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Income Taxes | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Following is a summary of earnings before income taxes for United States and foreign operations:
| 2020 |  | 2019 |  | 2018
United States | $ | 94,829 |  |  | 163,764 |  |  | 387,564 |
Foreign | 489,545 |  |  | 585,781 |  |  | 661,637 |
Earnings before income taxes | $ | 584,374 |  |  | 749,545 |  |  | 1,049,201 |
Income tax expense (benefit) for the years ended December 31, 2020, 2019 and 2018 consists of the following:
| 2020 |  | 2019 |  | 2018
Current income taxes: |  |  |  |  |
U.S. federal | $ | (33,821) |  |  | 19,936 |  |  | 22,700 |
State and local | 7,794 |  |  | 12,659 |  |  | 14,521 |
Foreign | 72,350 |  |  | 80,221 |  |  | 58,669 |
Total current | 46,323 |  |  | 112,816 |  |  | 95,890 |
Deferred income taxes: |  |  |  |  |
U.S. federal | 14,533 |  |  | 11,993 |  |  | 54,983 |
State and local | 112 |  |  | 15,371 |  |  | 19,076 |
Foreign | 7,679 |  |  | (135,206) |  |  | 14,397 |
Total deferred | 22,324 |  |  | (107,842) |  |  | 88,456 |
Total income tax expense | $ | 68,647 |  |  | 4,974 |  |  | 184,346 |
The geographic dispersion of earnings and losses contributes to the annual changes in the Company’s effective tax rates. Approximately 16% of the Company’s current year earnings before income taxes was generated in the United States. The Company is also subject to taxation in other jurisdictions where it has operations, including Australia, Belgium, Brazil, Bulgaria, France, Ireland, Italy, Luxembourg, Malaysia, Mexico, the Netherlands, New Zealand, Poland, Russia, Spain, the United Kingdom and Ukraine. The effective tax rates that the Company accrues in these jurisdictions vary widely, but they are generally lower than the Company’s overall effective tax rate. The Company’s domestic effective tax rates for the years ended December 31, 2020, 2019 and 2018 were (12.0)%, 36.6%, and 28.7%, respectively, and its non-U.S. effective tax rates for the years ended December 31, 2020, 2019 and 2018 were 16.3%, (9.4)%, and 11.0%, respectively. The difference in rates applicable in foreign jurisdictions results from a number of factors, including lower statutory rates, historical loss carry-forwards, financing arrangements, and other factors. The Company’s effective tax rate has been and will continue to be impacted by the geographical dispersion of the Company’s earnings and losses. To the extent that domestic earnings increase while the foreign earnings remain flat or decrease, or increase at a lower rate, the Company’s effective tax rate will increase. Income tax expense (benefit) attributable to earnings before income taxes differs from the amounts computed by applying the U.S. statutory federal income tax rate to earnings before income taxes as follows:
| 2020 |  | 2019 |  | 2018
Income taxes at statutory rate | $ | 122,719 |  |  | 157,404 |  |  | 220,332 |
State and local income taxes, net of federal income tax benefit | 8,081 |  |  | 22,185 |  |  | 22,315 |
Foreign income taxes(a) | (57,898) |  |  | (17,276) |  |  | (39,915) |
Change in valuation allowance | 35,381 |  |  | (21,975) |  |  | 2,472 |
European Restructuring(b) | — |  |  | (136,194) |  |  | — |
Loss on previously taxed earnings | (10,346) |  |  | — |  |  | — |
Carryback rate differential(c) | (33,739) |  |  | — |  |  | — |
Transition Tax | — |  |  | — |  |  | 28,201 |
Transition tax planning initiatives | — |  |  | — |  |  | (18,706) |
Tax contingencies and audit settlements, net | 6,779 |  |  | 6,686 |  |  | (31,874) |
Other, net | (2,330) |  |  | (5,856) |  |  | 1,521 |
| $ | 68,647 |  |  | 4,974 |  |  | 184,346 |
(a) Foreign income taxes include statutory rate differences, financing arrangements, withholding taxes, local income taxes, notional deductions, and other miscellaneous items. (b) The Company implemented select operational, administrative and financial restructurings that centralized certain business processes and intangible assets in various European jurisdictions into a new entity. (c) The CARES Act permits the Company to carry back its 2020 U.S. taxable loss to a tax year before the corporate income tax rate was lowered by the Tax Cuts and Jobs Act. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2020 and 2019 are presented below:
| 2020 |  | 2019
Deferred tax assets: |  |  |
Accounts receivable | $ | 14,384 |  |  | 7,063 |
Inventories | 44,597 |  |  | 50,585 |
Employee benefits | 39,526 |  |  | 36,068 |
Accrued expenses and other | 103,892 |  |  | 67,638 |
Deductible state tax and interest benefit | 4,042 |  |  | 3,665 |
Intangibles | 152,499 |  |  | 146,953 |
Lease liabilities | 91,359 |  |  | 86,717 |
Federal, foreign and state net operating losses and credits | 433,822 |  |  | 376,375 |
Gross deferred tax assets | 884,121 |  |  | 775,064 |
Valuation allowance | (267,838) |  |  | (232,196) |
Net deferred tax assets | 616,283 |  |  | 542,868 |
Deferred tax liabilities: |  |  |
Inventories | (17,403) |  |  | (12,885) |
Plant and equipment | (489,240) |  |  | (510,952) |
Intangibles | (197,009) |  |  | (182,424) |
Right of use assets | (87,351) |  |  | (83,271) |
Prepaids | (56,140) |  |  | — |
Other liabilities | (46,121) |  |  | (24,220) |
Gross deferred tax liabilities | (893,264) |  |  | (813,752) |
Net deferred tax liability | $ | (276,981) |  |  | (270,884) |
