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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | 10. Income Taxes U.S. and foreign income before income taxes consist of the following (in millions):
| Year Ended December 31,
| 2022 |  | 2021 |  | 2020
United States | $ | (90.3) |  |  | $ | (47.7) |  |  | $ | 51.2 |
Foreign | 235.4 |  |  | 147.8 |  |  | 110.5 |
Income (loss) before income taxes | $ | 145.1 |  |  | $ | 100.0 |  |  | $ | 161.7 |
Our total income tax provision (benefit) related to income before income taxes consists of the following components (in millions):
| Year Ended December 31,
| 2022 |  | 2021 |  | 2020
Current: |  |  |  |  |
U.S. federal statutory tax | $ | 4.2 |  |  | $ | 4.4 |  |  | $ | 10.1 |
State | 2.2 |  |  | 1.4 |  |  | 2.6 |
Foreign | 42.9 |  |  | 22.4 |  |  | 42.9 |
Current income tax expense (benefit) | 49.2 |  |  | 28.2 |  |  | 55.6 |
Deferred: |  |  |  |  |
U.S. federal statutory tax | (4.6) |  |  | 2.2 |  |  | — |
State | 0.6 |  |  | 2.7 |  |  | — |
Foreign | (14.5) |  |  | (12.5) |  |  | (14.4) |
Deferred income tax expense (benefit) | (18.5) |  |  | (7.6) |  |  | (14.4) |
Non-current tax expense (income) (1) | (1.5) |  |  | 5.3 |  |  | 10.9 |
Total provision for income taxes | $ | 29.2 |  |  | $ | 25.8 |  |  | $ | 52.1 |
(1)Non-current tax expense (income) is primarily related to income tax associated with the reserve for uncertain tax positions, including associated interest and penalties. A reconciliation of the tax provision calculated using the U.S. federal statutory income tax rate to our tax provision is as follows (in millions):
| Year Ended December 31,
| 2022 |  | 2021 |  | 2020
Tax provision based on U.S. federal statutory tax rate | $ | 30.5 |  |  | $ | 21.0 |  |  | $ | 34.0 |
Foreign rates varying from federal statutory tax rate | (5.4) |  |  | (10.3) |  |  | (21.5) |
State income taxes, net of U.S. federal income tax benefit | 0.7 |  |  | 1.8 |  |  | 3.6 |
U.S. taxes on foreign earnings and other tax reform impacts | 29.7 |  |  | 11.1 |  |  | 12.0 |
Uncertain tax positions | (1.5) |  |  | 5.3 |  |  | 10.9 |
Foreign currency, statutory adjustments, and tax rate changes | (3.8) |  |  | 0.6 |  |  | (3.1) |
Non-taxable interest income & non-deductible interest expense | 2.1 |  |  | (2.1) |  |  | 1.5 |
Valuation allowances | (13.3) |  |  | (6.6) |  |  | 15.6 |
Non-deductible officer compensation | 1.0 |  |  | 1.5 |  |  | 1.9 |
Withholding Tax | 7.8 |  |  | 6.2 |  |  | 1.6 |
Foreign tax credit | (25.0) |  |  | (5.6) |  |  | (9.2) |
Other (1) | 6.6 |  |  | 2.9 |  |  | 4.9 |
Total provision for income taxes | $ | 29.2 |  |  | $ | 25.8 |  |  | $ | 52.1 |
(1)Includes a gain of sale of company of $4.9 million for the year ended December 31, 2020. For the year ended December 31, 2022, our income tax provision was $29.2 million and our effective income tax rate was 20.2%, as compared to an income tax provision of $25.8 million and an effective income tax rate of 25.8% for 2021. The higher income tax provision for the year ended December 31, 2022 resulted primarily from additional income before taxes reduced by additional discrete tax benefits as compared to 2021, including reductions to valuation allowances against our deferred tax assets in certain foreign jurisdictions and the resolution of a tax matter of one of our foreign subsidiaries. For the year ended December 31, 2021, our income tax provision was $25.8 million and our effective income tax rate was 25.8%, as compared to an income tax provision of $52.1 million and an effective income tax rate of 32.2% for 2020. The lower income tax provision for the year ended December 31, 2021 resulted primarily from reduced income before taxes and tax expense of $12.9 million recorded during the year ended December 31, 2020 on the gain on the sale of MSTS, as well as tax benefits on the impact of the change in the UK tax rate, benefits resulting from tax return filings in various foreign jurisdictions, and adjustments to valuation allowances against our deferred tax assets in various foreign jurisdictions. We have analyzed our global working capital and cash requirements and the potential tax liabilities attributable to repatriation and have determined that we intend to continue our assertion that the earnings of certain of our non-U.S. subsidiaries are indefinitely reinvested. At December 31, 2022, $1.0 billion of our foreign earnings were permanently reinvested in non-US business operations. For these investments, if not reinvested indefinitely, we could potentially owe approximately $221.2 million in foreign withholding tax. For the remaining $1.7 billion of accumulated foreign earnings that are actually or deemed repatriated, we have made an estimate of the associated foreign withholding and state income tax effects of $11.8 million for the year ended December 31, 2022. The temporary differences which comprise our net deferred tax liabilities are as follows (in millions):
