Income Taxes

6 Months Ended

Jun. 30, 2019

INCOME TAXES

Income tax expense (benefit) was $130 million and $(2) million for the three and six months ended June 30, 2019, respectively, compared to income tax expense of $30 million and $45 million in the same periods of 2018. For the three months ended June 30, 2019, the increase in the effective tax rate from the prior period is due primarily to a higher level of earnings and related tax expense and impact of changes in enacted tax rates. For the six months ended June 30, 2019, the decrease in the effective tax rate from the prior period is due to valuation allowance releases, partially offset by higher level of earnings and related tax expense, non-deductible impairments and government payments.

The following table summarizes the difference between income tax expense (benefit) at the U.S. statutory rate of 21% and the income tax expense (benefit) at effective worldwide tax rates for the respective periods:



	Three Months Ended June 30,						Six Months Ended June 30,
Millions of dollars	2019			2018			2019			2018
Earnings (loss) before income taxes	$	202		$	(609	)	$	544		$	(500	)

Income tax expense (benefit) computed at United States statutory tax rate	42			(128		)	114			(105		)
Valuation allowances	39			39			(196		)	39
Audits and settlements	(13		)	(3		)	(13		)	(3		)
U.S. foreign income items, net of credits	4			(34		)	11			(45		)
Changes in enacted tax rates	25			—			25			—
Non deductible impairments	—			138			—			138
Non deductible government payments	—			37			—			37
Other	33			(19		)	57			(16		)
Income tax expense (benefit) computed at effective worldwide tax rates	$	130		$	30		$	(2	)	$	45

At the end of each interim period, we estimate the effective tax rate expected to be applicable for the full fiscal year and the impact of discrete items, if any, and adjust the quarterly rate as necessary.

Valuation Allowances

We routinely review the future realization of deferred tax assets based on projected future reversal of taxable temporary differences, available tax planning strategies and projected future taxable income. We have reduced the valuation allowance to reflect the estimated amount of certain deferred tax assets associated with net operating losses and other deferred tax assets we believe are now more-likely-than-not to be realized. During the first quarter of 2019, upon completion of our $700 million bond offering, we used the proceeds to refinance and recapitalize various entities in the EMEA region. Based upon our existing transfer pricing policies, these actions are expected to provide sufficient future taxable income to realize the deferred tax assets. In addition, these actions inject additional internal capital into certain EMEA entities to meet local country capitalization requirements, repay all outstanding borrowings under the Whirlpool EMEA Finance Term Loan and prepare for the Embraco divestiture. Accordingly, we reduced the valuation allowance by $235 million during the first quarter of 2019. During the second quarter of 2019, we increased our total valuation allowance by $39 million related to disposals of businesses in Turkey and South Africa and tax planning strategies that are no longer prudent.