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Income Taxes | 12 Months Ended
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Dec. 31, 2015
Income Tax Disclosure [Abstract] |
Income Taxes | Note 16 Income Taxes The components of earnings (loss) from continuing operations before income tax provision were as follows:
|  | Year Ended December 31, |
(In millions) |  | 2015 |  |  | 2014 |  |  | 2013 |
Domestic |  | $ | 102.8 |  |  | $ | (62.2 | ) |  | $ | (92.6 | )
Foreign |  |  | 323.1 |  |  |  | 329.4 |  |  |  | 272.8 |
Total |  | $ | 425.9 |  |  | $ | 267.2 |  |  | $ | 180.2 |
The components of our income tax provision (benefit) were as follows:
|  | Year Ended December 31, |
(In millions) |  | 2015 |  |  | 2014 |  |  | 2013 |
Current tax expense (benefit): |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 6.3 |  |  | $ | (216.0 | ) |  | $ | (4.3 | )
State and local |  |  | 7.3 |  |  |  | 0.2 |  |  |  | (3.9 | )
Foreign |  |  | 99.5 |  |  |  | 78.7 |  |  |  | 89.3 |
Total current expense (benefit) |  |  | 113.1 |  |  |  | (137.1 | ) |  |  | 81.1 |
Deferred tax expense (benefit) : |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (35.7 | ) |  |  | 176.8 |  |  |  | 4.2 |
State and local |  |  | 10.9 |  |  |  | (27.2 | ) |  |  | 10.4 |
Foreign |  |  | 2.2 |  |  |  | (3.4 | ) |  |  | (10.8 | )
Total deferred tax expense (benefit) |  |  | (22.6 | ) |  |  | 146.2 |  |  |  | 3.8 |
Total income tax provision |  | $ | 90.5 |  |  | $ | 9.1 |  |  | $ | 84.9 |
The Company’s income taxes payable have been reduced by the tax benefits from employee stock plan awards. The excess tax benefit recorded as an increase to additional paid-in capital was $13 million in 2015 and less than $1 million in 2014 and 2013. Deferred tax assets (liabilities) consist of the following:
|  | December 31, |  |  | December 31, |
(In millions) |  | 2015 |  |  | 2014 |
Restructuring reserves |  | $ | 9.1 |  |  | $ | 4.7 |
Accruals not yet deductible for tax purposes |  |  | 45.6 |  |  |  | 56.5 |
Net operating loss carry forwards |  |  | 250.1 |  |  |  | 291.1 |
Foreign, federal and state credits and investment tax allowances |  |  | 162.2 |  |  |  | 109.3 |
Employee benefit items |  |  | 166.5 |  |  |  | 163.8 |
Other |  |  | 37.5 |  |  |  | 44.1 |
Gross deferred tax assets |  |  | 671.0 |  |  |  | 669.5 |
Valuation allowance |  |  | (257.4 | ) |  |  | (227.8 | )
Total deferred tax assets |  |  | 413.6 |  |  |  | 441.7 |
Depreciation and amortization |  |  | (30.3 | ) |  |  | (40.0 | )
Unremitted foreign earnings |  |  | (44.1 | ) |  |  | (130.0 | )
Intangibles |  |  | (209.6 | ) |  |  | (214.2 | )
Other |  |  | — |  |  |  | (11.7 | )
Total deferred tax liabilities |  |  | (284.0 | ) |  |  | (395.9 | )
Net deferred tax assets |  | $ | 129.6 |  |  | $ | 45.8 |
The increase in net deferred tax assets is primarily attributable to the decrease in the liability on unremitted earnings and the recognition of foreign tax credits, partially offset by a decrease in the net operating loss asset. The unremitted foreign earnings liability decreased due to the Company’s ability to recognize the benefits of foreign tax credits associated with repatriated earnings. The net operating loss carryforwards decreased as a result of the domestic prior year taxable income adjustment from the OFL recapture, offset in part by an increase in foreign net operating losses. The Company’s foreign tax credits increased as a result of the ability to utilize favorable tax attributes which allows for realization of foreign tax credits. We have concluded that it is more likely than not that we will realize the majority of deferred tax assets at December 31, 2015. In assessing the need for a valuation allowance, we estimate future reversals of existing temporary differences, future taxable earnings, taxable income in carryback periods and tax planning strategies to determine which deferred tax assets are more likely than not to be realized in the future. Changes to tax laws, statutory tax rates and future taxable earnings can have an impact on valuation allowances related to deferred tax assets. A valuation allowance has been provided based on the uncertainty of utilizing the tax benefits related to the following deferred tax assets:
| — | $162 million of foreign net operating losses;
| — | $16 million of foreign credits;
| — | $12 million of foreign accruals and employee benefit items;
| — | $53 million of state net operating loss carry forwards; and
| — | $14 million of state tax credits.