| As of December 31,
| 2022 |  | 2021
Gross Deferred Tax Assets: |  |  |
Bad debt reserve and accrued expenses | $ | 12.0 |  |  | $ | 20.1 |
Net operating loss | 56.7 |  |  | 45.9 |
Accrued and other share-based compensation | 26.1 |  |  | 16.6 |
U.S. foreign income tax credits | 8.3 |  |  | 1.4 |
Unrealized foreign exchange, derivatives, and cash flow hedges | — |  |  | 10.7 |
Interest expense limitations | 18.4 |  |  | 26.2 |
Other | 15.4 |  |  | 5.2 |
Total gross deferred tax assets | 136.8 |  |  | 126.2 |
Less: Valuation allowance (1) | 26.1 |  |  | 39.7 |
Gross deferred tax assets, net of valuation allowance | 110.7 |  |  | 86.5 |
Deferred Tax Liabilities: |  |  |
Depreciation | (26.7) |  |  | (23.9) |
Goodwill and intangible assets | (70.8) |  |  | (55.9) |
Unrealized foreign exchange, derivatives, and cash flow hedges | (7.0) |  |  | — |
Deferred tax costs on foreign unrepatriated earnings | (11.8) |  |  | (10.6) |
Other | (4.3) |  |  | (11.7) |
Total gross deferred tax liabilities | (120.6) |  |  | (102.0) |
Net deferred tax liability | $ | 9.9 |  |  | $ | 15.5 |
Net deferred tax asset | $ | — |  |  | $ | — |
Reported on the Consolidated Balance Sheets as: |  |  |
Other non-current assets for deferred tax assets, non-current | $ | 68.0 |  |  | $ | 44.8 |
Non-current income tax liabilities, net for deferred tax liabilities, non-current | $ | 77.9 |  |  | $ | 60.3 |
(1)During the year ended December 31, 2022, we recognized additional valuation allowances of $4.8 million relating primarily to the 2022 results of certain our worldwide entities and released valuation allowances totaling $18.4 million relating to certain of our non-US entities. As of December 31, 2022 and 2021, we had gross net operating losses ("NOLs") of approximately $455.7 million and $402.5 million, respectively. The NOLs as of December 31, 2022 originated in various U.S. states and non-U.S. countries. We have recorded a deferred tax asset of $56.7 million reflecting the benefit of the NOL carryforward as of December 31, 2022. This deferred tax asset expires as follows (in millions):
Net Operating Loss | Expiration Date | Deferred Tax Asset
US States | 2023-2042 | $ | 12.2 |
US States | Indefinite | 4.3 |
Foreign | 2023-2042 | 4.7 |
Foreign | Indefinite | 35.4 |
Total |  | $ | 56.7 |
We assessed the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. On the basis of this evaluation, as of December 31, 2022, a valuation allowance of $26.1 million was recorded to recognize the deferred tax assets that are more likely than not to be realized, $17.5 million of which relates to the deferred tax asset for NOLs. The amount of the deferred tax asset considered realizable could be adjusted if estimates of future taxable income during the carryforward period change or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as growth projections. We have operated under a special income tax concession in Singapore since 2008, which is subject to renewal. Our current five-year income tax concession period ended on December 31, 2022 and was renewed for an additional five-year period beginning January 1, 2023. It remains conditional upon our meeting certain employment and investment thresholds which, if not met in accordance with our agreement, may eliminate the benefit beginning with the first year in which the conditions are not satisfied. The income tax concession reduces the income tax rate on qualified sales and derivative gains and losses. The increase (decrease) to our foreign income taxes from the Singapore tax concession was as follows (in millions, except per share amounts):
| Year Ended December 31,
| 2022 |  | 2021 |  | 2020
Singapore tax concession impact on foreign income tax | $ | (3.3) |  |  | $ | (1.1) |  |  | $ | (2.4) |
Impact on basic earnings per share | $ | (0.05) |  |  | $ | (0.02) |  |  | $ | (0.04) |
Impact on diluted earnings per share | $ | (0.05) |  |  | $ | (0.02) |  |  | $ | (0.04) |
Income Tax Contingencies During the year ended December 31, 2022, we recorded a net decrease of Unrecognized Tax Liabilities of $7.0 million and a net decrease to Unrecognized Tax Assets of $5.6 million. In addition, during the year ended December 31, 2022, we recorded a decrease of $2.9 million to our Unrecognized Tax Liabilities related to a foreign currency translation gain, which is included in Other income (expense), net, in the accompanying Consolidated Statements of Income and Comprehensive Income. As of December 31, 2022, our Unrecognized Tax Liabilities, including penalties and interest, were $93.5 million and our Unrecognized Tax Assets were $18.2 million. During the year ended December 31, 2021, we recorded a net decrease of $3.1 million of liabilities related to Unrecognized Tax Liabilities and a net decrease of $1.6 million in assets related to Unrecognized Tax Assets. In addition, during the year ended December 31, 2021, we recorded a decrease of $3.8 million to our Unrecognized Tax Liabilities related to a foreign currency translation gain, which is included in Other income (expense), net, in the accompanying Consolidated Statements of Income and Comprehensive Income. As of December 31, 2021, our Unrecognized Tax Liabilities, including penalties and interest, were $98.2 million and our Unrecognized Tax Assets were $23.9 million. The following is a tabular reconciliation of the total amounts of gross Unrecognized Tax Liabilities for the year (in millions):
