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Income Taxes | 12 Months Ended
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Dec. 31, 2017
Income Taxes |
12. | Income Taxes
The components of the provision (benefit) for income taxes consisted of the following:
Years ended December 31 (dollars in millions) |  | 2017 |  |  | 2016 |  |  | 2015 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 148.0 |  |  | $ | 71.6 |  |  | $ | 82.9 |
State |  |  | 9.4 |  |  |  | 14.5 |  |  |  | 13.9 |
International |  |  | 43.8 |  |  |  | 34.9 |  |  |  | 23.6 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 23.5 |  |  |  | 11.0 |  |  |  | (4.2 | )
State |  |  | 5.8 |  |  |  | 5.2 |  |  |  | 2.2 |
International |  |  | (6.2 | ) |  |  | (1.2 | ) |  |  | 1.2 |
|  | $ | 224.3 |  |  | $ | 136.0 |  |  | $ | 119.6 |
The provision for income taxes differs from the U.S. federal statutory rate due to the following items:
Years ended December 31 |  | 2017 |  |  | 2016 |  |  | 2015 |
Provision at U.S. federal statutory rate |  |  | 35.0 | % |  |  | 35.0 | % |  |  | 35.0 | %
State taxes, net of federal benefit |  |  | 1.9 |  |  |  | 2.8 |  |  |  | 2.6 |
International income tax rate differential - China |  |  | (6.5 | ) |  |  | (6.2 | ) |  |  | (6.8 | )
International income tax rate differential - other |  |  | 0.1 |  |  |  | 0.3 |  |  |  | 0.2 |
U.S. manufacturing credit |  |  | (1.4 | ) |  |  | (1.5 | ) |  |  | (1.3 | )
Research tax credits |  |  | (0.3 | ) |  |  | (0.3 | ) |  |  | (0.3 | )
Excess tax benefit on stock compensation |  |  | (2.2 | ) |  |  | (1.1 | ) |  |  | — |
Other |  |  | 0.8 |  |  |  | 0.4 |  |  |  | 0.3 |
|  |  | 27.4 | % |  |  | 29.4 | % |  |  | 29.7 | %
U.S. Tax Cuts & Jobs Act (U.S. Tax Reform) |  |  | 15.7 |  |  |  | — |  |  |  | — |
|  |  | 43.1 | % |  |  | 29.4 | % |  |  | 29.7 | %
U.S. Tax Reform was enacted on December 22, 2017 and significantly changed U.S. corporate income tax laws. Among other things, U.S. Tax Reform reduced the U.S. corporate income tax rate to 21 percent commencing on January 1, 2018, implemented a territorial tax system and levied a one-time mandatory tax on undistributed earnings of foreign subsidiaries of U.S. companies. As a result of U.S. Tax Reform, the Company recorded provisional income tax expense of $81.8 million in the fourth quarter of 2017. The provisional income tax expense resulting from U.S. Tax Reform is included in the provision for income taxes on the Company’s consolidated statement of earnings and consisted of two components: $83.5 million of income tax expense related to the one-time mandatory tax on undistributed foreign earnings and a $1.7 million income tax benefit resulting from the remeasurement of the Company’s U.S. deferred tax assets and liabilities based on the new lower U.S. corporate income tax rate. As permitted under the SEC Staff Accounting Bulletin 118, these amounts may be subject to revisions in 2018. Future revisions may include adjustments to the measurement of accumulated foreign earnings included in the one-time mandatory tax calculation. The ultimate impact of U.S. Tax Reform may differ from the provisional amounts recorded due to future changes in interpretation of the guidance issued. Components of earnings before income taxes were as follows:
Years ended December 31 (dollars in millions) |  | 2017 |  |  | 2016 |  |  | 2015 |
U.S. |  | $ | 329.9 |  |  | $ | 300.9 |  |  | $ | 255.7 |
International |  |  | 190.9 |  |  |  | 161.6 |  |  |  | 146.8 |
|  | $ | 520.8 |  |  | $ | 462.5 |  |  | $ | 402.5 |
