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Income Taxes | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | Footnote 17 — Income Taxes On December 22, 2017, the Tax Cuts and Jobs Act (“U.S. Tax Reform”) was enacted. The legislation significantly changed U.S. tax law by lowering the federal corporate tax rate from 35.0% to 21.0%, effective January 1, 2018, modifying the foreign earnings deferral provisions, and imposing a one-time toll charge on deemed repatriated earnings of foreign subsidiaries as of December 31, 2017. Effective for 2018 and forward, there are additional changes including changes to bonus depreciation, the deduction for executive compensation and interest expense, a tax on global intangible low-taxed income provisions (“GILTI”), the base erosion antiabuse tax (“BEAT”), and a deduction for foreign-derived intangible income (“FDII”). As of December 31, 2017, two provisions that affected the consolidated financial statements were the corporate tax rate reduction and the one-time toll charge. As the corporate tax rate reduction was enacted in 2017 and effective January 1, 2018, the Company appropriately accounted for the tax rate change in the valuation of its deferred taxes. As a result, the Company recorded a tax benefit of $1.5 billion in the prior year statement of operations. The SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides the Company with up to one year to finalize accounting for the impacts of U.S. Tax Reform. In 2017, the Company estimated the provisional tax impacts related to the toll charge, deferred income taxes, including the impacts of the change in corporate tax rate, executive compensation, and its indefinite reinvestment assertion. As of the fourth quarter of 2018, the Company has completed its accounting for the tax effects of U.S. Tax Reform. The Company recorded immaterial adjustments to its toll change and finalized its accounting related to deferred income taxes, executive compensation, and our indefinite reinvestment assertion. The Company elected to account for the tax on GILTI as a period cost and therefore has not recorded deferred taxes related to GILTI on its foreign subsidiaries. As of December 31, 2018, the Company has accumulated unremitted earnings generated by our foreign subsidiaries of approximately $5.5 billion. A significant portion of these earnings were subject to U.S. federal taxation in the prior year with the one-time toll charge. The Company is no longer asserting indefinite reinvestment on a portion of its unremitted earnings of its foreign subsidiaries as of December 31, 2018 and is recognizing deferred income taxes of approximately $17.6 million, primarily related to the future U.S. state tax effects of unremitted foreign earnings. With respect to unremitted earnings of $1.9 billion where the Company is continuing to assert indefinite reinvestment, any future remittances could be subject to additional foreign withholding taxes, U.S. state taxes and certain tax impacts relating to foreign currency exchange effects on any future repatriations of the unremitted earnings. It is not practicable for the Company to estimate the amount of any unrecognized tax effects on these reinvested earnings. The provision for income taxes consists of the following for the years ended December 31, (in millions):
|  | 2018 |  |  | 2017 |  |  | 2016 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 121.4 |  |  | $ | 272.1 |  |  | $ | 126.6 |
State |  |  | 31.0 |  |  |  | 21.4 |  |  |  | 39.0 |
Foreign |  |  | 203.5 |  |  |  | 168.5 |  |  |  | 87.0 |
Total current |  |  | 355.9 |  |  |  | 462.0 |  |  |  | 252.6 |
Deferred |  |  | (1,597.9 | ) |  |  | (1,781.8 | ) |  |  | 33.4 |
Total income tax provision (benefit) |  |  | (1,242.0 | ) |  |  | (1,319.8 | ) |  |  | 286.0 |
Total provision — discontinued operations |  |  | 236.1 |  |  |  | 258.6 |  |  |  | 228.9 |
Total provision (benefit)— continuing operations |  | $ | (1,478.1 | ) |  | $ | (1,578.4 | ) |  | $ | 57.1 |
