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INCOME TAXES | 12 Months Ended
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Dec. 31, 2017
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The components of income (loss) from continuing operations before income taxes are as follows (in millions):
|  | Year Ended December 31,
|  | 2017 |  | 2016 |  | 2015
United States |  | $ | (36.3 | ) |  | $ | (29.9 | ) |  | $ | 212.2 |
Foreign |  | 148.3 |  |  | (240.8 | ) |  | (16.5 | )
Income (loss) from continuing operations before income taxes |  | $ | 112.0 |  |  | $ | (270.7 | ) |  | $ | 195.7 |
Income (loss) before income taxes including Income (loss) from discontinued operations and Gain (loss) from disposition of discontinued operations attributable to the Company was $205.4 million, $(242.0) million and $231.1 million for the years ended December 31, 2017, 2016 and 2015, respectively. The major components of the Company’s provision for (benefit from) income taxes on continuing operations before income taxes are summarized below (in millions):
|  | Year Ended December 31,
|  | 2017 |  | 2016 |  | 2015
Current: |  |  |  |  |  |  |  |  |
Federal |  | $ | (14.5 | ) |  | $ | 31.5 |  |  | $ | 49.2 |
State |  | 2.0 |  |  | 6.2 |  |  | 3.1 |
Foreign |  | 26.8 |  |  | 38.2 |  |  | 15.6 |
Current income tax provision (benefit) |  | 14.3 |  |  | 75.9 |  |  | 67.9 |
Deferred: |  |  |  |  |  |  |  |  |
Federal |  | 37.4 |  |  | (27.0 | ) |  | (3.7 | )
State |  | (0.5 | ) |  | (1.4 | ) |  | — |
Foreign |  | 0.8 |  |  | (124.9 | ) |  | 3.3 |
Deferred income tax (benefit) provision |  | 37.7 |  |  | (153.3 | ) |  | (0.4 | )
Total provision for (benefit from) income taxes |  | $ | 52.0 |  |  | $ | (77.4 | ) |  | $ | 67.5 |
The elimination of tax from intercompany transactions is included in current tax expense. Including discontinued operations and disposition of discontinued operations, the total (benefit from) provision for income taxes was $76.7 million, $(66.5) million and $82.1 million for the years ended December 31, 2017, 2016 and 2015, respectively. On December 22, 2017, H.R. 1 “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018” (formerly known as “Tax Cuts and Jobs Act” and is referred to as the “2017 Federal Tax Act”) was enacted. The 2017 Federal Tax Act lowered the U.S. federal corporate income tax rate from 35% to 21% effective January 1, 2018. As a result, the change in the U.S. federal tax rate required Terex to re-measure its federal deferred tax assets and liabilities. The 2017 Federal Tax Act contains a deemed repatriation transition tax (“Transition Tax”) on accumulated earnings and profits of the Company’s non-U.S. subsidiaries that have not been subject to U.S. tax. Terex plans to elect to pay its net Transition Tax over eight years. In addition, the 2017 Federal Tax Act also allows full expensing of the cost of certain assets placed into service after September 27, 2017 and through December 31, 2022. Effective for tax years beginning on January 1, 2018, the 2017 Federal Tax Act essentially repealed the existing U.S. system of deferred taxation on foreign earnings by adding the global intangible low-taxed income (“GILTI”) regime which will subject the majority of the post-2017 earnings of the Company’s non-U.S. subsidiaries (i.e., amounts in excess of a deemed return on net tangible assets of non-U.S. subsidiaries) to current tax in the U.S. along with the application of a special deduction and allowable foreign tax credits. Additionally, a territorial taxation system is also introduced by the 2017 Federal Tax Act which will exempt foreign dividends from U.S. federal tax. The 2017 Federal Tax Act also repealed the domestic production activities deduction and the performance exception permitting certain executive officer compensation greater than $1 million to be deducted. Other provisions from the 2017 Federal Tax Act include the deduction for foreign-derived intangible income, new limitations on the deductibility of business interest, and the new base erosion and anti-abuse tax regime. On December 22, 2017, the SEC issued SAB 118 which provides guidance on accounting for the impact of the 2017 Federal Tax Act. SAB 118 provides a measurement period of up to one year from enactment for a company to complete its tax accounting under ASC 740. Once a company is able to make a reasonable estimate and record a provisional amount for effects of the 2017 Federal Tax Act, it is required to do so. Such provisional measurement amounts are anticipated to change as remaining data is obtained, calculations are prepared, and analysis and review are completed, until the Company records a final amount within the measurement period. During the fourth quarter of 2017, the Company recorded $29.8 million as a provisional tax charge for the Transition Tax and $20.6 million as a provisional tax charge for the re-measurement of its U.S. deferred tax balances. Both