Income Taxes

12 Months Ended

Dec. 31, 2020

Domestic and foreign components of income (loss) from continuing operations before income taxes are shown below:


	Year Ended December 31,
(in Millions)	2020		2019		2018
Domestic	$	(36.5)	$	(227.4)	$	(234.9)
Foreign	766.3		882.4		843.3
Total	$	729.8	$	655.0	$	608.4

The provision (benefit) for income taxes attributable to income (loss) from continuing operations consisted of:


	Year Ended December 31,
(in Millions)	2020		2019		2018
Current:
Federal	$	24.9	$	(12.0)	$	25.1
Foreign	91.7		77.0		90.0
State	0.7		0.4		(0.4)
Total current	$	117.3	$	65.4	$	114.7
Deferred:
Federal	$	15.0	$	(1.2)	$	(4.4)
Foreign	7.7		42.7		(30.4)
State	10.9		4.6		(9.1)
Total deferred	$	33.6	$	46.1	$	(43.9)
Total	$	150.9	$	111.5	$	70.8

The effective income tax rate applicable to income from continuing operations before income taxes was different from the statutory U.S. federal income tax rate due to the factors listed in the following table:


	Year Ended December 31,
(in Millions)	2020		2019		2018
U.S. Federal statutory rate	$	153.3	$	137.5	$	127.8
Impacts of Tax Cuts and Jobs Act Enactment (1)	—		—		7.8
Foreign earnings subject to different tax rates (2)	(127.6)		(137.7)		(154.9)

State and local income taxes, less federal income tax benefit	2.7		(2.9)		1.4
Research and development and miscellaneous tax credits	(6.2)		(3.8)		(3.7)
Tax on dividends, deemed dividends, and GILTI (3)	46.5		46.8		45.5
Changes to unrecognized tax benefits	5.8		(5.4)		2.7
Nondeductible expenses	5.5		3.5		12.4
Change in valuation allowance (4)	52.1		49.9		7.4
Exchange gains and losses (5)	(2.1)		(2.1)		5.7
Other	20.9		25.7		18.7
Total Tax Provision	$	150.9	$	111.5	$	70.8

____________________

(1) The tax impacts of the Tax Cuts and Jobs Act ("the Act") were completed in 2018 as permitted by Staff Accounting Bulletin 118.

(2) A significant amount of our earnings is generated by our foreign subsidiaries (e.g., Singapore, Hong Kong, and Switzerland), which tax earnings at lower statutory rates than the United States federal statutory rate. Our future effective tax rates may be materially impacted by a future change in the composition of earnings from foreign and domestic tax jurisdictions.

(3) The years ended December 31, 2020, 2019 and 2018 includes tax expense of $40.7 million, $41.6 million and $43.8 million, respectively, associated with the global intangible low-taxed income (GILTI) provisions of the Act.

(4) The year ended December 31, 2020 is primarily related to net operating losses with our Brazil operations. The year ended December 31, 2019 is primarily related to net operating losses with limited carryforward associated with our India operations.

(5) Includes the impact of transaction gains or losses on net monetary assets for which no corresponding tax expense or benefit is realized and the tax provision for statutory taxable gains or losses in foreign jurisdictions for which there is no corresponding amount in income before taxes.

Significant components of our deferred tax assets and liabilities were attributable to:


	December 31,
(in Millions)	2020		2019
Reserves for discontinued operations, environmental and restructuring	$	161.7	$	188.3
Accrued pension and other postretirement benefits	1.8		2.4

Capital loss, foreign tax and other credit carryforwards	5.5		7.5
Net operating loss carryforwards	311.4		227.0
Deferred expenditures capitalized for tax	39.6		18.7
Other	163.3		163.6
Deferred tax assets	$	683.3	$	607.5
Valuation allowance, net	(335.6)		(303.3)
Deferred tax assets, net of valuation allowance	$	347.7	$	304.2
Intangibles, Property, plant and equipment, and Investments, net	468.1		380.0
Deferred tax liabilities	$	468.1	$	380.0
Net deferred tax assets (liabilities)	$	(120.4)	$	(75.8)

