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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | 9. Income Taxes The domestic and foreign components of income (loss) before income taxes were as follows (in millions):
| December 31, |
| 2019 |  | 2018 |  | 2017 |
United States | $ | (12 | ) | $ | 39 |  | $ | (64 | )
Foreign |  | (81 | ) |  | 19 |  |  | 12 |
Income (loss) before income taxes | $ | (93 | ) | $ | 58 |  | $ | (52 | )
The provision (benefit) for income taxes for 2019, 2018 and 2017 consisted of the following (in millions):
| 2019 |  | 2018 |  | 2017 |
U.S. Federal: |  |  |  |  |  |  |  |  |
Current |  | — |  |  | — |  |  | — |
Deferred |  | — |  |  | — |  |  | — |
|  | — |  |  | — |  |  | — |
U.S. State: |  |  |  |  |  |  |  |  |
Current |  | 1 |  |  | 1 |  |  | — |
Deferred |  | — |  |  | — |  |  | — |
|  | 1 |  |  | 1 |  |  | — |
Foreign |  |  |  |  |  |  |  |  |
Current |  | 5 |  |  | 6 |  |  | 1 |
Deferred |  | (2 | ) |  | (1 | ) |  | (1 | )
|  | 3 |  |  | 5 |  |  | — |
Income tax provision (benefit) | $ | 4 |  | $ | 6 |  | $ | — |
The reconciliation between the Company’s effective tax rate on income (loss) from continuing operations and the statutory tax rate is as follows (in millions):
| December 31, |
| 2019 |  | 2018 |  | 2017 |
Income tax provision (benefit) at federal statutory rate | $ | (19 | ) | $ | 12 |  | $ | (18 | )
Foreign tax rate differential |  | 2 |  |  | 2 |  |  | (2 | )
State income tax provision (benefit), net of federal benefit |  | — |  |  | 3 |  |  | (5 | )
Nondeductible expenses |  | 3 |  |  | 9 |  |  | 2 |
Foreign tax credits |  | 1 |  |  | 21 |  |  | (31 | )
Benefit of net operating loss |  | — |  |  | (14 | ) |  | — |
One-time transition tax |  | — |  |  | 1 |  |  | 33 |
U.S. tax rate change |  | — |  |  | — |  |  | 69 |
Investment in subsidiaries |  | (9 | ) |  | — |  |  | — |
Nondeductible goodwill impairment |  | 16 |  |  | — |  |  | — |
Change in valuation allowance |  | 9 |  |  | (28 | ) |  | (45 | )
Change in contingency reserve and other |  | 1 |  |  | — |  |  | (3 | )
Income tax provision (benefit) | $ | 4 |  | $ | 6 |  | $ | — |
Effective tax rate |  | (4.4 | )% |  | 10.7 | % |  | 0.0 | %
For the year ended December 31, 2019, the effective tax rate was impacted by a valuation allowance recorded against the Company’s deferred tax assets in the U.S., Canada and other foreign jurisdictions, nondeductible goodwill impairment and recognition of deferred taxes related to outside basis differences in subsidiaries classified as held-for-sale. For the years ended December 31, 2018 and 2017, the effective tax rate was impacted by a valuation in the U.S., Canada and other foreign jurisdictions, and the TCJA which includes the one-time transition tax, the U.S. tax rate change and foreign tax credits related to earnings of foreign subsidiaries that were previously tax deferred. The TCJA subjects a U.S. shareholder to current tax on Global Intangible Low-Taxed Income (“GILTI”) earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5 Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. The Company adopted an accounting policy to recognize the tax effects of GILTI in the year tax is incurred. Due to the Company’s net operating losses in certain foreign jurisdictions, the Company recognized no income tax related to GILTI in 2019 and 2018. Significant components of the Company’s deferred tax assets and liabilities were as follows (in millions):
| December 31, |
| 2019 |  | 2018 |  | 2017 |
Deferred tax assets: |  |  |  |  |  |  |  |  |
Allowances and operating liabilities | $ | 5 |  | $ | 8 |  | $ | 8 |
Net operating loss carryforwards |  | 56 |  |  | 56 |  |  | 52 |
Foreign tax credit carryforwards |  | 7 |  |  | 8 |  |  | 29 |
Allowance for doubtful accounts |  | 2 |  |  | 6 |  |  | 6 |
Inventory reserve |  | 9 |  |  | 10 |  |  | 12 |
Stock-based compensation |  | 8 |  |  | 8 |  |  | 15 |
Intangible assets |  | 28 |  |  | 24 |  |  | 27 |
Assets held-for-sale |  | 4 |  |  | — |  |  | — |
Investment in subsidiaries |  | 9 |  |  | — |  |  | — |
Book over tax depreciation |  | 4 |  |  | 2 |  |  | — |
Other |  | 4 |  |  | 3 |  |  | 3 |
Total deferred tax assets | $ | 136 |  | $ | 125 |  | $ | 152 |
Deferred tax liabilities: |  |  |  |  |  |  |  |  |
Total deferred tax liabilities | $ | — |  | $ | — |  | $ | — |
Net deferred tax assets before valuation allowance |  | 136 |  |  | 125 |  |  | 152 |
Valuation allowance |  | (138 | ) |  | (129 | ) |  | (157 | )
Net deferred tax liabilities | $ | (2 | ) | $ | (4 | ) | $ | (5 | )
The Company records a valuation allowance when it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets depends on the ability to generate sufficient taxable income of the appropriate character in the future and in the appropriate taxing jurisdictions. If the Company was to determine that it would be able to realize the deferred tax assets in the future in excess of their net recorded amount, the Company would make an adjustment to the valuation allowance, which would reduce the provision for income taxes. The Company remains in a three year cumulative loss position at the end of 2019. As a result, management believes that it is not more-likely-than-not that the Company would be able to realize the benefits of its deferred tax assets in the U.S., Canada and other foreign jurisdictions and accordingly recognized a valuation allowance for the year ended December 31, 2019. The change during the year in the valuation allowance was $5 million in the U.S., $1 million in Canada, and $3 million in other foreign jurisdictions. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in millions):
