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Income Taxes | 12 Months Ended
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Dec. 31, 2017
Income Taxes | 15. Income Taxes The components of income from continuing operations before income taxes and noncontrolling interests were as follows:
(In millions) |  | 2017 |  |  | 2016 |  |  | 2015 |
Domestic operations |  | $ | 554.7 |  |  | $ | 513.8 |  |  | $ | 387.7 |
Foreign operations |  |  | 80.1 |  |  |  | 68.3 |  |  |  | 72.2 |
Income before income taxes and noncontrolling interests |  | $ | 634.8 |  |  | $ | 582.1 |  |  | $ | 459.9 |
A reconciliation of income taxes at the 35% federal statutory income tax rate to the income tax provision reported was as follows:
(In millions) |  | 2017 |  |  | 2016 |  |  | 2015 |
Income tax expense computed at federal statutory income tax rate |  | $ | 222.2 |  |  | $ | 203.7 |  |  | $ | 161.0 |
Other income taxes, net of federal tax benefit |  |  | 13.4 |  |  |  | 12.6 |  |  |  | 9.4 |
Foreign taxes at a different rate than U.S. federal statutory income tax rate |  |  | (8.3 | ) |  |  | (7.6 | ) |  |  | (8.7 | )
Tax benefit on income attributable to domestic production activities |  |  | (10.9 | ) |  |  | (13.0 | ) |  |  | (12.5 | )
Net adjustments for uncertain tax positions |  |  | 11.6 |  |  |  | 13.2 |  |  |  | 4.7 |
Share-based compensation (ASU 2016-09) |  |  | (23.9 | ) |  |  | (27.8 | ) |  |  | — |
Tax Act impact |  |  | (25.7 | ) |  |  | — |  |  |  | — |
Deferred tax impact of state tax rate changes |  |  | (2.0 | ) |  |  | (1.1 | ) |  |  | 0.2 |
Valuation allowance increase (decrease) |  |  | (5.2 | ) |  |  | (2.1 | ) |  |  | 0.8 |
Miscellaneous other, net |  |  | (11.7 | ) |  |  | (8.2 | ) |  |  | (1.5 | )
Income tax expense as reported |  | $ | 159.5 |  |  | $ | 169.7 |  |  | $ | 153.4 |
Effective income tax rate |  |  | 25.1 | % |  |  | 29.2 | % |  |  | 33.4 | %
The 2017 effective income tax rate was favorably impacted by The Tax Cuts and Jobs Act of 2017, (the “Tax Act”). The effective income tax rates for 2017, 2016 and 2015 were favorably impacted by the tax benefit attributable to the Domestic Production Activity (Internal Revenue Code Section 199) Deduction and favorable tax rates in foreign jurisdictions, partially offset by state and local taxes and increases to uncertain tax positions. In addition, the 2017 and 2016 effective income tax rates were favorably impacted by a tax benefit related to share-based compensation. The benefit associated with the favorable tax rates in foreign jurisdictions is affected by overall allocation of income, rate changes and impact of foreign exchange rates. The 2015 effective income tax rate was unfavorably impacted by $2.4 million related to nondeductible acquisition costs. The Tax Act made significant changes to the U.S. Internal Revenue Code including a reduction in the corporate tax rate from 35% to 21% for tax years beginning after December 31, 2017, generally providing for an exemption from federal income tax for dividends received from foreign subsidiaries, and imposing a one-time transition tax on the deemed repatriation of cumulative foreign earnings and profits as of December 31, 2017. On December 22, 2017, Staff Accounting Bulletin No. 118 (“SAB 118”) was issued which deals with the application of US GAAP to situations where a registrant does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. In accordance with SAB 118 we have calculated our best estimate of the impact of the Tax Act on our 2017 effective income tax rate, based upon available information, limited timing and our understanding of the Tax Act as well as the facts and guidance available at our assessment date of January 22, 2018. As a result, the Company has recorded a provisional net benefit of $25.7 million in the fourth quarter of 2017, the period in which the Tax Act was enacted. This provisional amount includes an estimated reduction in the Company’s net deferred tax liabilities of $62.4 million resulting from the decrease in the federal income tax rate; an estimated deemed repatriation tax liability of $28.5 million; and an estimated net increase to our provision for taxes on foreign earnings not considered permanently reinvested of $8.2 million. The impact of the Tax Act may differ from these estimates, possibly materially, due to, among other things, refinement of calculations due to additional analysis, changes in interpretations, assumptions made and additional guidance that may be issued. Any subsequent adjustment, related to the aforementioned, will be recorded in current tax expense when such analysis is completed or such guidance is issued. A reconciliation of the beginning and ending amount of unrecognized tax benefits (“UTBs”) was as follows:
(In millions) |  | 2017 |  |  | 2016 |  |  | 2015 |
Unrecognized tax benefits — beginning of year |  | $ | 58.2 |  |  | $ | 38.2 |  |  | $ | 31.0 |
Gross additions — current year tax positions |  |  | 31.0 |  |  |  | 10.7 |  |  |  | 4.6 |
Gross additions — prior year tax positions |  |  | 10.9 |  |  |  | 10.4 |  |  |  | 8.3 |
Gross additions (reductions) — purchase accounting adjustments |  |  | 4.0 |  |  |  | 9.7 |  |  |  | 0.1 |
Gross reductions — prior year tax positions |  |  | (9.4 | ) |  |  | (9.8 | ) |  |  | (2.1 | )
