid in installments. The accounting for the income tax effects of the TCJA has been completed based on regulatory guidance issued to date. Additional guidance could be issued, which could affect the amounts described above. The Company will continue to evaluate its tax positions with respect to the TCJA as the IRS releases additional regulatory guidance. Future adjustments, if any, for tax positions taken to date will be recognized as discrete income tax expense or benefit in the period in which such guidance is issued. The following table sets forth the components of income before income taxes by jurisdiction:
| Year Ended December 31,
| 2019 |  | 2018 |  | 2017
|  |  | (In thousands) |  |
United States | $ | 198,566 |  |  | $ | 198,556 |  |  | $ | 180,957 |
Foreign | 83,495 |  |  | 82,469 |  |  | 71,483 |
Income before income taxes | $ | 282,061 |  |  | $ | 281,025 |  |  | $ | 252,440 |
The following table sets forth the components of the provision (benefit) for income taxes:
| Year Ended December 31,
| 2019 |  | 2018 |  | 2017
|  |  | (In thousands) |  |
Current income taxes: |  |  |  |  |
Federal | $ | 31,695 |  |  | $ | 28,464 |  |  | $ | 122,170 |
State | 8,616 |  |  | 7,458 |  |  | 2,259 |
Foreign | 6,347 |  |  | 10,611 |  |  | 15,274 |
Total current income taxes | 46,658 |  |  | 46,533 |  |  | 139,703 |
Deferred income taxes: |  |  |  |  |
Federal | 6,774 |  |  | 5,253 |  |  | (48,060 | )
State | 1,846 |  |  | 1,967 |  |  | 4,508 |
Foreign | 4,585 |  |  | 1,917 |  |  | (6,844 | )
Total deferred income taxes | 13,205 |  |  | 9,137 |  |  | (50,396 | )
Provision for income taxes | $ | 59,863 |  |  | $ | 55,670 |  |  | $ | 89,307 |
The following table sets forth the reconciliation between the federal statutory income tax rate and the effective tax rate:
| Year Ended December 31,
| 2019 |  | 2018 |  | 2017
Federal statutory rate | 21.0 | % |  | 21.0 | % |  | 35.0 | %
State income taxes, net of federal income tax benefit | 3.1 |  |  | 2.8 |  |  | 1.4 |
Deemed repatriation of undistributed foreign earnings | (1.3 | ) |  | (1.2 | ) |  | 32.8 |
Deferred income tax remeasurement | — |  |  | (0.3 | ) |  | (22.4 | )
Tax effect of intercompany financing | (5.5 | ) |  | (5.6 | ) |  | (10.5 | )
Other | 3.9 |  |  | 3.1 |  |  | (0.9 | )
Effective tax rate | 21.2 | % |  | 19.8 | % |  | 35.4 | %
As a result of the TCJA, WESCO reevaluated its intent and ability to repatriate foreign earnings based upon the liquidity of the Company's domestic operations and cash flow needs of its foreign subsidiaries. Consequently, during the years ended December 31, 2019 and 2018, WESCO repatriated a portion of the previously taxed earnings attributable to its foreign operations. WESCO continues to assert that the remaining undistributed earnings of its foreign subsidiaries, the majority of which were subject to the transition tax described above, are indefinitely reinvested. WESCO believes that it is able to maintain a sufficient level of liquidity for its domestic operations and commitments without repatriating cash held by these foreign subsidiaries. Upon any future repatriation, additional tax expense or benefit may be incurred; however, we do not believe such amount would be material. The following table sets forth deferred tax assets and liabilities:
| As of December 31,
| 2019 |  | 2018
|  |  | (In thousands) |  |
| Assets |  | Liabilities |  | Assets |  | Liabilities
Accounts receivable | $ | 3,382 |  |  | $ | — |  |  | $ | 3,657 |  |  | $ | — |
Inventories | — |  |  | 4,580 |  |  | — |  |  | 3,315 |
Depreciation of property, buildings and equipment | — |  |  | 18,393 |  |  | — |  |  | 17,384 |
Operating leases | 61,326 |  |  | 60,670 |  |  | — |  |  | — |
Amortization of intangible assets | — |  |  | 159,573 |  |  | — |  |  | 158,795 |
Employee benefits | 20,641 |  |  | — |  |  | 20,107 |  |  | — |
Stock-based compensation | 13,792 |  |  | — |  |  | 12,840 |  |  | — |
Tax loss carryforwards | 10,486 |  |  | — |  |  | 15,557 |  |  | — |
