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6. Income Taxes | 12 Months Ended
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Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Income Taxes [Text Block] | 6. INCOME TAXES On December 22, 2017, comprehensive tax legislation (the “Tax Act”) was enacted into law. The Tax Act made broad and complex changes to the U.S. tax code that affect our 2017 financial statements, including, but not limited to, (1) a one-time mandatory deemed repatriation tax on certain unrepatriated foreign earnings (“Transition Tax”) that is payable over eight years; (2) bonus depreciation that allows for full expensing of qualified property; and (3) a reduction in the U.S. federal corporate tax rate from 35% to 21% effective in 2018, which requires us to remeasure our deferred tax assets and liabilities as of December 31, 2017. The Tax Act also includes provisions that may affect our 2018 financial statements, including, but not limited to, (1) the elimination of the corporate alternative minimum tax; (2) the creation of the base erosion anti-abuse tax, a new minimum tax; (3) a change from a worldwide tax system to a modified territorial system; (4) a new provision designed to tax global intangible low-taxed income, which allows for the possibility of using foreign tax credits and a deduction of up to 50 percent to offset the income tax liability (subject to some limitations); (5) a new limitation on deductible interest expense; (6) the repeal of the domestic production activity deduction; (7) limitations on the deductibility of certain executive compensation; (8) limitations on the use of foreign tax credits to reduce the U.S. income tax liability; and (9) limitations on net operating losses generated after December 31, 2017 to 80 percent of taxable income. We are currently reviewing and evaluating the Tax Act and its impacts to our financial statements. Subsequent to the enactment of the Tax Act, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under Accounting Standards Codification ("ASC") 740, "Income Taxes." In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but a reasonable estimate can be determined, the company must record a provisional estimate in the financial statements. For the year ended December 31, 2017, we recorded those amounts for which the accounting was complete or for which we were able to make reasonable estimates. The provisional estimates of the Transition Tax and remeasurement of our deferred tax assets and liabilities will be adjusted as additional information and guidance become available. The U.S. and international components of income before taxes are as follows (in millions):
|  | Year Ended December 31,
|  | 2017 |  | 2016 |  | 2015
U.S. |  | $ | 72.8 |  |  | $ | (38.5 | ) |  | $ | 48.4 |
International |  | 25.0 |  |  | 80.1 |  |  | 97.4 |
Income before taxes |  | $ | 97.8 |  |  | $ | 41.6 |  |  | $ | 145.8 |
The provision for income taxes consists of the following (in millions):
|  | Year Ended December 31,
|  | 2017 |  | 2016 |  | 2015
Current tax expense: |  |  |  |  |  |  |  |  |
U.S. Federal |  | $ | 6.7 |  |  | $ | 16.1 |  |  | $ | 8.7 |
State |  | 3.4 |  |  | 3.1 |  |  | 1.7 |
International |  | 32.0 |  |  | 30.4 |  |  | 34.1 |
Current tax expense |  | 42.1 |  |  | 49.6 |  |  | 44.5 |
Deferred tax (benefit) expense: |  |  |  |  |  |  |  |
U.S. Federal |  | (69.8 | ) |  | (42.4 | ) |  | 2.0 |
State |  | 4.3 |  |  | (2.8 | ) |  | 1.4 |
International |  | (19.3 | ) |  | (6.0 | ) |  | (7.1 | )
Deferred tax benefit |  | (84.8 | ) |  | (51.2 | ) |  | (3.7 | )
Non-current tax expense (benefit) |  | 18.3 |  |  | 17.2 |  |  | (4.2 | )
(Benefit from) provision for income taxes |  | $ | (24.4 | ) |  | $ | 15.6 |  |  | $ | 36.6 |
Prior year amounts have been revised (see Note 1 to the consolidated financial statements). The reconciliation between our effective tax rate on income before taxes and the statutory tax rate is as follows:
|  | Year Ended December 31,
|  | 2017 |  | 2016 |  | 2015
U. S. statutory tax rate |  | 35 | % |  | 35 | % |  | 35 | %
Impact of foreign operations |  | 7 |  |  | (15 | ) |  | (4 | )
Foreign dividends, net |  | — |  |  | (40 | ) |  | (4 | )
Research tax credits |  | (4 | ) |  | (9 | ) |  | (2 | )
Nontaxable subsidies |  | (2 | ) |  | (4 | ) |  | (1 | )
Tax settlements and changes to unrecognized tax benefits |  | — |  |  | 47 |  |  | (3 | )
Goodwill impairment |  | — |  |  | 11 |  |  | — |
Domestic manufacturing deduction |  | — |  |  | (4 | ) |  | (2 | )
Stock-based compensation |  | (5 | ) |  | 3 |  |  | 1 |
Nondeductible executive compensation |  | 2 |  |  | 3 |  |  | 1 |
Fines and penalties |  | — |  |  | 2 |  |  | — |
Prior period adjustments |  | — |  |  | 4 |  |  | 3 |
U.S. taxation of foreign income |  | 3 |  |  | 2 |  |  | — |
Acquisition-related |  | 10 |  |  | — |  |  | — |
U.S. tax reform |  | (71 | ) |  | — |  |  | — |
State taxes |  | 3 |  |  | 1 |  |  | 1 |
Other |  | (3 | ) |  | 1 |  |  | — |
(Benefit from) provision for income taxes |  | (25 | )% |  | 37 | % |  | 25 | %
Prior year amounts have been revised (see Note 1 to the consolidated financial statements). Our effective income tax rate was (25)%, 37% and 25% in 2017, 2016 and 2015, respectively. The lower effective tax rate in 2017 is primarily due to an estimated provisional tax benefit from the Tax Act of approximately $70 million. 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. In accordance with SAB 118, our accounting for the following elements of the Tax Act is incomplete. However, we were able to make reasonable estimates of certain effects and, therefore, recorded provisional estimates as follows:
– | Our deferred tax assets and liabilities are measured at the enacted tax rate that will apply when these temporary differences are expected to be realized or settled. In connection with the Tax Act, we have provisionally recorded a deferred income tax benefit of $125 million for the statutory corporate tax rate reduction as our U.S. federal deferred tax liabilities exceed our deferred tax assets. This deferred tax benefit is primarily related to the remeasurement of the deferred tax liability for our investment in the preferred shares of Sartorius AG.
