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INCOME TAXES | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
INCOME TAXES | 12. INCOME TAXES Pursuant to the enactment of the Tax Cuts and Jobs Act of 2017 (the "TCJA”) on December 22, 2017, the Company recognized the provisional income tax effects of the TCJA in the year ended December 31, 2017. 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 liability for the one-time tax on the deemed repatriation of undistributed foreign earnings (the "transition tax") based upon guidance issued by the Internal Revenue Service ("IRS"), which resulted in a discrete benefit of $3.7 million. As of December 31, 2020 and 2019, a liability of $63.3 million and $36.8 million, respectively, was recorded as components of other current and noncurrent liabilities in the Consolidated Balance Sheets for the transition tax. The transition tax will be paid in installments. The accounting for the income tax effects of the TCJA is complete 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,
| 2020 |  | 2019 |  | 2018
|  |  | (In thousands) |  |
United States | $ | 26,031 |  |  | $ | 198,566 |  |  | $ | 198,556 |
Foreign | 96,811 |  |  | 83,495 |  |  | 82,469 |
Income before income taxes | $ | 122,842 |  |  | $ | 282,061 |  |  | $ | 281,025 |
The following table sets forth the components of the provision (benefit) for income taxes:
| Year Ended December 31,
| 2020 |  | 2019 |  | 2018
|  |  | (In thousands) |  |
Current income taxes: |  |  |  |  |
Federal | $ | 25,605 |  |  | $ | 31,695 |  |  | $ | 28,464 |
State | 11,322 |  |  | 8,616 |  |  | 7,458 |
Foreign | 19,414 |  |  | 6,347 |  |  | 10,611 |
Total current income taxes | 56,341 |  |  | 46,658 |  |  | 46,533 |
Deferred income taxes: |  |  |  |  |
Federal | (17,913) |  |  | 6,774 |  |  | 5,253 |
State | (7,264) |  |  | 1,846 |  |  | 1,967 |
Foreign | (8,361) |  |  | 4,585 |  |  | 1,917 |
Total deferred income taxes | (33,538) |  |  | 13,205 |  |  | 9,137 |
Provision for income taxes | $ | 22,803 |  |  | $ | 59,863 |  |  | $ | 55,670 |
The following table sets forth the reconciliation between the federal statutory income tax rate and the effective tax rate:
| Year Ended December 31,
| 2020 |  | 2019 |  | 2018
Federal statutory rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State income taxes, net of federal income tax benefit | 1.4 |  |  | 3.1 |  |  | 2.8 |
Deemed repatriation of undistributed foreign earnings | — |  |  | (1.3) |  |  | (1.2) |
Deferred income tax remeasurement | — |  |  | — |  |  | (0.3) |
Tax effect of intercompany financing | (13.4) |  |  | (5.5) |  |  | (5.6) |
Unrecognized tax benefits | 2.1 |  |  | (0.4) |  |  | (0.1) |
Nondeductible expenses | 5.7 |  |  | 0.7 |  |  | 1.0 |
Change in valuation allowance | 1.8 |  |  | 0.6 |  |  | 0.6 |
Other | — |  |  | 3.0 |  |  | 1.6 |
Effective tax rate | 18.6 | % |  | 21.2 | % |  | 19.8 | %
Undistributed earnings of the Company's foreign subsidiaries amounted to approximately $1,835.0 million at December 31, 2020. Most of these earnings have been taxed in the U.S. under either the one-time transition tax or the GILTI tax regime imposed by the TCJA. Except for a portion of foreign earnings previously taxed in the U.S. that can effectively be distributed without further material U.S. or foreign taxation, the Company continues to assert that the undistributed earnings of its foreign subsidiaries are indefinitely reinvested. To the extent the earnings of the Company's foreign subsidiaries are distributed in the form of dividends, such earnings may be subject to additional taxes. WESCO estimates that additional taxes of approximately $75.0 million would be payable upon the remittance of foreign earnings as dividends at December 31, 2020, based upon the laws in effect on that date. The Company believes that it is able to maintain a sufficient level of liquidity for its domestic operations and commitments without incurring any material tax cost to repatriate cash held by its foreign subsidiaries. The following table sets forth deferred tax assets and liabilities:
| As of December 31,
| 2020 |  | 2019
|  |  | (In thousands) |  |
| Assets |  | Liabilities |  | Assets |  | Liabilities
Accounts receivable | $ | 17,560 |  |  | $ | — |  |  | $ | 3,382 |  |  | $ | — |
Inventories | 14,793 |  |  | — |  |  | — |  |  | 4,580 |
Depreciation of property, buildings and equipment | — |  |  | 60,687 |  |  | — |  |  | 18,393 |
Operating leases | 134,377 |  |  | 136,477 |  |  | 61,326 |  |  | 60,670 |
Amortization of intangible assets | — |  |  | 540,520 |  |  | — |  |  | 159,573 |
Employee benefits | 53,040 |  |  | — |  |  | 20,641 |  |  | — |
Stock-based compensation | 14,061 |  |  | — |  |  | 13,792 |  |  | — |