provisional tax amounts are the Company’s reasonable estimate of the impact from the 2017 Federal Tax Act based on its understanding and available guidance, along with the assumptions made, calculations, analysis, and review as of the date of this filing. In addition, these provisional amounts incorporate assumptions made based upon the Company’s current interpretation of the 2017 Federal Tax Act and may change as the Company receives additional clarification and implementation guidance. Deferred tax assets and liabilities result from differences in the bases of assets and liabilities for tax and financial reporting purposes. The tax effects of the basis differences and loss carry forwards as of December 31, 2017 and 2016 for continuing operations are summarized below for major balance sheet captions (in millions):
|  | 2017 |  | 2016
Property, plant and equipment |  | $ | (8.8 | ) |  | $ | (16.8 | )
Intangibles |  | (5.7 | ) |  | (7.3 | )
Inventories |  | 13.9 |  |  | 18.1 |
Accrued warranties and product liability |  | 7.8 |  |  | 15.1 |
Loss carry forwards |  | 218.4 |  |  | 214.3 |
Retirement plans |  | 21.5 |  |  | 32.5 |
Accrued compensation and benefits |  | 28.9 |  |  | 40.1 |
Investments |  | (2.0 | ) |  | 2.3 |
Currency translation adjustments |  | 0.1 |  |  | (0.6 | )
Credit carry forwards |  | 4.5 |  |  | 11.9 |
Other |  | 18.5 |  |  | 20.8 |
Deferred tax assets valuation allowance |  | (136.4 | ) |  | (148.6 | )
Net deferred tax assets (liabilities) |  | $ | 160.7 |  |  | $ | 181.8 |
Deferred tax assets total $299.3 million before valuation allowances of $136.4 million, partially offset by deferred tax liabilities of $2.2 million at December 31, 2017. There were $182.7 million of deferred tax assets after valuation allowances in continuing operations ($19.7 million in discontinued operations), partially offset by deferred tax liabilities of $0.9 million in continuing operations ($3.7 million in discontinued operations) at December 31, 2016. The Company re-measured its U.S. federal deferred tax balances at the applicable rate of 21% in accordance with the 2017 Federal Tax Act as of the enactment date on December 22, 2017. As a result, the Company recorded a provisional $20.6 million deferred tax expense. In January 2018, the FASB released guidance on the accounting for tax on GILTI. The guidance indicates that either accounting for deferred taxes related to GILTI or treating any taxes on GILTI as period costs are both acceptable accounting policy elections. Terex is evaluating both methods, and will select a method during the measurement period in 2018. The Company evaluates the net realizable value of its deferred tax assets each reporting period. The Company must consider all objective evidence, both positive and negative, in evaluating the future realization of its deferred tax assets, including tax loss carry forwards. Historical information is supplemented by currently available information about future tax years. Realization of deferred tax assets requires sufficient taxable income of the appropriate character. To the extent estimates of future taxable income decrease or do not materialize, additional valuation allowances may be required. The Company records a valuation allowance for each deferred tax asset for which realization is not assessed as more likely than not. The valuation allowance for deferred tax assets as of December 31, 2017 and 2016 was $136.4 million and $148.6 million, respectively. The net change in the total valuation allowance for the years ended December 31, 2017 and 2016 was a decrease of $12.2 million and a decrease of $66.5 million, respectively. During the second quarter of 2016, the Company released the valuation allowances for its German and Italian subsidiaries due to its change in judgment regarding the realization of the deferred tax assets in Germany and Italy. The change in judgment was due to the Disposition, recent earnings history, and expected future income supporting the more likely than not assessment that the deferred tax assets will be realized. The Company’s Provision for (benefit from) income taxes is different from the amount that would be provided by applying the statutory federal income tax rate to the Company’s Income (loss) from continuing operations before income taxes. The reasons for the difference are summarized as follows (in millions):
|  | Year Ended December 31,
|  | 2017 |  | 2016 |  | 2015
Tax at statutory federal income tax rate |  | $ | 39.2 |  |  | $ | (94.7 | ) |  | $ | 68.5 |
State taxes |  | 1.0 |  |  | 3.1 |  |  | 2.0 |
Change in valuation allowance |  | (2.8 | ) |  | (47.7 | ) |  | (22.3 | )
Foreign tax differential on income/losses of foreign subsidiaries |  | (20.1 | ) |  | (37.5 | ) |  | 12.2 |
U.S. tax on multi-national operations |  | 11.1 |  |  | 41.9 |  |  | 3.7 |
Change in foreign statutory rates |  | — |  |  | 1.9 |  |  | 7.7 |
U.S. manufacturing and export incentives |  | — |  |  | (2.0 | ) |  | (4.3 | )