Foreign tax credit carryforwards | 1,247 |  |  | — |  |  | — |  |  | — |
Other | 6,791 |  |  | 3,964 |  |  | 7,927 |  |  | 4,115 |
Deferred income taxes before valuation allowance | 117,665 |  |  | 247,180 |  |  | 60,088 |  |  | 183,609 |
Valuation allowance | (5,854 | ) |  | — |  |  | (4,072 | ) |  | — |
Total deferred income taxes | $ | 111,811 |  |  | $ | 247,180 |  |  | $ | 56,016 |  |  | $ | 183,609 |
As of December 31, 2018, WESCO had a deferred tax asset of $6.4 million related to Canadian net operating loss carryforwards. These carryforwards were fully utilized during the year ended December 31, 2019. Additionally, WESCO had deferred tax assets of $7.9 million and $7.2 million as of December 31, 2019 and 2018, respectively, related to non-Canadian foreign net operating loss carryforwards. These net operating loss carryforwards expire beginning in 2020 through 2029, while some may be carried forward indefinitely. As of December 31, 2019 and 2018, WESCO had deferred tax assets of $2.6 million and $3.2 million, respectively, related to state net operating loss carryforwards. These carryforwards expire beginning in 2022 through 2037. The Company has determined, based upon an evaluation of all available evidence, that certain non-Canadian foreign net operating loss carryforwards will not be realized before they expire. Accordingly, the Company recorded a full valuation allowance against deferred tax assets related to certain non-Canadian foreign net operating loss carryforwards of $4.6 million and $4.1 million at December 31, 2019 and 2018, respectively. As of December 31, 2019, WESCO had a deferred tax asset of $1.2 million related to foreign tax credit carryforwards. The foreign tax credit carryforwards expire beginning in 2028. The Company determined, based upon an evaluation of all available evidence, that the foreign tax credit carryforwards will not be realized before they expire. Accordingly, the Company recorded a full valuation allowance against the deferred tax asset related to foreign tax credit carryforwards of $1.2 million at December 31, 2019. 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 |  | 2015 and forward
United States — Material States |  | 2015 and forward
Canada |  | 2008 and forward
The following table sets forth the reconciliation of gross unrecognized tax benefits:
| As of December 31,
| 2019 |  | 2018 |  | 2017
| (In thousands)
Beginning balance January 1 | $ | 1,293 |  |  | $ | 4,348 |  |  | $ | 6,181 |
Reductions for tax positions of prior years | — |  |  | — |  |  | (155 | )
Settlements | (1,290 | ) |  | (2,646 | ) |  | (1,025 | )
Lapse in statute of limitations | — |  |  | (287 | ) |  | (755 | )
Foreign currency exchange rate changes | 51 |  |  | (122 | ) |  | 102 |
Ending balance December 31 | $ | 54 |  |  | $ | 1,293 |  |  | $ | 4,348 |
The total amount of unrecognized tax benefits were $0.1 million, $1.3 million, and $4.3 million as of December 31, 2019, 2018 and 2017, respectively. The amount of unrecognized tax benefits that would affect the effective tax rate if recognized in the consolidated financial statements was $0.1 million, $1.3 million, and $1.7 million, respectively. It is not expected that the amount of unrecognized tax benefits will change within the next twelve months. The Company classifies interest related to unrecognized tax benefits as a component of net interest and other in the Consolidated Statement of Income and Comprehensive Income. The Company recognized interest income on unrecognized tax benefits of $0.8 million in 2019. In 2018 and 2017, interest expense on unrecognized tax benefits was $0.2 million and $0.1 million, respectively. As of December 31, 2019 and 2018, WESCO had a liability of $0.1 million and $0.8 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 2019, 2018, and 2017.

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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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