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Income Taxes | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | On March 27, 2020, the U.S. Federal government passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act to provide economic relief from COVID-19. The CARES Act contains significant business tax provisions, which the Company has evaluated and determined will not have a material impact on the Company's financial statements or related disclosures. The CARES Act also provides employer payroll tax credits for wages paid to employees who are unable to work during the COVID-19 outbreak and options to defer payroll tax payments. The Company has elected to defer remittances of payroll and other taxes into the future as provided for under the Act, and may assess in subsequent quarters the impact and availability of payroll tax credits from the U.S. and similar programs provided for by foreign governments, as applicable. The following table summarizes the provision (benefit) for U.S. federal, state, and foreign taxes on income from continuing operations:
| Year Ended December 31,
In thousands | 2020 |  | 2019 |  | 2018
Current: |  |  |  |  |
Federal | $ | (963) |  |  | $ | 4,859 |  |  | $ | (7,695) |
State and local | 1,731 |  |  | 2,179 |  |  | (362) |
Foreign | 12,409 |  |  | 13,771 |  |  | 14,618 |
Total current | 13,177 |  |  | 20,809 |  |  | 6,561 |
Deferred: |  |  |  |  |
Federal | (2,852) |  |  | 2,334 |  |  | (17,463) |
State and local | (3,340) |  |  | (1,846) |  |  | (4,492) |
Foreign | (60,444) |  |  | (1,518) |  |  | (139,915) |
Total deferred | (66,636) |  |  | (1,030) |  |  | (161,870) |
Change in valuation allowance | 53,697 |  |  | 838 |  |  | 142,739 |
Total provision (benefit) for income taxes | $ | 238 |  |  | $ | 20,617 |  |  | $ | (12,570) |
Subsequent to the issuance of our 2019 financial statements, we determined that a deferred tax liability related to the difference between the book and tax bases of a European subsidiary, initially recorded in 2018, should not have been recognized. Instead, we should have established a valuation allowance against the net operating loss deferred tax asset recognized for that subsidiary. As a result, the valuation allowance, the deferred tax liability, and the related disclosures of movements in those amounts, including foreign currency impacts, have been restated from the amounts previously reported in the 2018 and 2019 tax disclosures to reverse the $117 million deferred tax liability originally recorded in 2018 and to record a $117 million valuation allowance. There is no impact on income tax benefit (provision), net income or the balance sheet presentation of this immaterial misstatement. The change in the valuation allowance does not include the impacts of currency translation adjustments, acquisitions, or significant intercompany transactions. Our tax provision (benefit) as a percentage of income before tax was less than 1%, 28%, and 12% for 2020, 2019, and 2018, respectively. Our actual tax rate differed from the 21% U.S. federal statutory tax rate due to various items. A reconciliation of income taxes at the U.S. federal statutory rate of 21% to the consolidated actual tax rate is as follows:
| Year Ended December 31,
In thousands | 2020 |  | 2019 |  | 2018
Income (loss) before income taxes |  |  |  |  |
Domestic | $ | 24,010 |  |  | $ | 57,261 |  |  | $ | (50,463) |
Foreign | (80,649) |  |  | 15,771 |  |  | (58,688) |
Total income before income taxes | $ | (56,639) |  |  | $ | 73,032 |  |  | $ | (109,151) |
Expected federal income tax provision | $ | (11,894) |  |  | $ | 15,337 |  |  | $ | (22,922) |
Latin America Divestiture | 10,936 |  |  | — |  |  | — |
Change in valuation allowance | 53,697 |  |  | 838 |  |  | 142,739 |
Stock-based compensation | (163) |  |  | (2,130) |  |  | (104) |
Foreign earnings | (58,649) |  |  | (15,610) |  |  | (132,808) |
Tax credits | (9,101) |  |  | (8,794) |  |  | (10,502) |
Uncertain tax positions, including interest and penalties | 11,144 |  |  | 13,060 |  |  | 7,727 |
Change in tax rates | 557 |  |  | 9,514 |  |  | 335 |
State income tax provision (benefit), net of federal effect | (1,997) |  |  | 2,805 |  |  | (4,524) |
U.S. tax provision on foreign earnings | 142 |  |  | 129 |  |  | 25 |