We evaluate our deferred income taxes quarterly to determine if valuation allowances are required or should be adjusted. GAAP accounting guidance requires companies to assess whether valuation allowances should be established against deferred tax assets based on all available evidence, both positive and negative, using a "more likely than not" standard. In assessing the need for a valuation allowance, appropriate consideration is given to all positive and negative evidence related to the realization of deferred tax assets. This assessment considers, among other matters, the nature and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carryforward periods, and tax planning alternatives. We operate and derive income across multiple jurisdictions. As our business experiences changes in operating results across its geographic footprint, we may encounter losses in jurisdictions that have been historically profitable, and as a result might require additional valuation allowances to be recorded. We are committed to implementing tax planning actions, when deemed appropriate, in jurisdictions that experience losses in order to realize deferred tax assets prior to their expiration.

At December 31, 2020, we had net operating loss and tax credit carryforwards as follows: U.S. state net operating loss carryforwards of $28.5 million (tax-effected) expiring in future tax years through 2040, foreign net operating loss carryforwards of $282.9 million (tax-effected) expiring in various future years, and other tax credit carryforwards of $5.5 million expiring in various future years.

At December 31, 2020, our net valuation allowance was primarily comprised of balances within continuing operations locations of Brazil of $116.8 million, Luxembourg of $30.3 million, U.S. state of $40.8 million, Switzerland of $30.2 million and India of $15.5 million and within discontinued operations in Spain of $70.1 million. The valuation allowance balances at these locations are associated mainly with net operating losses, but in some cases relate to other additional deferred tax assets in the jurisdiction.

We do not provide income taxes for other outside basis differences inherent in our investments in subsidiaries because the investments and related unremitted earnings are essentially permanent in duration or we have concluded that no additional tax liability will arise upon disposal or remittance. Determining the amount of unrecognized deferred tax liability related to any remaining undistributed foreign earnings is not practicable due to the complexity of the hypothetical calculation.

Uncertain Income Tax Positions

U.S. GAAP accounting guidance for uncertainty in income taxes prescribes a model for the recognition and measurement of a tax position taken or expected to be taken in a tax return, and provides guidance on derecognition, classification, interest and penalties, disclosure and transition.

We file income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. The income tax returns for FMC entities taxable in the U.S. and significant foreign jurisdictions are open for examination and adjustment. As of December 31, 2020, the U. S. federal and state income tax returns are open for examination and adjustment for the years 2017 - 2020 and 2000 - 2020, respectively. Our significant foreign jurisdictions, which total 11, are open for examination and adjustment during varying periods from 2010 - 2020.

As of December 31, 2020, we had total unrecognized tax benefits of $76.2 million, of which $34.6 million would favorably impact the effective tax rate from continuing operations if recognized. As of December 31, 2019, we had total unrecognized tax benefits of $68.2 million, of which $29.4 million would favorably impact the effective tax rate if recognized. Interest and penalties related to unrecognized tax benefits are reported as a component of income tax expense. For the years ended December 31, 2020, 2019 and 2018, we recognized interest and penalties of $(1.5) million, $1.4 million, and $0.9 million, respectively, in the consolidated statements of income (loss). As of December 31, 2020 and 2019, we have accrued interest and penalties in the consolidated balance sheets of $13.9 million and $15.4 million, respectively.

Due to the potential for resolution of federal, state, or foreign examinations, and the expiration of various jurisdictional statutes of limitation, it is reasonably possible that our liability for unrecognized tax benefits will decrease within the next 12 months by a range of $33.4 million to $53.1 million.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:


(in Millions)	2020		2019		2018
Balance at beginning of year	$	68.2	$	79.1	$	84.0
Increases related to positions taken in the current year	1.1		4.1		11.8

Increases and decreases related to positions taken in prior years	25.7		3.4		(1.8)
Decreases related to lapse of statutes of limitations	(18.8)		(13.0)		(13.5)
Settlements during the current year	—		(2.8)		(1.4)
Decreases for tax positions on dispositions	—		(2.6)		—
Balance at end of year (1)	$	76.2	$	68.2	$	79.1

____________________

(1) At December 31, 2020, 2019, and 2018 we recognized an offsetting non-current asset of $27.4 million, $34.0 million, and $45.3 million respectively, relating to the indirect income tax benefits associated with specific uncertain tax positions presented above.

- 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.

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