The Company evaluates its ability to realize the tax benefits associated with deferred tax assets by analyzing its forecasted taxable income using both historic and projected future operating results, the reversal of existing temporary differences, taxable income in prior carry-back years (if permitted) and the availability of tax planning strategies. The valuation allowance as of December 31, 2020, and 2019 is $267,838 and $232,196, respectively. The valuation allowance as of December 31, 2020 relates to the net deferred tax assets of certain of the Company’s foreign subsidiaries as well as certain state net operating losses and tax credits. The total change in the 2020 valuation allowance was an increase of $35,642 related to tax rate changes, foreign currency translation, and other activities. The total change in the 2019 valuation allowance was a decrease of $115,590, which includes $148,240 related to the tax liability resulting from the European Restructuring, with remaining $32,650 related to tax rate changes, foreign currency translation, and other activities. Management believes it is more likely than not that the Company will realize the benefits of its deferred tax assets, net of valuation allowances, based upon the expected reversal of deferred tax liabilities and the level of historic and forecasted taxable income over periods in which the deferred tax assets are deductible. As of December 31, 2020, the Company has state net operating loss carry forwards and state tax credits with potential tax benefits of $57,613, net of federal income tax benefit; these carry forwards expire over various periods based on taxing jurisdiction. A valuation allowance totaling $29,919 has been recorded against these state deferred tax assets as of December 31, 2020. In addition, as of December 31, 2020, the Company has credits and net operating loss carry forwards in the U.S. with potential tax benefits of $10,179 and in various foreign jurisdictions with potential tax benefits of $1,710,619. A valuation allowance of $5,881 and $232,038, respectively, has been recorded against these deferred tax assets as of December 31, 2020. As a result of the redemption of hybrid instruments in response to changes in global tax regimes, the Company has an ASC 740-10 liability of $1,344,589 for the full tax effected loss on the hybrid instrument in the Tax Uncertainties section below. This ASC 740-10-45 liability is recorded as a reduction to the related deferred tax asset in the financial statements as a result of management’s determination that it is not more likely than not that the benefit will be realized. As of December 31, 2019, the Company had recognized $134,754 of income tax expense on foreign earnings of approximately $2,126,617. Due to the impact of the COVID-19 pandemic, the Company made a one-time distribution of $1,742,539 of previously taxed earnings during the current year to address short term liquidity needs in the US. The tax effects related to this distribution were not material to the Company’s income tax expense. Notwithstanding the one-time distribution and the new territorial tax regime created by the Tax Cuts and Jobs Act passed in 2017, the Company has no intentions or plans to repatriate additional foreign earnings and continues to assert that historical earnings of its foreign subsidiaries as of December 31, 2020 are permanently reinvested. Should the remaining earnings be distributed in the form of dividends in the future, the Company might be subject to withholding taxes (possibly offset by U.S. foreign tax credits) in various foreign jurisdictions, but the Company would not expect incremental U.S. federal or state taxes to be accrued on these previously taxed earnings. Tax Uncertainties In the normal course of business, the Company’s tax returns are subject to examination by various taxing authorities. Such examinations may result in future tax and interest assessments by these taxing jurisdictions. Accordingly, the Company accrues liabilities when it believes that it is not more likely than not that it will realize the benefits of tax positions that it has taken in its tax returns or for the amount of any tax benefit that exceeds the cumulative probability threshold in accordance with ASC 740-10. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties related to unrecognized tax benefits in income tax expense (benefit). Differences between the estimated and actual amounts determined upon ultimate resolution, individually or in the aggregate, are not expected to have a material adverse effect on the Company’s consolidated financial position but could possibly be material to the Company’s consolidated results of operations or cash flow in any given quarter or annual period. As of December 31, 2020, the Company’s gross amount of unrecognized tax benefits is $1,388,391, excluding interest and penalties. If the Company were to prevail on all uncertain tax positions, $33,144 of the unrecognized tax benefits would affect the Company’s effective tax rate, exclusive of any benefits related to interest and penalties. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| 2020 |  | 2019
Balance as of January 1 | $ | 1,260,970 |  |  | 1,330,713 |
Additions based on tax positions related to the current year (a) | 1,694 |  |  | 2,302 |
Additions for tax positions of acquired companies | — |  |  | 2,094 |
Additions for tax positions of prior years | 7,663 |  |  | 4,744 |