– | The Tax Act imposes a Transition Tax payable over eight years. The Transition Tax is assessed on the U.S. shareholders’ share of certain foreign corporations’ accumulated untaxed foreign earnings. Earnings in the form of cash and cash equivalents are taxed at a rate of 15.5% and all other earnings are taxed at a rate of 8.0%. We recorded a provisional income tax expense of $55 million for Transition Tax. As additional information and guidance become available, the determination of the Transition Tax will be completed within the measurement period in accordance with SAB 118.
Our accounting for certain other elements of the Tax Act is incomplete, and we are not yet able to make reasonable estimates of those effects. For example, we have not made a determination as to our accounting policy with respect to the new Global Intangible Low Tax Income ("GILTI"). Therefore, no provisional adjustments were recorded. Many jurisdictions in which we operate have statutory tax rates that are significantly lower than the U.S. statutory tax rate of 35%. Our effective tax rate is impacted, either favorably or unfavorably, by many factors including, but not limited to the jurisdictional mix of income before tax, 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,
|  | 2017 |  | 2016
Deferred tax assets: |  |  |  |  |  |
Bad debt, inventory and warranty accruals |  | $ | 28.6 |  |  | $ | 25.8 |
Other post-employment benefits, vacation and other reserves |  | 24.0 |  |  | 26.3 |
Tax credit and net operating loss carryforwards |  | 73.3 |  |  | 96.4 |
Other |  | 19.7 |  |  | 35.7 |
Total gross deferred tax assets |  | 145.6 |  |  | 184.2 |
Valuation allowance |  | (66.4 | ) |  | (66.4 | )
Total deferred tax assets |  | 79.2 |  |  | 117.8 |
Deferred tax liabilities: |  |  |  |
Property and equipment |  | 33.5 |  |  | 22.2 |
Investments and intangible assets |  | 219.1 |  |  | 287.8 |
Total deferred tax liabilities |  | 252.6 |  |  | 310.0 |
Net deferred tax liabilities |  | $ | (173.4 | ) |  | $ | (192.2 | )
Prior year amounts have been revised (see Note 1 to the consolidated financial statements). At December 31, 2017, Bio-Rad’s international subsidiaries had combined net operating loss carryforwards of $207.2 million. Of these loss carryforwards, $150.6 million have no expiration date. We believe that it is more likely than not that the benefit from approximately half of these net operating loss carryforwards will not be realized. We have provided a valuation allowance of $27.8 million relating to these net operating loss carryforwards. At December 31, 2017, 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, 2017, Bio-Rad had a deferred tax asset of $29.6 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. Although 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 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 2014 and forward for the U.S. and the years 2012 and forward for certain foreign jurisdictions including France, Germany, India and Switzerland. 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 an d 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):
|  | 2017 |  | 2016 |  | 2015
Unrecognized tax benefits – January 1 |  | $ | 21.1 |  |  | $ | 11.9 |  |  | $ | 15.8 |
Additions to tax positions related to prior years |  | 1.3 |  |  | 10.4 |  |  | 0.7 |
Reductions to tax positions related to prior years |  | (1.0 | ) |  | — |  |  | (0.2 | )
Additions to tax positions related to the current year |  | 34.8 |  |  | 3.4 |  |  | 2.9 |
Settlements |  | (0.2 | ) |  | (2.4 | ) |  | (0.5 | )
Lapse of statute of limitations |  | (3.4 | ) |  | (2.3 | ) |  | (6.3 | )
Currency translation |  | 2.3 |  |  | 0.1 |  |  | (0.5 | )
Unrecognized tax benefits – December 31 |  | $ | 54.9 |  |  | $ | 21.1 |  |  | $ | 11.9 |
Prior year amounts have been revised (see Note 1 to the consolidated financial statements). Bio-Rad recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. Related to the unrecognized tax benefits noted above, the cumulative amount of accrued interest and penalties as of December 31, 2017, 2016 and 2015, respectively was $10.9 million, $11.8 million and $3.1 million. Bio-Rad accrued interest and penalties of $(0.9) million, $8.7 million, and $(0.7) million in 2017, 2016, and 2015, respectively. The total unrecognized tax benefits and interest and penalties of $65.8 million in 2017 was partially offset by deferred tax assets of $2.8 million and prepaid taxes of $14.5 million, for a net amount of $48.5 million. As of December 31, 2017, 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 $2.3 million. Substantially all such amounts will impact our effective income tax rate if recognized. Certain foreign subsidiary earnings are subject to U.S. taxation under the Tax Act, which also repeals U.S. taxation on the subsequent repatriation of those earnings. It is generally our intention to repatriate those foreign earnings to the extent that such repatriations are not restricted by local laws or accounting rules, and there are no substantial incremental costs. While we currently estimate that the repatriation of those earnings would not trigger material costs, these estimates are provisional, and we are still evaluating the full impact of these potential repatriations in accordance with SAB 118.

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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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