The non-U.S. component of income before income taxes was $52 million, $966 million and $350 million in 2018, 2017 and 2016, respectively. A reconciliation of the U.S. statutory rate to the effective income tax rate on a continuing basis is as follows for the years ended December 31:
|  | 2018 |  |  | 2017 |  |  | 2016 |
Statutory rate |  |  | 21.0 | % |  |  | 35.0 | % |  |  | 35.0 | %
Add (deduct) effect of: |  |  |  |  |  |  |  |  |  |  |  |
State income taxes, net of federal income tax effect |  |  | 2.4 |  |  |  | 2.0 |  |  |  | 100.5 |
Foreign tax credit |  |  | 2.1 |  |  |  | 4.3 |  |  |  | 47.0 |
Foreign rate differential |  |  | 0.5 |  |  |  | (28.2 | ) |  |  | (319.1 | )
Resolution of tax contingencies, net of increases |  |  | 0.2 |  |  |  | (5.0 | ) |  |  | (112.4 | )
Valuation allowance reserve (decrease) increase |  |  | 0.8 |  |  |  | (7.4 | ) |  |  | (149.5 | )
Manufacturing deduction |  |  | — |  |  |  | (1.3 | ) |  |  | (60.7 | )
Foreign statutory tax rate change |  |  | — |  |  |  | (2.7 | ) |  |  | (52.9 | )
Impairment |  |  | (9.3 | ) |  |  | 2.8 |  |  |  | — |
Sale of businesses |  |  | — |  |  |  | (11.8 | ) |  |  | — |
Tools outside basis difference |  |  | — |  |  |  | — |  |  |  | 878.3 |
Reversal of outside basis difference |  |  | — |  |  |  | (11.4 | ) |  |  | — |
U.S. Tax Reform, impact of change in tax rate and other |  |  | — |  |  |  | (269.2 | ) |  |  | — |
U.S. Tax Reform, federal income tax on mandatory deemed repatriation |  |  | 0.2 |  |  |  | 29.7 |  |  |  | — |
Other |  |  | — |  |  |  | (1.9 | ) |  |  | (60.2 | )
Effective rate |  |  | 17.9 | % |  |  | (265.1 | )% |  |  | 306.0 | %
The components of net deferred tax assets are as follows as of December 31, (in millions):
|  | 2018 |  |  | 2017 |
Deferred tax assets: |  |  |  |  |  |  |  |
Accruals not currently deductible for tax purposes |  | $ | 147.5 |  |  | $ | 173.0 |
Inventory |  |  | 31.6 |  |  |  | 34.6 |
Postretirement liabilities |  |  | 28.0 |  |  |  | 24.0 |
Pension liabilities |  |  | 53.6 |  |  |  | 49.4 |
Net operating losses |  |  | 355.1 |  |  |  | 374.0 |
Foreign tax credits |  |  | 133.3 |  |  |  | 7.5 |
Other |  |  | 123.9 |  |  |  | 137.3 |
Total gross deferred tax assets |  |  | 873.0 |  |  |  | 799.8 |
Less valuation allowance |  |  | (195.0 | ) |  |  | (293.0 | )
Net deferred tax assets after valuation allowance |  |  | 678.0 |  |  |  | 506.8 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Accelerated depreciation |  |  | (87.2 | ) |  |  | (59.0 | )
Amortizable intangibles |  |  | (1,405.4 | ) |  |  | (2,801.6 | )
Outside basis differences |  |  | (13.1 | ) |  |  | (18.3 | )
Other |  |  | (49.0 | ) |  |  | (35.6 | )
Total gross deferred tax liabilities |  |  | (1,554.7 | ) |  |  | (2,914.5 | )
Net deferred tax liabilities |  | $ | (876.7 | ) |  | $ | (2,407.7 | )
At December 31, 2018, the Company has approximately $1.3 billion of U.S., state, and foreign net operating losses (“NOLs”), of which approximately $886 million do not expire and approximately $438 million expire between 2019 and 2038. Additionally, approximately $197 million U.S. federal NOLs are subject to varying limitations on their use under Section 382 of the Internal Revenue Code of 1986, as amended. Of these U.S. federal NOLs, approximately $189 million are not reflected in the consolidated financial statements and approximately $31 million were utilized in the current year. The majority of the U.S. foreign tax credits are recognized as a deferred tax asset as of December 31, 2018 can be carried back one year and carried forward ten years. The Company routinely reviews valuation allowances recorded against deferred tax assets on a more likely than not basis as to whether the Company has the ability to realize the deferred tax assets. In making such a determination, the Company takes into consideration all available and appropriate positive and negative evidence, including projected future taxable income, future reversals of existing taxable temporary differences, the ability to carryback net operating losses, and available tax planning strategies. Although realization