Tax effect of dispositions |  | (27.2 | ) |  | 2.1 |  |  | — |
2017 Federal Tax Act (1) |  | 46.9 |  |  | — |  |  | — |
Impairment loss on goodwill and intangible assets |  | — |  |  | 52.4 |  |  | — |
Expired stock awards |  | 2.4 |  |  | — |  |  | — |
Other |  | 1.5 |  |  | 3.1 |  |  | — |
Total provision for (benefit from) income taxes |  | $ | 52.0 |  |  | $ | (77.4 | ) |  | $ | 67.5 |
(1) The total impact of the 2017 Federal Tax Act is $50.4 million. Impacts of $1.3 million and $2.1 million are included in State taxes and Change in valuation allowance, respectively.
For the year ended December 31, 2016, the effective tax rate was reduced due to tax expense associated with the Disposition, which changed expectations concerning the indefinite reinvestment of foreign earnings. The Company received tax incentives in certain jurisdictions through 2016. For the years ended December 31, 2016 and 2015, the Company received no tax benefits and $7.0 million of tax benefits in continuing operations ($0.8 million and $1.2 million of tax benefits in discontinued operations), respectively. The Company does not provide for foreign income and withholding, U.S. Federal, or state income taxes or tax benefits on the financial reporting basis over the tax basis of its investments in foreign subsidiaries to the extent such amounts are indefinitely reinvested to support operations and continued growth plans outside the U.S. The Company reviews its plan to indefinitely reinvest on a quarterly basis. In making its decision to indefinitely reinvest, the Company evaluates its plans of reinvestment, its ability to control repatriation and to mobilize funds without triggering basis differences, and the profitability of U.S. operations and their cash requirements and the need, if any, to repatriate funds. If the assessment of the Company with respect to earnings of non-U.S. subsidiaries changes, deferred U.S. income taxes, foreign income taxes, and foreign withholding taxes may have to be accrued. As a result of the 2017 Federal Tax Act, the Company has changed its indefinite reinvestment assertion related to foreign earnings that have been taxed in the U.S. and now considers these earnings no longer indefinitely reinvested. The Company has not recorded any foreign or state tax expense with respect to earnings which have been subject to federal income tax and which are no longer indefinitely reinvested, because it is not yet able to make a reasonable estimate. Any adjustments related to the indefinite reinvestment assertion will be included in income from continuing operations as an adjustment to tax expense during the measurement period in 2018. The Company plans to indefinitely reinvest all undistributed foreign earnings in excess of those previously taxed in the U.S. For the year ended December 31, 2017, the Company’s provisional estimate of its remaining unremitted earnings of its foreign subsidiary ownership chains that have positive retained earnings and have not been subject to tax in the U.S. was approximately $27 million. At this time, determination of the unrecognized deferred tax liabilities for temporary differences related to the Company’s investment in non-U.S. subsidiaries is not practicable. For the year ended December 31, 2016, as a result of the Disposition, the Company repatriated approximately $1 billion of foreign earnings that were previously intended to be permanently reinvested. At December 31, 2017, the Company has various state net operating loss carry forwards available to reduce future state taxable income and income taxes. These net operating loss carry forwards expire at various dates through 2037. In addition, the gross amount of the U.S. federal capital loss carryforward is $14.8 million which expires in 2019 and 2022. At December 31, 2017, the Company has approximately $568 million of loss carry forwards, consisting of $195 million in Germany, $185 million in Italy, $60 million in China, $33 million in Spain, $25 million in Switzerland, and $70 million in other countries, which are available to offset future taxable income. The majority of these tax loss carry forwards are available without expiration. In addition, the gross amount of the Australian capital loss carryforward is $24 million, and it has an unlimited carryforward period. The Company had total net income tax payments including discontinued operations of $29.0 million, $52.8 million and $67.6 million in 2017, 2016 and 2015, respectively. At December 31, 2017 and 2016, Other current assets included net income tax receivable amounts of $19.4 million and $22.6 million, respectively. The Company and its subsidiaries conduct business globally and file income tax returns in U.S. federal, state and foreign jurisdictions, as required. From a tax perspective, major jurisdictions where the Company is often subject to examination by tax authorities include Germany, Italy, the