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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes In 2019, 2018 and 2017, we recorded tax provisions of $76.6 million, $307.5 million and $330.5 million, respectively. Cash tax payments, net of refunds were $94.7 million, $155.0 million and $161.7 million for 2019, 2018 and 2017, respectively. Tax Cuts and Jobs Act On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (“TCJA”). The legislation significantly changed U.S. tax law by, among other things, lowering the corporate income tax rate, implementing a territorial tax system and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. (“Transition Tax”). The TCJA permanently reduced the U.S. corporate income tax rate from a maximum of 35% to 21%, effective January 1, 2018. While the TCJA provides for a territorial tax system, beginning in 2018, it includes the global intangible low-taxed income (“GILTI”) provision. The Company has elected to account for GILTI tax in the period in which it is incurred. The GILTI provisions require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. Provisional Tax Impacts On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when 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 Reform Act. SAB 118 provided that where reasonable estimates can be made, the provisional accounting should be based on such estimates and when no reasonable estimate can be made, the provisional accounting may be based on the tax law in effect before the TCJA. We applied the guidance in SAB 118 when accounting for the enactment-date effects of TCJA. Accordingly, we remeasured U.S. deferred tax assets and liabilities in 2017 based on the income tax rates at which the deferred tax assets and liabilities were expected to reverse in the future and recorded a provisional amount of $41.1 million of tax expense for the year ended December 31, 2017. Upon further analysis and refinement of our calculations, during the year ended December 31, 2018, we recorded an incremental expense of $1.6 million related to the remeasurement of the U.S. deferred tax assets. At December 31, 2017, we were not able to reasonably estimate the impact of Transition Tax and therefore our estimate of Transition Tax expense was recorded in the first quarter of 2018. Accordingly, we recognized a provisional tax expense of $290 million related to the tax on the deemed repatriated earnings in our consolidated financial statements for the quarter ended March 31, 2018. The one-time Transition Tax is based on our total post-1986 earnings and profits ("E&P"), which had been deferred from U.S. taxes under prior law. A final adjustment was made to the provisional amounts allowed under SAB 118 in the fourth quarter of 2018 based on additional guidance from the IRS and state taxing authorities, and the filing of the 2017 tax returns. After the adjustment, total Transition Tax recorded in 2018 was $222 million. The impact of the Transition Tax comprised 48.5% of the 2018 effective tax rate. As of December 31, 2018, we completed our accounting for the tax effects of enactment of the TCJA. In the fourth quarter of 2019, as part of our Reinvent SEE strategy and in order to align our structure with our evolving global operations, we transferred certain intangible assets between wholly-owned subsidiaries. The transfer resulted in the establishment of a deferred tax asset and the corresponding recognition of deferred tax benefit of $49 million. The components of earnings before income tax provision were as follows:
|  | Year Ended December 31,
(In millions) |  | 2019 |  | 2018 |  | 2017
Domestic |  | $ | 126.7 |  |  | $ | 255.1 |  |  | $ | 192.1 |
Foreign |  | 243.6 |  |  | 202.7 |  |  | 201.2 |
Total |  | $ | 370.3 |  |  | $ | 457.8 |  |  | $ | 393.3 |
The components of our income tax provision (benefit) were as follows:
|  | Year Ended December 31,
(In millions) |  | 2019 |  | 2018 |  | 2017
Current tax expense: |  |  |  |  |  |
Federal |  | $ | 62.3 |  |  | $ | 228.2 |  |  | $ | 79.6 |
State and local |  | 4.6 |  |  | 9.8 |  |  | 14.3 |
Foreign |  | 64.1 |  |  | 59.8 |  |  | 106.0 |
Total current expense |  | $ | 131.0 |  |  | $ | 297.8 |  |  | $ | 199.9 |
Deferred tax (benefit) expense: |  |  |  |  |  |  |  |  |
Federal |  | $ | (19.0 | ) |  | $ | 56.8 |  |  | $ | 130.1 |
State and local |  | 4.0 |  |  | (21.2 | ) |  | 5.3 |
Foreign |  | (39.4 | ) |  | (25.9 | ) |  | (4.8 | )
Total deferred tax (benefit) expense |  | (54.4 | ) |  | 9.7 |  |  | 130.6 |
Total income tax provision |  | $ | 76.6 |  |  | $ | 307.5 |  |  | $ | 330.5 |
Deferred tax assets (liabilities) consist of the following:
|  | December 31,
(In millions) |  | 2019 |  | 2018
Accruals not yet deductible for tax purposes |  | $ | 17.4 |  |  | $ | 17.5 |