Tax loss carryforwards | 36,923 |  |  | — |  |  | 10,486 |  |  | — |
Foreign tax credit carryforwards | 55,637 |  |  | — |  |  | 1,247 |  |  | — |
Other | 27,643 |  |  | 6,286 |  |  | 6,791 |  |  | 3,964 |
Deferred income taxes before valuation allowance | 354,034 |  |  | 743,970 |  |  | 117,665 |  |  | 247,180 |
Valuation allowance | (60,629) |  |  | — |  |  | (5,854) |  |  | — |
Total deferred income taxes | $ | 293,405 |  |  | $ | 743,970 |  |  | $ | 111,811 |  |  | $ | 247,180 |
In connection with the acquisition of Anixter, WESCO recorded deferred income tax liabilities of $347.3 million, which primarily related to identifiable intangible assets for which there was no increase in tax basis. WESCO had deferred tax assets of $34.5 million and $7.9 million as of December 31, 2020 and 2019, respectively, related to foreign net operating loss carryforwards. These net operating loss carryforwards expire beginning in 2021 through 2030, while some may be carried forward indefinitely. The Company determined that certain foreign net operating loss carryforwards would not be realized before they expire. Accordingly, the Company recorded a valuation allowance of $22.3 million and $4.6 million against deferred tax assets related to certain foreign net operating loss carryforwards at December 31, 2020 and 2019, respectively. Additionally, these foreign jurisdictions had deferred tax assets of $8.2 million as of December 31, 2020 related to other future deductible temporary differences. The Company recorded a full valuation allowance against this amount as of December 31, 2020. As of December 31, 2020 and 2019, WESCO had deferred tax assets of $2.4 million and $2.6 million, respectively, related to state net operating loss carryforwards. These carryforwards expire beginning in 2024 through 2039. As of December 31, 2020 and 2019, WESCO had deferred tax assets of $55.6 million and $1.2 million, respectively, related to foreign tax credit carryforwards. The foreign tax credit carryforwards expire beginning in 2026 through 2030. The Company determined that certain foreign tax credit carryforwards will not be realized before they expire. Accordingly, the Company recorded a valuation allowance of $30.1 million and $1.2 million against deferred tax assets related to certain foreign tax credit carryforwards at December 31, 2020 and 2019, respectively. The Company is under examination by tax authorities in various jurisdictions 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 |  | 2016 and forward
Canada |  | 2012 and forward
UK |  | 2015 and forward
The following table sets forth the reconciliation of gross unrecognized tax benefits:
| As of December 31,
| 2020 |  | 2019 |  | 2018
| (In thousands)
Beginning balance January 1 | $ | 54 |  |  | $ | 1,293 |  |  | $ | 4,348 |
Additions for current year tax positions | 14,009 |  |  | — |  |  | — |
Additions for acquired tax positions | 68,048 |  |  | — |  |  | — |
Reductions for prior year tax positions | (43) |  |  | — |  |  | — |
Settlements | — |  |  | (1,290) |  |  | (2,646) |
Lapse in statute of limitations | (15,886) |  |  | — |  |  | (287) |
Foreign currency exchange rate changes | 1,893 |  |  | 51 |  |  | (122) |
Ending balance December 31 | $ | 68,075 |  |  | $ | 54 |  |  | $ | 1,293 |
The total amount of unrecognized tax benefits were $68.1 million and $0.1 million as of December 31, 2020 and 2019, respectively. The amount of unrecognized tax benefits that would affect the effective tax rate if recognized in the consolidated financial statements for the years ended December 31, 2020, 2019 and 2018 were $29.1 million, $0.1 million, and $1.3 million, respectively. Within the next twelve months, the amount of unrecognized tax benefits is expected to decrease by $3.6 million due to the expiration of statutes of limitation. Such change would result in a favorable effective tax rate impact of $4.2 million. The Company classifies interest related to unrecognized tax benefits as a component of net interest in the Consolidated Statement of Income and Comprehensive Income. In 2020, the Company recognized interest expense on unrecognized tax benefits of $0.3 million. The Company recognized interest income on unrecognized tax benefits of $0.8 million in 2019. In 2018, interest expense on unrecognized tax benefits was $0.2 million. As of December 31, 2020 and 2019, WESCO had a liability of $5.5 million and $0.1 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 for 2020, 2019, and 2018 were immaterial. As of December 31, 2020, WESCO had a liability of $1.5 million for penalties related to unrecognized tax benefits.

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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