United Kingdom, China, India and the U.S. Currently, various entities of the Company are under audit in Germany, Italy, India, the U.S. and elsewhere. With few exceptions, including certain subsidiaries in Germany that are under audit, the statute of limitations for the Company and most of its subsidiaries has expired for tax years prior to 2011. The Company assesses uncertain tax positions for recognition, measurement and effective settlement. Where the Company has determined that its tax return filing position does not satisfy the more likely than not recognition threshold of ASC 740, “Income Taxes,” it has recorded no tax benefits. Where the Company has determined that its tax return filing positions are more likely than not to be sustained, the Company has measured and recorded the largest amount of tax benefit greater than 50% likely to be realized. The Company recognizes accrued interest and penalties, if any, related to income taxes as (Provision for) benefit from income taxes in its Consolidated Statement of Income (Loss). The following table summarizes the activity related to the Company’s total (including discontinued operations) unrecognized tax benefits (in millions). Amounts in 2015 have been adjusted to eliminate the impact of offsets, which are immaterial:
Balance as of January 1, 2015 | $ | 78.1 |
Additions for current year tax positions | — |
Additions for prior year tax positions | 1.7 |
Reductions for prior year tax positions | (9.3 | )
Reductions for current year tax positions | — |
Reductions for expiration of statute of limitations | (1.1 | )
Settlements | — |
Acquired balances | — |
Balance as of December 31, 2015 | 69.4 |
Additions for current year tax positions | — |
Additions for prior year tax positions | 6.3 |
Reductions for prior year tax positions | (3.1 | )
Reductions for current year tax positions | — |
Reductions for expiration of statute of limitations | (5.0 | )
Settlements | (7.8 | )
Acquired balances | — |
Balance as of December 31, 2016 | 59.8 |
Additions for current year tax positions | — |
Additions for prior year tax positions | 12.3 |
Reductions for prior year tax positions | (29.9 | )
Reductions for current year tax positions | — |
Reductions for expiration of statute of limitations | (1.3 | )
Settlements | (6.8 | )
Acquired balances | — |
Balance as of December 31, 2017 | $ | 34.1 |
As a result of the Disposition, the Company’s ending balance of unrecognized tax benefits for the year ended December 31, 2017 was reduced by $29.2 million. The Company evaluates each reporting period whether it is reasonably possible material changes to its uncertain tax position liability could occur in the next 12 months. Changes may occur as a result of uncertain tax positions being considered effectively settled, re-measured, paid, acquired or divested, as a result of a change in accounting rules, tax law or judicial decision, or due to expiration of the relevant statute of limitations. It is not possible to predict which uncertain tax positions, if any, may be challenged by tax authorities. Timing and impact of income tax audits and their resolution is highly uncertain. New facts, laws, pronouncements and judicial decisions can change assessments concerning technical merit and measurement. The amounts of or periods in which changes to reserves for uncertain tax positions will occur is rarely ascertainable. Of the balances remaining after the Disposition, the Company believes it is reasonably possible the total amount of unrecognized tax benefits disclosed as of December 31, 2017 may decrease approximately $16 million in the fiscal year ending December 31, 2018. Such possible decrease relates primarily to audit settlements, transfer pricing, deductibility issues and expiration of statutes of limitation. As of December 31, 2017 and 2016, the Company had $34.1 million and $59.8 million, respectively, of unrecognized tax benefits. Of the $34.1 million at December 31, 2017, $26.4 million, if recognized, would affect the effective tax rate. As of December 31, 2017 and 2016, the liability for potential interest and penalties was $8.5 million and $12.9 million, respectively. During the year ended December 31, 2017, the Company recognized tax (benefit) expense of $1.6 million in continuing operations and $(6.0) million in Gain (loss) on disposition of discontinued operations - (net of tax) in the Consolidated Statement of Income (Loss) for interest and penalties. During the year ended December 31, 2016, the Company recognized $(1.0) million for interest and penalties.

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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=65882285&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=65882285&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=65882285&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=65882285&loc=d3e32537-109319 + Details
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