For the year ended December 31, 2015, the valuation allowance increased by $30 million. The increase is primarily related to recording additional valuation allowance on certain foreign and state net operating losses partially offset by a decrease of $58 million primarily based on the expectation that the Company will realize the majority of its foreign tax credits. The ability to realize additional foreign tax credits is attributable to the existence of a tax attribute generated in prior years which allows for foreign tax credit utilization and a decrease in the 2014 net operating loss related to provision to return adjustments. Included in the $58 million valuation allowance decrease is $29 million of foreign tax credits recognized as a result of the reserve on a portion of the Settlement Agreement payment. A valuation allowance for state net operating losses included approximately $5 million that upon reversal would be recorded as a credit to additional paid in capital. As of December 31, 2015, we have foreign net operating loss carry forwards of $800 million expiring in years beginning in 2016 with the majority of losses having an unlimited carryover. The state net operating loss carryforwards totaling $1.5 billion expire in various amounts over one to 20 years. As of December 31, 2015, we have foreign and federal foreign tax credit carry forwards and investment allowances totaling $199 million that expire in calendar year 2016 through 2035. $67 million of foreign tax credits will expire in 2016 if not utilized; we have provided a valuation allowance for the portion of credits expected to expire unutilized. We have $22 million of state credit carryovers expiring in 2016 – 2035. We have provided a full valuation allowance on the state credits. The Company has provided a $44 million deferred tax liability for unremitted foreign earnings, which is net of foreign tax credits of approximately $124 million. The liability relates to approximately $1.5 billion of our foreign subsidiaries’ accumulated earnings that the Company plans to repatriate. The Company has not recorded a deferred tax liability related to the federal and state income taxes and foreign withholding taxes on approximately $5.1 billion of undistributed earnings of certain foreign subsidiaries indefinitely reinvested. Upon repatriation of those earnings the Company could be subject to both U.S. income taxes and withholding taxes payable to the various foreign countries. Determination of the amount of unrecognized deferred U.S. income tax liability is not practicable due to the complexities associated with its hypothetical calculation; however, unrecognized foreign tax credits would be available to reduce a portion of the U.S. tax liability. We recorded an excess tax benefit of $46 million as an out of period adjustment in December 2015 and $38 million in December 2014 related to shares of Common Stock issued in the Settlement agreement. A reconciliation of the provision for income taxes, with the amount computed by applying the statutory federal income tax rate (35%) to income before provision for income taxes, is as follows (dollars in millions):
|  | Year Ended December 31, |
|  | 2015 |  |  | 2014 |  |  | 2013 |
Computed expected tax |  | $ | 149.1 |  |  |  | 35.0 | % |  | $ | 93.5 |  |  |  | 35.0 | % |  | $ | 63.0 |  |  |  | 35.0 | %
State income taxes, net of federal tax benefit |  |  | 5.2 |  |  |  | 1.2 | % |  |  | (5.7 | ) |  |  | (2.1 | )% |  |  | (2.2 | ) |  |  | (1.2 | )%
Foreign earnings taxed at lower rates |  |  | (21.8 | ) |  |  | (5.1 | )% |  |  | (35.2 | ) |  |  | (13.2 | )% |  |  | (15.9 | ) |  |  | (8.8 | )%
U.S. tax on foreign earnings |  |  | 12.1 |  |  |  | 2.8 | % |  |  | 10.5 |  |  |  | 3.9 | % |  |  | 8.6 |  |  |  | 4.8 | %
Foreign tax credits |  |  | (54.4 | ) |  |  | (12.8 | )% |  |  | — |  |  |  | (— | )% |  |  | — |  |  |  | (— | )%
Unremitted foreign earnings |  |  | (86.0 | ) |  |  | (20.2 | )% |  |  | (5.2 | ) |  |  | (1.9 | )% |  |  | — |  |  |  | (— | )%
Overall foreign loss recapture |  |  | 67.9 |  |  |  | 16.0 | % |  |  | — |  |  |  | (— | )% |  |  | — |  |  |  | (— | )%
Net change in valuation allowance |  |  | (58.2 | ) |  |  | (13.7 | )% |  |  | (13.2 | ) |  |  | (4.9 | )% |  |  | 40.3 |  |  |  | 22.4 | %
Net change in unrecognized tax benefits |  |  | 56.8 |  |  |  | 13.3 | % |  |  | (23.4 | ) |  |  | (8.8 | )% |  |  | 3.6 |  |  |  | 2.0 | %
Reorganization tax benefit |  |  | — |  |  |  | (— | )% |  |  | (2.2 | ) |  |  | (0.9 | )% |  |  | (12.0 | ) |  |  | (6.7 | )%
Other |  |  | 19.8 |  |  |  | 4.7 | % |  |  | (10.0 | ) |  |  | (3.7 | )% |  |  | (0.5 | ) |  |  | (0.3 | )%
Effective income tax rate |  | $ | 90.5 |  |  |  | 21.2 | % |  | $ | 9.1 |  |  |  | 3.4 | % |  | $ | 84.9 |  |  |  | 47.1 | %
The primary adjustments to the statutory rate in 2015 were the following items:
| — | decrease in tax expense related to unremitted earnings based on the Company’s ability to repatriate earnings in a tax efficient manner and utilize foreign tax credits against the expected U.S liability
| — | net benefit for reduction in valuation allowance primarily based on management’s expectation that the majority of the foreign tax credits will be utilized
| — | benefit of recording foreign tax credits including a benefit for 2014 credits originally deducted but now planned to directly reduce the U.S tax liability
| — | increase in tax expense for recapture of the 2014 OFL in the U.S. in connection with the 2014 reorganization
| — | increase in tax expense for reserve established in connection with Settlement payment offset by reductions in reserves for lapses in statute of limitations.