Local foreign taxes | 1,298 |  |  | 1,471 |  |  | 2,540 |
Transaction costs | — |  |  | — |  |  | 974 |
Other, net | 4,268 |  |  | 3,997 |  |  | 3,950 |
Total provision (benefit) from income taxes | $ | 238 |  |  | $ | 20,617 |  |  | $ | (12,570) |
Deferred tax assets and liabilities consist of the following:
| December 31,
In thousands | 2020 |  | 2019
Deferred tax assets |  |  |
Loss carryforwards(1) | $ | 423,013 |  |  | $ | 343,614 |
Tax credits(2) | 88,433 |  |  | 98,098 |
Accrued expenses | 47,569 |  |  | 46,846 |
Pension plan benefits expense | 21,735 |  |  | 17,310 |
Warranty reserves | 11,083 |  |  | 12,961 |
Depreciation and amortization | 6,363 |  |  | 6,112 |
Equity compensation | 4,701 |  |  | 4,685 |
Inventory valuation | 1,799 |  |  | 1,069 |
Deferred revenue | 9,705 |  |  | 8,951 |
Leases | 10,872 |  |  | 13,876 |
Other deferred tax assets, net | 10,817 |  |  | 9,777 |
Total deferred tax assets | 636,090 |  |  | 563,299 |
Valuation allowance | (503,859) |  |  | (427,030) |
Total deferred tax assets, net of valuation allowance | 132,231 |  |  | 136,269 |
Deferred tax liabilities |  |  |
Depreciation and amortization | (39,995) |  |  | (54,663) |
Leases | (10,046) |  |  | (12,976) |
Other deferred tax liabilities, net | (7,969) |  |  | (6,540) |
Total deferred tax liabilities | (58,010) |  |  | (74,179) |
Net deferred tax assets | $ | 74,221 |  |  | $ | 62,090 |
(1)For tax return purposes at December 31, 2020, we had U.S. federal loss carryforwards of $125.3 million, which begin to expire in the year 2021. At December 31, 2020, we have net operating loss carryforwards in Luxembourg of $1.4 billion, the majority of which can be carried forward indefinitely, offset by a full valuation allowance. The remaining portion of the loss carryforwards are composed primarily of losses in various other state and foreign jurisdictions. The majority of these losses can be carried forward indefinitely. At December 31, 2020, there was a valuation allowance of $503.9 million primarily associated with foreign loss carryforwards and foreign tax credit carryforwards (discussed below). (2)For tax return purposes at December 31, 2020, we had: (1) U.S. general business credits of $46.9 million, which begin to expire in 2022; (2) U.S. foreign tax credits of $50.8 million, which begin to expire in 2024; and (3) state tax credits of $38.2 million, which begin to expire in 2021. Changes in the valuation allowance for deferred tax assets are summarized as follows:
| Year Ended December 31,
In thousands | 2020 |  | 2019 |  | 2018
Balance at beginning of period | $ | 427,030 |  |  | $ | 437,149 |  |  | $ | 285,784 |
Other adjustments | 23,132 |  |  | (10,957) |  |  | 8,626 |
Additions charged to costs and expenses | 53,697 |  |  | 838 |  |  | 142,739 |
Balance at end of period, noncurrent | $ | 503,859 |  |  | $ | 427,030 |  |  | $ | 437,149 |
We recognize valuation allowances to reduce deferred tax assets to the extent we believe it is more likely than not that a portion of such assets will not be realized. In making such determinations, we consider all available favorable and unfavorable evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and our ability to carry back losses to prior years. We are required to make assumptions and judgments about potential outcomes that lie outside management's control. Our most sensitive and critical factors are the projection, source, and character of future taxable income. Although realization is not assured, management believes it is more likely than not that deferred tax assets, net of valuation allowance, will be realized. The amount of deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward periods are reduced or current tax planning strategies are not implemented. We do not provide U.S. deferred taxes on temporary differences related to our foreign investments that are considered permanent in duration. These temporary differences include undistributed foreign earnings of $18.1 million and $13.7 million at December 31, 2020 and 2019, respectively. Foreign taxes have been provided on these undistributed foreign earnings. As a result of recent changes in U.S. tax legislation, any repatriation of these earnings would not result in additional U.S. federal income tax. We are subject to