Gross reductions — settlements with taxing authorities |  |  | (7.2 | ) |  |  | (1.0 | ) |  |  | (3.6 | )
Impact of change in foreign exchange rates |  |  | (0.0 | ) |  |  | (0.0 | ) |  |  | (0.1 | )
Unrecognized tax benefits — end of year |  | $ | 87.5 |  |  | $ | 58.2 |  |  | $ | 38.2 |
The amount of UTBs that, if recognized as of December 31, 2017, would affect the Company’s effective tax rate was $53.0 million. It is reasonably possible that, within the next twelve months, total UTBs may decrease in the range of $1.5 million to $21.5 million primarily as a result of the conclusion of U.S. federal, state and foreign income tax proceedings. We classify interest and penalty accruals related to UTBs as income tax expense. In 2017, we recognized an interest and penalty expense of approximately $2.0 million. In 2016, we recognized an interest and penalty expense of approximately $1.1 million. In 2015, we recognized an interest and penalty expense of approximately $1.0 million. At December 31, 2017 and 2016, we had accruals for the payment of interest and penalties of $11.8 million and $11.0 million, respectively. We file income tax returns in the U.S., various state and foreign jurisdictions. The Company is currently under examination by the U.S. Internal Revenue Service (“IRS”) for the periods related to 2013 through 2015, and is open and subject to examination for subsequent tax years. In addition to the U.S., we have tax years that remain open and subject to examination by tax authorities in the following major taxing jurisdictions: Canada for years after 2012, Mexico for years after 2011 and China for years after 2013. Income taxes in 2017, 2016 and 2015 were as follows:
(In millions) |  | 2017 |  |  | 2016 |  |  | 2015 |
Current |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 133.1 |  |  | $ | 150.4 |  |  | $ | 130.6 |
Foreign |  |  | 22.4 |  |  |  | 22.3 |  |  |  | 19.7 |
State and other |  |  | 22.8 |  |  |  | 22.9 |  |  |  | 16.1 |
Deferred |  |  |  |  |  |  |  |  |  |  |  |
Federal, state and other |  |  | (27.2 | ) |  |  | (23.9 | ) |  |  | (11.3 | )
Foreign |  |  | 8.4 |  |  |  | (2.0 | ) |  |  | (1.7 | )
Total income tax expense |  | $ | 159.5 |  |  | $ | 169.7 |  |  | $ | 153.4 |
The components of net deferred tax assets (liabilities) as of December 31, 2017 and 2016 were as follows:
(In millions) |  | 2017 |  |  | 2016 |
Deferred tax assets: |  |  |  |  |  |  |  |
Compensation and benefits |  | $ | 22.1 |  |  | $ | 56.1 |
Defined benefit plans |  |  | 43.7 |  |  |  | 82.5 |
Capitalized inventories |  |  | 11.1 |  |  |  | 13.6 |
Accounts receivable |  |  | 7.8 |  |  |  | 10.3 |
Other accrued expenses |  |  | 45.6 |  |  |  | 41.4 |
Net operating loss and other tax carryforwards |  |  | 25.6 |  |  |  | 39.7 |
Valuation allowance |  |  | (11.0 | ) |  |  | (16.4 | )
Miscellaneous |  |  | 3.7 |  |  |  | 2.5 |
Total deferred tax assets |  |  | 148.6 |  |  |  | 229.7 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
LIFO inventories |  |  | (4.2 | ) |  |  | (6.7 | )
Fixed assets |  |  | (44.5 | ) |  |  | (57.1 | )
Intangible assets |  |  | (232.0 | ) |  |  | (210.4 | )
Investment in partnership |  |  | (9.2 | ) |  |  | (109.3 | )
Miscellaneous |  |  | (16.1 | ) |  |  | (0.2 | )
Total deferred tax liabilities |  |  | (306.0 | ) |  |  | (383.7 | )
Net deferred tax liability |  | $ | (157.4 | ) |  | $ | (154.0 | )
In accordance with ASC requirements for Income Taxes, deferred taxes were classified in the consolidated balance sheets as of December 31, 2017 and 2016 as follows:
(In millions) |  | 2017 |  |  | 2016 |
Other assets |  | $ | 9.4 |  |  | $ | 9.5 |
Deferred income taxes |  |  | (166.8 | ) |  |  | (163.5 | )
Net deferred tax liability |  | $ | (157.4 | ) |  | $ | (154.0 | )
As of December 31, 2017 and 2016, the Company had deferred tax assets relating to net operating losses, capital losses, and other tax carryforwards of $25.6 million and $39.7 million, respectively, of which approximately $8.3 million will expire between 2018 and 2022, and the remainder of which will expire in 2023 and thereafter. The Company has provided a valuation allowance to reduce the carrying value of certain of these deferred tax assets, as management has concluded that, based on the available evidence, it is more likely than not that the deferred tax assets will not be fully realized. Under the Tax Act, the accumulated foreign earnings and profits of the Company’s foreign subsidiaries are subject to a deemed repatriation tax and should not be subject to additional U.S. federal income tax upon an actual repatriation of those earnings. As a result, the Company has recorded an estimated tax liability of $9.6 million for foreign and state taxes that would be payable on a distribution of those earnings and profits. We have not provided for deferred taxes on the remaining book over tax outside basis differences of our foreign subsidiaries. The outside basis differences of foreign subsidiaries considered indefinitely reinvested totaled approximately $50 million at December 31, 2017. The associated deferred tax liability on this basis difference would not be material.

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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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