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6. Income Taxes | 12 Months Ended
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Dec. 31, 2016
Income Tax Disclosure [Abstract] |
Income Taxes [Text Block] | 6. INCOME TAXES The U.S. and international components of income before taxes are as follows (in millions):
|  | Year Ended December 31,
|  | 2016 |  | 2015 |  | 2014
U.S. |  | $ | (38.5 | ) |  | $ | 48.4 |  |  | $ | 30.6 |
International |  | 80.1 |  |  | 97.4 |  |  | 101.0 |
Income before taxes |  | $ | 41.6 |  |  | $ | 145.8 |  |  | $ | 131.6 |
The provision for income taxes consists of the following (in millions):
|  | Year Ended December 31,
|  | 2016 |  | 2015 |  | 2014
Current tax expense: |  |  |  |  |  |  |  |  |
U.S. Federal |  | $ | 16.1 |  |  | $ | 8.7 |  |  | $ | 9.6 |
State |  | 3.1 |  |  | 1.7 |  |  | 3.8 |
International |  | 30.3 |  |  | 34.1 |  |  | 35.6 |
Current tax expense |  | 49.5 |  |  | 44.5 |  |  | 49.0 |
Deferred tax (benefit) expense: |  |  |  |  |  |  |  |
U.S. Federal |  | (42.4 | ) |  | (0.2 | ) |  | 1.5 |
State |  | (2.8 | ) |  | 1.2 |  |  | (0.2 | )
International |  | (6.0 | ) |  | (7.1 | ) |  | (7.3 | )
Deferred tax benefit |  | (51.2 | ) |  | (6.1 | ) |  | (6.0 | )
Non-current tax expense (benefit) |  | 15.1 |  |  | (5.6 | ) |  | (0.3 | )
Provision for income taxes |  | $ | 13.4 |  |  | $ | 32.8 |  |  | $ | 42.7 |
The reconciliation between our effective tax rate on income before taxes and the statutory tax rate is as follows:
|  | Year Ended December 31,
|  | 2016 |  | 2015 |  | 2014
U.S. statutory tax rate |  | 35 | % |  | 35 | % |  | 35 | %
Impact of foreign operations |  | (15 | ) |  | (4 | ) |  | (4 | )
Foreign dividends, net |  | (40 | ) |  | (4 | ) |  | — |
Research tax credits |  | (9 | ) |  | (2 | ) |  | (3 | )
Nontaxable subsidies |  | (4 | ) |  | (1 | ) |  | (2 | )
Tax settlements and changes to unrecognized tax benefits |  | 42 |  |  | (4 | ) |  | (1 | )
Goodwill impairment |  | 11 |  |  | — |  |  | — |
Domestic manufacturing deduction |  | (4 | ) |  | (2 | ) |  | — |
Stock-based compensation |  | 3 |  |  | 1 |  |  | 1 |
Nondeductible executive compensation |  | 3 |  |  | 1 |  |  | 1 |
Fines and penalties |  | 2 |  |  | — |  |  | 3 |
Prior period adjustments |  | 4 |  |  | 1 |  |  | 2 |
U.S. taxation on foreign income |  | 2 |  |  | — |  |  | — |
Other |  | 2 |  |  | 1 |  |  | — |
Provision for income taxes |  | 32 | % |  | 22 | % |  | 32 | %
Our effective income tax rate was 32%, 22% and 32% in 2016, 2015 and 2014, respectively. The effective tax rates for 2016 and 2015 included tax benefits from the repatriation of foreign earnings. The effective tax rate for 2016 included additional tax liabilities for unrecognized tax benefits related to the non-deductibility of interest expense in our foreign jurisdictions. The effective tax rate for 2014 included nondeductible penalties and losses that were nonrecurring. Our foreign taxes result primarily from income earned in France and Switzerland. Many jurisdictions in which we operate, including Switzerland, Russia, the U.K. and Singapore, have statutory tax rates that are significantly lower than the U.S. statutory tax rate of 35%. Our effective tax rate may be impacted in the future, either favorably or unfavorably, by many factors including, but not limited to, changes to statutory tax rates, changes in tax laws or regulations, tax audits and settlements, and generation of tax credits. Deferred tax assets and liabilities reflect the tax effects of losses, credits, and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of deferred tax assets and liabilities are as follows (in millions):
|  | December 31,
|  | 2016 |  | 2015
Deferred tax assets: |  |  |  |  |  |
Bad debt, inventory and warranty accruals |  | $ | 28.4 |  |  | $ | 26.3 |
Other post-employment benefits, vacation and other reserves |  | 26.3 |  |  | 28.1 |
Tax credit and net operating loss carryforwards |  | 96.4 |  |  | 80.2 |
Other |  | 35.7 |  |  | 23.2 |
Total gross deferred tax assets |  | 186.8 |  |  | 157.8 |
Valuation allowance |  | (66.4 | ) |  | (58.3 | )
Total deferred tax assets |  | 120.4 |  |  | 99.5 |
Deferred tax liabilities: |  |  |  |
Property and equipment |  | 22.5 |  |  | 30.2 |
Investments and intangible assets |  | 287.8 |  |  | 271.8 |
Total deferred tax liabilities |  | 310.3 |  |  | 302.0 |
Net deferred tax liabilities |  | $ | (189.9 | ) |  | $ | (202.5 | )