Total income taxes paid by the Company amounted to $131.1 million, $117.4 million, and $97.5 million in 2017, 2016 and 2015, respectively. As of December 31, 2017, the Company has $38.6 million accrued for its estimate of withholding taxes due upon repatriation of undistributed foreign earnings it considers to be not permanently reinvested. As of December 31, 2017, $815.2 million of cash and cash equivalents and marketable securities were held by its foreign subsidiaries. The tax effects of temporary differences of assets and liabilities between income tax and financial reporting are as follows:
December 31 (dollars in millions) |  |  |  |  |  |  |  |  |  |  |  |
|  | 2017 |  |  | 2016 |
|  | Assets |  |  | Liabilities |  |  | Assets |  |  | Liabilities |
Employee benefits |  | $ | 30.4 |  |  | $ | — |  |  | $ | 67.5 |  |  | $ | — |
Product liability and warranties |  |  | 43.4 |  |  |  | — |  |  |  | 67.1 |  |  |  | — |
Inventories |  |  | — |  |  |  | 2.0 |  |  |  | — |  |  |  | 3.4 |
Accounts receivable |  |  | 16.5 |  |  |  | — |  |  |  | 14.9 |  |  |  | — |
Property, plant and equipment |  |  | — |  |  |  | 31.1 |  |  |  | — |  |  |  | 34.3 |
Intangibles |  |  | — |  |  |  | 54.3 |  |  |  | — |  |  |  | 77.4 |
Environmental liabilities |  |  | 2.4 |  |  |  | — |  |  |  | 2.9 |  |  |  | — |
Undistributed foreign earnings |  |  | — |  |  |  | 38.6 |  |  |  | — |  |  |  | 42.3 |
Tax loss and credit carryovers |  |  | 19.8 |  |  |  | — |  |  |  | 18.2 |  |  |  | — |
All other |  |  | 5.5 |  |  |  | — |  |  |  | 4.3 |  |  |  | — |
Valuation allowance |  |  | (15.0 | ) |  |  | — |  |  |  | (13.1 | ) |  |  | — |
|  | $ | 103.0 |  |  | $ | 126.0 |  |  | $ | 161.8 |  |  | $ | 157.4 |
Net asset |  |  |  |  |  | $ | 23.0 |  |  | $ | 4.4 |  |  |  |  |
The Company believes it is more likely than not that it will realize its deferred tax assets through the reduction of future taxable income. The Company considered historical operating results in determining the probability of the realization of the deferred tax assets. A reconciliation of the beginning and ending amounts of tax loss carryovers, credit carryovers and valuation allowances is as follows:
December 31 (dollars in millions) |  |  |  |  |  |  |  |  |  |  |  |
|  | Net Operating Losses and Tax Credits |  |  | Valuation Allowances |
|  | 2017 |  |  | 2016 |  |  | 2017 |  |  | 2016 |
Beginning balance |  | $ | 18.2 |  |  | $ | 14.6 |  |  | $ | 13.1 |  |  | $ | 11.0 |
Additions |  |  | 1.6 |  |  |  | 3.7 |  |  |  | 1.9 |  |  |  | 2.1 |
Reductions |  |  | — |  |  |  | (0.1 | ) |  |  | — |  |  |  | — |
Ending balance |  | $ | 19.8 |  |  | $ | 18.2 |  |  | $ | 15.0 |  |  | $ | 13.1 |
The Company has foreign net operating loss carryovers that expire in 2018 through 2025 and state and local net operating loss carryovers that expire between 2018 and 2034. A reconciliation of the beginning and ending amount of unrecognized benefits is as follows:
(Dollars in millions) |  | 2017 |  |  | 2016 |
Balance at January 1 |  | $ | 4.2 |  |  | $ | 2.6 |
Additions for tax positions of prior years |  |  | 2.0 |  |  |  | 1.6 |
Balance at December 31 |  | $ | 6.2 |  |  | $ | 4.2 |
The amount of unrecognized tax benefits that, if recognized, would affect the effective income tax rate is $0.6 million. The Company recognizes potential interest and penalties related to unrecognized tax benefits as a component of income tax expense. At December 31, 2017, there was an immaterial amount of interest and penalties accrued. The Company anticipates that there will not be a decrease in the total amount of unrecognized tax benefits in 2018. The Company’s U.S. federal income tax returns and its U.S. state and local income tax returns are subject to audit for the years 2015-2017 and 2001-2017, respectively. The Company is subject to non-U.S. income tax audits for the years 2009-2017.

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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://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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