is not assured, based on this existing evidence, the Company believes it is more likely than not that the Company will realize the benefit of existing deferred tax assets, net of the valuation allowances. As of December 31, 2018, the Company has a valuation allowance recorded against foreign NOLs and other deferred tax assets the Company believes are not more likely than not to be realized due to the uncertainty resulting from a lack of previous taxable income within the applicable tax jurisdictions. A valuation allowance of $195 million and $293 million was recorded against certain deferred tax asset balances as of December 31, 2018 and 2017, respectively. For the year ended December 31, 2018, the Company recorded a net valuation allowance decrease of $98 million, comprised of a valuation allowance decrease of $64.2 million relating to the Company’s French operations for which the Company concluded the deferred tax assets were realizable, expiration of NOLs in Japan on which a valuation allowance was recorded, and other miscellaneous changes in valuation allowances related to ongoing operations. For the year ended December 31, 2017, the Company recorded a net valuation allowance decrease of $30.5 million, comprised of a valuation allowance decrease of $35.2 million relating to the Company’s German operations for which the Company concluded the deferred tax assets were realizable; and an increase in valuation allowance in the current year in certain jurisdictions that the Company previously determined were not more likely than not to be realized. The following table summarizes the changes in gross unrecognized tax benefits for the years ended December 31, (in millions):
|  | 2018 |  |  | 2017 |
Unrecognized tax benefits, January 1, |  | $ | 385.3 |  |  | $ | 379.0 |
Increases (decreases): |  |  |  |  |  |  |  |
Increases in tax positions for prior years |  |  | 35.9 |  |  |  | 26.0 |
Decreases in tax positions for prior years |  |  | (20.6 | ) |  |  | (12.3 | )
Increase in tax positions for the current period |  |  | 115.0 |  |  |  | 34.5 |
Settlements with taxing authorities |  |  | (6.2 | ) |  |  | — |
Lapse of statute of limitations |  |  | (46.4 | ) |  |  | (41.9 | )
Unrecognized tax benefits, December 31, |  | $ | 463.0 |  |  | $ | 385.3 |
If recognized, $444 million and $365 million of unrecognized tax benefits as of December 31, 2018, and 2017, respectively, would affect the effective tax rate. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as a component of income tax expense. During 2018 and 2017, the Company recognized income tax expense on interest and penalties of $8 million and $8.3 million, respectively, due to the accrual of current year interest on existing positions offset by the resolution of certain tax contingencies. The Company anticipates approximately $66.7 million of unrecognized tax benefits will reverse within the next 12 months. It is reasonably possible due to activities of various worldwide taxing authorities, including proposed assessments of additional tax and possible settlement of audit issues that additional changes to the Company’s unrecognized tax benefits could occur. In the normal course of business, the Company is subject to audits by worldwide taxing authorities regarding various tax liabilities. The Company’s U.S. federal income tax returns for 2011, 2012, 2013, 2014 and 2015 as well as certain state and non-US income tax returns for various years, are under routine examination. The Company files numerous consolidated and separate income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The statute of limitations for the Company’s U.S. federal income tax returns has expired for years prior to 2011. The Company’s Canadian tax returns are subject to examination for years after 2010. With few exceptions, the Company is no longer subject to other income tax examinations for years before 2013.

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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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