Tax expense for 2015 includes an $11 million benefit from adjustments that would appropriately be recorded in a prior period, but which management has determined are not material to the financial statements and therefore included in current year. These items include income from OFL recapture, benefit from recognition of foreign tax credits, deferred tax adjustments and additional domestic taxable income from foreign sources. Unrecognized Tax Benefits We are providing the following disclosures related to our unrecognized tax benefits and the effect on our effective income tax rate if recognized (in millions):
|  | Year Ended December 31, |
|  | 2015 |  |  | 2014 |  |  | 2013 |
Beginning balance of unrecognized tax benefits |  | $ | 188.9 |  |  | $ | 221.9 |  |  | $ | 233.2 |
Additions for tax positions of current year |  |  | 3.1 |  |  |  | 5.2 |  |  |  | 7.5 |
Additions for tax positions of prior years |  |  | 111.9 |  |  |  | 7.7 |  |  |  | 5.0 |
Reductions for tax positions of prior years |  |  | (64.8 | ) |  |  | (45.9 | ) |  |  | (23.8 | )
Ending balance of unrecognized tax benefits |  | $ | 239.1 |  |  | $ | 188.9 |  |  | $ | 221.9 |
In 2015, we increased our unrecognized tax benefit by $50 million, primarily related to the recording of a reserve related to the Settlement payment which was partially offset by the release of $58 million of tax reserves for which the statute of limitations has expired and were primarily recorded at the time of the Diversey Holdings, Inc. acquisition. The decrease in unrecognized tax benefits in 2014 was primarily due to a release of reserves in connection with funding the Settlement agreement, an amnesty program available in a foreign jurisdiction and approximately $6 million of payments made in connection with that program. If the unrecognized tax benefits at December 31, 2015 were recognized, our income tax provision would decrease by $204 million, resulting in a substantially lower effective tax rate. Based on the potential outcome of the Company’s global tax examinations and the expiration of the statute of limitations for specific jurisdictions, it is reasonably possible that the unrecognized tax benefits will change within the next 12 months. The associated impact on the reserve balance is estimated to be a decrease in the range of $0 to $48 million. We recognize interest and penalties related to unrecognized tax benefits in income tax provision in the Consolidated Statements of Operations. We had a liability of approximately of$29 million (of which $10 million represents penalties) at December 31, 2015 for the payment of interest and penalties (before any tax benefit), a liability of $29 million (of which $11 million represents penalties) at December 31, 2014 and a liability of approximately $27 million (of which $12 million represents penalties) at December 31, 2013. In 2015, there was a negligible change in interest and penalties in the tax accruals for uncertainties in prior years. In 2014 and 2013, interest and penalties of $4 million and $5 million respectively were reversed in connection with the related tax accruals for uncertainties in prior years. Income Tax Returns The Internal Revenue Service (the “Service”) has concluded its examination of the legacy Sealed Air U.S. federal income tax returns for all years through 2008, except 2007 remains open to the extent of a capital loss carryback. The Service is currently auditing the 2007 and 2010 consolidated U.S. federal income tax returns of legacy Sealed Air. We are also under examination by the IRS with respect to the Settlement agreement deduction in 2014. The outcome of the negotiations may affect the utilization of certain tax attributes and require us to return a portion of the refund. State income tax returns are generally subject to examination for a period of three to five years after their filing date. We have various state income tax returns in the process of examination, and are open to examination for periods after 2002. Our foreign income tax returns are under examination in various jurisdictions in which we conduct business. Income tax returns in foreign jurisdictions have statutes of limitations generally ranging from three to five years after their filing date and except where still under examination or where we are litigating, we have generally concluded all other income tax matters globally for years through 2007. Management believes that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs.

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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 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 + Details
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