| 2019 |  |  | 2018 |  |  | 2017 |
Unrecognized tax benefit at January 1 | $ | — |  |  | $ | — |  |  | $ | 1 |
Gross increases - tax positions in prior period |  | — |  |  |  | — |  |  |  | — |
Gross decreases - tax positions in prior period |  | — |  |  |  | — |  |  |  | — |
Gross increases - tax positions in current period |  | — |  |  |  | — |  |  |  | — |
Settlement |  | — |  |  |  | — |  |  |  | (1 | )
Lapse of statute of limitations |  | — |  |  |  | — |  |  |  | — |
Unrecognized tax benefit at December 31 | $ | — |  |  | $ | — |  |  | $ | — |
To the extent penalties and interest would be assessed on any underpayment of income tax, such accrued amounts are classified as a component of income tax provision (benefit) in the financial statements consistent with the Company’s policy. For the year ended December 31, 2019, the Company did not record any income tax expense for interest and penalties related to uncertain tax positions. The Company is subject to taxation in the U.S., various states and foreign jurisdictions. The Company has significant operations in the U.S. and Canada and to a lesser extent in various other international jurisdictions. Tax years that remain subject to examination vary by legal entity, but are generally open in the U.S. for the tax years ending after 2015 and outside the U.S. for the tax years ending after 2013. In the U.S., the Company has $218 million of federal net operating loss carryforwards as of December 31, 2019, which will expire between 2036 through 2037. The potential tax benefit of $46 million has been reduced by a $46 million valuation allowance. In addition to a reduction in future income tax expense, future income tax payments will also be reduced in the event the Company ultimately realizes the benefit of these net operating losses. The Company has $126 million of state net operating loss carryforwards as of December 31, 2019, which will expire between 2020 through 2038, with the majority expiring after 2034. The potential benefit of $7 million has been reduced by a $7 million valuation allowance. Outside the U.S., the Company has $15 million of net operating loss carryforwards as of December 31, 2019, of which $12 million have no expiration and $3 million will expire between 2021 and 2039. The potential tax benefit of $3 million has been reduced by a $3 million valuation allowance. As of December 31, 2019, the Company has $7 million of excess foreign tax credits in the U.S. The foreign tax credits will expire between 2024 and 2027. The potential benefit of $7 million has been reduced by a $7 million valuation allowance. In addition to future income tax expense, future income tax payments will also be reduced in the event the Company ultimately realizes the benefit of these foreign tax credits. As of December 31, 2019, the amount of undistributed earnings of foreign subsidiaries was approximately $81 million. With the exception of the Company’s pre-2018 earnings in Canada and the United Kingdom, the Company’s foreign earnings continue to be indefinitely reinvested. The Company makes a determination each period whether to permanently reinvest these earnings. If, as a result of these reassessments, the Company distributes these earnings in the future, additional tax liabilities would result, offset by any available foreign tax credits. The Company has provided for taxes on outside basis differences in subsidiaries classified as held-for-sale. No additional income taxes have been provided for any additional outside basis differences inherent in the Company’s foreign subsidiaries, as these amounts continue to be indefinitely reinvested. Determining the amount of unrecognized deferred tax liability related to any additional outside basis differences in these entities is not practicable. Because of the number of tax jurisdictions in which the Company operates, its effective tax rate can fluctuate as operations and the local country tax rates fluctuate. The Company is also subject to audits by federal, state and foreign jurisdictions which may result in proposed assessments. The Company’s future tax provision will reflect any favorable or unfavorable adjustments to its estimated tax liabilities when resolved. The Company is unable to predict the outcome of these matters. However, the Company believes that none of these matters will have a material adverse effect on the results of operations or financial position of the Company.

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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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