income tax in the United States and numerous foreign jurisdictions. Significant judgment is required in evaluating our tax positions and determining our provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. We establish reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These reserves are established when we believe that certain positions might be challenged despite our belief that our tax return positions are fully supportable. We adjust these reserves in light of changing facts and circumstances, such as the outcome of tax audits. The provision for income taxes includes the impact of reserve positions and changes to reserves that are considered appropriate. A reconciliation of the beginning and ending amount of unrecognized tax benefits were as follows:
In thousands | Total
Unrecognized tax benefits at January 1, 2018 | $ | 56,702 |
Gross increase to positions in prior years | 22,943 |
Gross decrease to positions in prior years | (24,949) |
Gross increases to current period tax positions | 63,869 |
Audit settlements | (2,977) |
Decrease related to lapsing of statute of limitations | (1,368) |
Effect of change in exchange rates | (1,662) |
Unrecognized tax benefits at December 31, 2018 | $ | 112,558 |
Gross increase to positions in prior years | 1,067 |
Gross decrease to positions in prior years | (3,296) |
Gross increases to current period tax positions | 13,762 |
Audit settlements | — |
Decrease related to lapsing of statute of limitations | (1,574) |
Effect of change in exchange rates | (802) |
Unrecognized tax benefits at December 31, 2019 | $ | 121,715 |
Gross increase to positions in prior years | 633 |
Gross decrease to positions in prior years | (2,140) |
Gross increases to current period tax positions | 14,821 |
Audit settlements | (795) |
Decrease related to lapsing of statute of limitations | (2,381) |
Effect of change in exchange rates | 4,057 |
Unrecognized tax benefits at December 31, 2020 | $ | 135,910 |
| At December 31,
In thousands | 2020 |  | 2019 |  | 2018
The amount of unrecognized tax benefits that, if recognized, would affect our effective tax rate | $ | 134,473 |  |  | $ | 120,410 |  |  | $ | 111,224 |
If certain unrecognized tax benefits are recognized they would create additional deferred tax assets. These assets would require a full valuation allowance in certain locations based upon present circumstances. We classify interest expense and penalties related to unrecognized tax benefits and interest income on tax overpayments as components of income tax expense. The net interest and penalties expense recognized were as follows:
| Year Ended December 31,
In thousands | 2020 |  | 2019 |  | 2018
Net interest and penalties expense (benefit) | $ | 400 |  |  | $ | 708 |  |  | $ | (990) |
| At December 31,
In thousands | 2020 |  | 2019
Accrued interest | $ | 3,432 |  |  | $ | 2,849 |
Accrued penalties | 1,645 |  |  | 1,681 |
At December 31, 2020, we are under examination by certain tax authorities. We believe we have appropriately accrued for the expected outcome of all tax matters and do not currently anticipate that the ultimate resolution of these examinations will have a material adverse effect on our financial condition, future results of operations, or cash flows. Based upon the timing and outcome of examinations, litigation, the impact of legislative, regulatory, and judicial developments, and the impact of these items on the statute of limitations, it is reasonably possible that the related unrecognized tax benefits could change from those recognized within the next twelve months. However, at this time, an estimate of the range of reasonably possible adjustments to the balance of unrecognized tax benefits cannot be made. We file income tax returns in various jurisdictions. We are subject to income tax examination by tax authorities in our major tax jurisdictions as follows:
Tax Jurisdiction |  | Years Subject to Audit
U.S. federal |  | Subsequent to 2001
France |  | Subsequent to 2012
Germany |  | Subsequent to 2013
United Kingdom |  | Subsequent to 2015
Indonesia |  | Subsequent to 2014
Italy |  | Subsequent to 2015

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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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