Transition tax planning initiatives | — |  |  | — |
Reductions resulting from the lapse of the statute of limitations | (1,239) |  |  | (2,729) |
Reductions due to Luxembourg tax rate change | — |  |  | (46,841) |
Settlements with taxing authorities | (497) |  |  | (1,929) |
Effects of foreign currency translation | 119,800 |  |  | (27,384) |
Balance as of December 31 | $ | 1,388,391 |  |  | 1,260,970 |
(a)The tax effected loss was adjusted for tax rate and foreign currency translation changes in 2020, resulting in an updated balance of $1,344,589 as of December 31, 2019. This $1,344,589 of unrecognized benefit is presented as a reduction to the related deferred tax asset in the balance sheet. As of December 31, 2020 and 2019, the Company has $11,485 and $12,555, respectively, accrued for the payment of interest and penalties, excluding the federal tax benefit of interest deductions where applicable. During the years ended December 31, 2020, 2019 and 2018, the Company accrued interest and penalties through income tax expense of $(695), $5,368 and $(1,085), respectively. The Company believes that its unrecognized tax benefits could decrease by $8,575 within the next twelve months. The Internal Revenue Service has completed its audit of the Company’s 2014 & 2015 tax years, therefore Federal income tax matters related to years prior to 2016 has been effectively settled. Various other state and foreign income tax returns are open to examination for various years. Belgian Tax Matter Between 2012 and 2014, the Company received assessments from the Belgian tax authority for the calendar years 2005 through 2010 in the amounts of €46,135, €38,817, €39,635, €30,131, €25,486 and €43,117 respectively, including penalties, but excluding interest. The Belgian tax authority denied the Company’s formal protests against these assessments and the Company brought all six years before the Court of First Appeal in Bruges. The Court of First Appeal in Bruges ruled in favor of the Company on January 27, 2016, with respect to the calendar years ending December 31, 2005 and December 31, 2009; and on June 13, 2018, the Court of First Appeal in Bruges ruled in favor of the Company with respect to the calendar years ending December 31, 2006, December 31, 2007, December 31, 2008 and December 31, 2010. The Belgian tax authority has lodged its Notification of Appeal for all six years with the Ghent Court of Appeal. On September 17, 2019, the Company pled its case to the Ghent Court of Special (Tax) Appeals and on October 1, 2019, the Court ruled in favor of the Company, re-confirming the rulings of the Court of First Appeals in Bruges with respect to the calendar years ending December 31, 2005 and December 31, 2009. On March 12, 2020, the Belgian tax authority filed another revised assessment for the calendar year ending December 31, 2009, with the Ghent Court. In March 2019, the Company received assessments from the Belgian tax authority for tax years 2011 through 2017 which were, as a result of the positive ruling of the Ghent Court of Appeal, cancelled in January 2020. On March 10, 2020, a new notice of change was received for the year ending December 31, 2016, resulting in a tax assessment in the amount of €67,959, including penalties, but excluding interest, against which the Company filed a protest on April 10, 2020. On December 22, 2020, a tax assessment for the year ending December 31, 2017, was received in the amount of €17,655, including penalties, but excluding interest, against which the company will file a protest in 2021. These notices of change/tax assessments from the Belgian tax authority represent a change in position in which it intends to apply new rules applicable as of 2018 to the Company's open tax years going back to 2009. On October 22, 2020, a notice of change was received by the Company’s licensing subsidiary in Luxembourg, against which the Company will file a protest. The notice covers the years ending December 31, 2013 to December 31, 2018 and is based on the same facts underlying the original actions that were unsuccessfully tried and appealed by the Belgian government. In December 2020, the Company received assessments for the years ending December 31, 2013 and 2017, in the amount of €45,466 and €65,152, respectively, including penalties, but excluding interest, against which the company will file a protest in 2021. In view of the allegations made against the Company’s licensing subsidiary in Luxembourg, the tax assessment received in the amount of €67,959 for the year ending December 31, 2016, was cancelled on January 27, 2021. The Company continues to disagree with the views of the Belgian tax authority on all matters referenced above and will persist in its vigorous defense. Nevertheless, on May 24, 2016, the tax collector representing the Belgian tax authorities imposed a lien on the Company’s properties in Wielsbeke (Ooigemstraat and Breestraat), Oostrozebeke (Ingelmunstersteenweg) and Desselgem (Waregemstraat) included in the Flooring ROW segment. The purpose of the lien is to provide security for payment should the Belgian tax authority prevail on its appeal. The lien does not interfere with the Company’s operations at these properties.

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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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