Net operating loss carryforwards |  | 245.9 |  |  | 265.5 |
Foreign, federal and state credits |  | 8.4 |  |  | 10.4 |
Employee benefit items |  | 79.5 |  |  | 77.0 |
Capitalized expenses |  | 32.2 |  |  | 8.9 |
Intangibles |  | 21.8 |  |  | — |
Derivatives and other |  | 47.7 |  |  | 38.0 |
Sub-total deferred tax assets |  | 452.9 |  |  | 417.3 |
Valuation allowance |  | (197.6 | ) |  | (218.4 | )
Total deferred tax assets |  | $ | 255.3 |  |  | $ | 198.9 |
Depreciation and amortization |  | $ | (37.0 | ) |  | $ | (26.8 | )
Unremitted foreign earnings |  | (10.0 | ) |  | — |
Intangible assets |  | — |  |  | (21.7 | )
Other |  | (0.4 | ) |  | (0.4 | )
Total deferred tax liabilities |  | (47.4 | ) |  | (48.9 | )
Net deferred tax assets |  | $ | 207.9 |  |  | $ | 150.0 |
A valuation allowance has been provided based on the uncertainty of utilizing the tax benefits, mainly related to the following deferred tax assets:
• | $183.4 million of foreign items, primarily net operating losses; and
• | $7.7 million of state tax credits.
For the year ended December 31, 2019, the valuation allowance decreased by $20.8 million. This is primarily driven by our Reinvent SEE initiatives and decreases in foreign tax rates. As of December 31, 2019, we have foreign net operating loss carryforwards of $899.4 million expiring in years beginning in 2020 with the majority of losses having an unlimited carryover. The state net operating loss carryforwards totaling $569.3 million expire in various amounts over 1 to 19 years. As of December 31, 2019, we have $0.6 million of foreign and federal tax credit carryforwards and we have $9.8 million of state credit carryovers expiring in 2020 – 2028. Most of the state credit carryovers have a valuation allowance. Although a deferred tax liability of $10.0 million was recorded in 2019 for planned repatriation of foreign earnings, the Company has indefinitely reinvested the large majority of its foreign earnings, which are the principal component of U.S and foreign outside basis differences. The total amount of unremitted foreign earnings is $4.7 billion upon which the U.S. federal income tax effect has largely been recorded as a result of Transition Tax. Remitting these foreign earnings would result in additional foreign and U.S. income tax consequences, the net tax costs of which are not practicable to determine. A reconciliation of the provision for income taxes, with the amount computed by applying the statutory federal income tax rate (21% in 2019-2018 and 35% in 2017) to income before provision for income taxes, is as follows (dollars in millions):
|  | Year Ended December 31,
|  | 2019 |  | 2018 |  | 2017
Computed expected tax |  | $ | 77.8 |  |  | 21.0 | % |  | $ | 96.1 |  |  | 21.0 | % |  | $ | 137.7 |  |  | 35.0 | %
State income taxes, net of federal tax benefit |  | 6.7 |  |  | 1.8 | % |  | 8.4 |  |  | 1.8 | % |  | 7.6 |  |  | 1.9 | %
Foreign earnings taxed at different rates |  | 10.5 |  |  | 2.8 | % |  | 8.3 |  |  | 1.8 | % |  | (22.3 | ) |  | (5.7 | )%
U.S. tax on foreign earnings |  | 29.0 |  |  | 7.8 | % |  | 13.5 |  |  | 2.9 | % |  | 72.3 |  |  | 18.4 | %
Tax credits |  | (50.1 | ) |  | (13.5 | )% |  | (20.7 | ) |  | (4.5 | )% |  | (16.8 | ) |  | (4.3 | )%
Unremitted foreign earnings |  | 10.0 |  |  | 2.7 | % |  | — |  |  | — | % |  | — |  |  | — | %
Reorganization and divestitures |  | (47.2 | ) |  | (12.7 | )% |  | — |  |  | — | % |  | 75.9 |  |  | 19.3 | %
Withholding tax |  | 4.8 |  |  | 1.3 | % |  | 21.7 |  |  | 4.7 | % |  | 7.4 |  |  | 1.9 | %
Net change in valuation allowance |  | (7.6 | ) |  | (2.1 | )% |  | (39.8 | ) |  | (8.7 | )% |  | (2.0 | ) |  | (0.5 | )%
Net change in unrecognized tax benefits |  | 36.0 |  |  | 9.7 | % |  | 95.0 |  |  | 20.8 | % |  | 33.4 |  |  | 8.5 | %
Tax Cuts and Jobs Act |  | — |  |  | — | % |  | 117.6 |  |  | 25.7 | % |  | 41.1 |  |  | 10.5 | %
Deferred tax adjustments |  | — |  |  | — | % |  | — |  |  | — | % |  | 14.1 |  |  | 3.6 | %
Other |  | 6.7 |  |  | 1.9 | % |  | 7.4 |  |  | 1.7 | % |  | (17.9 | ) |  | (4.6 | )%
Income tax expense and rate |  | $ | 76.6 |  |  | 20.7 | % |  | $ | 307.5 |  |  | 67.2 | % |  | $ | 330.5 |  |  | 84.0 | %
The primary adjustments to the statutory rate in 2019 were the following items:
• | increase for unrecognized tax benefits;
• | increase for minimum tax on certain non-U.S. earnings;
• | increase for tax on unremitted foreign earnings;
• | decrease related to Reinvent SEE and other restructuring initiatives;
• | decrease as a result of larger U.S. tax credits including benefits associated with prior year research & development credits; and
• | decrease for release of valuation allowance attributable to Reinvent SEE initiatives.