At December 31, 2016, Bio-Rad’s international subsidiaries had combined net operating loss carryforwards of $141.3 million. Of these loss carryforwards, $140.8 million have no expiration date. We believe that it is more likely than not that the benefit from most of these net operating loss carryforwards will not be realized. We have provided a valuation allowance of $29.6 million relating to these net operating loss carryforwards. At December 31, 2016, Bio-Rad had U.S. Federal net operating loss carryforwards of approximately $1.9 million as a result of acquisitions. These carryforwards are subject to limitation on their utilization and will expire between 2028 and 2033. At December 31, 2016, Bio-Rad had U.S. Federal foreign tax credit carryforwards of $27.6 million and U.S. Federal research tax credit carryforwards of $3.6 million, $0.4 million of which are subject to limitations on their utilization. At December 31, 2016, Bio-Rad had approximately $53 million of California net operating loss carryforwards related to the acquisition of QuantaLife. We believe that it is more likely than not that the benefit from these net operating loss carryforwards will not be realized and have recorded a full valuation allowance against these losses. At December 31, 2016, Bio-Rad had a deferred tax asset of $25.9 million relating to California research tax credit carryforwards, including $2.0 million from the acquisition of QuantaLife, which may be carried forward indefinitely. Based on our judgment and consistent with prior years, we have recorded a full valuation allowance against the deferred tax asset. We believe that it is more likely than not that certain of these deferred tax assets described above will not be realized in the foreseeable future. If or when recognized, the tax benefits relating to any reversal of the valuation allowance on deferred tax assets at December 31, 2016 will be recognized as a reduction of income tax expense. Our income tax returns are audited by U.S. federal, state and foreign tax authorities. We are currently under examination by many of these tax authorities. The tax years open to examination include the years 2013 and forward for the U.S., and the years 2010 and forward for certain foreign jurisdictions, including France, Switzerland and Germany. There are differing interpretations of tax laws and regulations, and as a result, significant disputes may arise with these tax authorities involving issues of the timing and amount of deductions and allocations of income among various tax jurisdictions. We evaluate our exposures associated with our tax filing positions on a quarterly basis. We record liabilities for unrecognized tax benefits related to uncertain tax positions. We do not believe any currently pending uncertain tax positions will have a material adverse effect on our consolidated financial statements, although an adverse resolution of one or more of these uncertain tax positions in any period may have a material impact on the results of operations for that period. The following is a tabular reconciliation of the total amounts of unrecognized tax benefits (in millions):
|  | 2016 |  | 2015 |  | 2014
Unrecognized tax benefits – January 1 |  | $ | 8.9 |  |  | $ | 14.2 |  |  | $ | 16.2 |
Additions to tax positions related to prior years |  | 10.4 |  |  | 0.7 |  |  | 1.7 |
Reductions to tax positions related to prior years |  | — |  |  | (0.2 | ) |  | (1.5 | )
Additions to tax positions related to the current year |  | 1.4 |  |  | 1.5 |  |  | 1.6 |
Settlements |  | (2.4 | ) |  | (0.5 | ) |  | (0.4 | )
Lapse of statute of limitations |  | (2.3 | ) |  | (6.3 | ) |  | (2.6 | )
Currency translation |  | 0.1 |  |  | (0.5 | ) |  | (0.8 | )
Unrecognized tax benefits – December 31 |  | $ | 16.1 |  |  | $ | 8.9 |  |  | $ | 14.2 |
Bio-Rad recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. Related to the unrecognized tax benefits noted above, Bio-Rad has accrued interest and penalties of $11.5 million, $3.0 million and $3.8 million as of December 31, 2016, 2015 and 2014, respectively. The total unrecognized tax benefits and interest and penalties of $27.6 million in 2016 was partially offset by prepaid taxes of $12.7 million, for a net amount of $14.9 million. As of December 31, 2016, based on the expected outcome of certain examinations or as a result of the expiration of statutes of limitation for certain jurisdictions, we believe that within the next twelve months it is reasonably possible that our previously unrecognized tax benefits could decrease by approximately $3.5 million. Substantially all such amounts will impact our effective income tax rate if recognized. In general, it is our practice and intention to reinvest the earnings of our non-U.S. subsidiaries in their operations. As of December 31, 2016, Bio-Rad had not made a provision for U.S. or additional foreign withholding taxes on approximately $447 million of the excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries that are essentially permanent in duration. Generally, such amounts become subject to U.S. taxation upon remittance of dividends and under certain other circumstances. If these earnings were repatriated to the U.S., the deferred tax liability associated with these temporary differences would be approximately $47 million.

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