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:
|  | Year Ended December 31,
(in millions) |  | 2019 |  | 2018 |  | 2017
Beginning balance of unrecognized tax benefits |  | $ | 356.4 |  |  | $ | 214.3 |  |  | $ | 162.6 |
Additions for tax positions of current year |  | 3.4 |  |  | 106.0 |  |  | 7.3 |
Additions for tax positions of prior years |  | 47.9 |  |  | 59.5 |  |  | 49.3 |
Reductions for tax positions of prior years |  | (16.0 | ) |  | (7.0 | ) |  | (4.3 | )
Reductions for lapses of statutes of limitation and settlements |  | (1.4 | ) |  | (16.4 | ) |  | (0.6 | )
Ending balance of unrecognized tax benefits |  | $ | 390.3 |  |  | $ | 356.4 |  |  | $ | 214.3 |
In 2019, our unrecognized tax benefit increased by $33.9 million, primarily related to increases in North America. In 2018, we increased our unrecognized tax benefit by $142.1 million, also primarily related to North America. If the unrecognized tax benefits at December 31, 2019 were recognized, our income tax provision would decrease by $343.5 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 possible that the unrecognized tax benefits could change significantly within the next 12 months. Absent resolution of significant tax controversy, the associated impact on the reserve balance is estimated to be a decrease in the range of $4.6 to $6.6 million during 2020. We recognize interest and penalties associated with unrecognized tax benefits in our income tax provision in the Consolidated Statements of Operations. Interest and penalties recorded were $13.1 million, negligible and $4.0 million, respectively in 2019, 2018 and 2017. We had gross liabilities, for interest and penalties, of $56.2 million at December 31, 2019, $18.2 million at December 31, 2018 and $14.8 million at December 31, 2017. The increase in the gross liability related to interest and penalties from 2018 to 2019 was primarily due to a reclass within other non-current liabilities from unrecognized tax benefits to interest and penalties which had no impact on the overall Consolidated Balance Sheets or Consolidated Statement of Operations. The majority of the unrecognized tax benefit amount of $390.3 million relates to North America. Income Tax Returns The Internal Revenue Service (the “IRS”) has concluded its examination of Sealed Air U.S. federal income tax returns for all years through 2008, except 2007 which remains open to the extent of a capital loss carryback. The IRS is currently auditing the years 2011-2014 and has proposed to disallow, as deductible expense, the entirety of the $1.49 billion payment made pursuant to the Settlement agreement (as defined in Note 20, Commitments and Contingencies). We believe that we have meritorious defenses to the proposed disallowance and are protesting it with the IRS. An unfavorable resolution of this matter could have a material adverse effect on our consolidated financial condition and results of operations, including cash flows. State income tax returns are generally subject to examination for a period of 3 to 5 years after their filing date. We have various state income tax returns in the process of examination and are generally open to examination for periods after 2012. 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 3 to 5 years after their filing date. We have various foreign returns in the process of examination but have largely concluded all other income tax matters for the years prior to 2010. 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 of the issues addressed in the Company’s tax audits are resolved in a manner that is inconsistent with management’s expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs and could be required to make significant payments as a result.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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