| 2022 |  | 2021 |  | 2020
Gross Unrecognized Tax Liabilities – opening balance | $ | 75.1 |  |  | $ | 78.2 |  |  | $ | 66.5 |
Gross increases – tax positions in prior period | 2.2 |  |  | 2.4 |  |  | 4.8 |
Gross decreases – tax positions in prior period | (8.0) |  |  | (6.1) |  |  | (0.5) |
Gross increases – tax positions in current period | 2.0 |  |  | 3.5 |  |  | 12.3 |
Settlements | (1.6) |  |  | — |  |  | (0.1) |
Payments | 1.6 |  |  | — |  |  | — |
Lapse of statute of limitations | (3.3) |  |  | (2.9) |  |  | (4.8) |
Gross Unrecognized Tax Liabilities – ending balance | $ | 68.1 |  |  | $ | 75.1 |  |  | $ | 78.2 |
If our gross Unrecognized Tax Liabilities, net of our Unrecognized Tax Assets of $18.2 million, as of December 31, 2022, are settled by the taxing authorities in our favor or otherwise resolved, our income tax expense would be reduced by $49.8 million (exclusive of interest and penalties) in the period the matter is considered settled or resolved in accordance with ASC 740. This would have the impact of reducing our 2022 effective income tax rate by 34.2%. As of December 31, 2022, it is reasonably possible that approximately $4.0 million of our unrecognized income tax liabilities may decrease within the next twelve months. We record accrued interest and penalties related to unrecognized income tax benefits as income tax expense. Related to the uncertain income tax benefits noted above, for interest we recorded expense of $2.0 million, $2.6 million and $3.1 million during the years ended December 31, 2022, 2021, and 2020, respectively. For penalties, we recorded expense of $0.3 million, income of $0.3 million, and expense of $0.2 million during the years ended December 31, 2022, 2021, and 2020, respectively. As of December 31, 2022 and 2021, we had recognized liabilities of $20.8 million and $18.8 million for interest and $4.6 million and $4.3 million for penalties, respectively. We have various tax returns under examination both in the U.S. and foreign jurisdictions. The most material of these is in Denmark for the 2013 - 2019 tax year where one of our subsidiaries has been under audit since 2018. Through the year ended December 31, 2022, we have received final tax assessments for the 2013 and 2014 tax years that were immaterial, a proposed tax assessment for the 2015 tax year of approximately $13.8 million (DKK 96.1 million), and proposed tax assessments for the 2016 and 2017 tax years of approximately $19.3 million (DKK 133.8 million) and $22.4 million (DKK 155.5 million), respectively. We believe these assessments are without merit and are vigorously defending against the actions. We have not yet received any proposed assessments related to the 2018 - 2019 tax years, which could be materially larger than the previous assessments if a similar methodology is applied. During the year ended December 31, 2022, we agreed to a settlement for the 2011 to 2014 tax years of the Korean branch of one of our subsidiaries for approximately $1.6 million (KRW 2.0 billion), including tax, interest, and penalties. The income tax examination for these years is now closed. The U.S. IRS examination for our 2019 tax year was closed during the year ended December 31, 2022, without any adjustments. We have not yet received notification that the examinations of our 2017 and 2018 tax years are closed but do not anticipate any changes from what we agreed in 2022. An unfavorable resolution of one or more of the above matters could have a material adverse effect on our operating results or cash flows in the quarter or year in which the adjustments are recorded, or the tax is due or paid. As examinations are still in process or have not yet reached the final stages of the appeals process, the timing of the ultimate resolution or payments that may be required cannot be determined at this time. In many cases, our uncertain tax positions are related to tax years that remain subject to examination by the relevant taxing authorities. The following table summarizes open tax years by major jurisdiction:
| Open Tax Year
Jurisdiction | Examination in progress |  | Examination not yet initiated
Denmark | 2013 - 2019 |  | 2020 - 2022
United States | None |  | 2020 - 2022
United Kingdom | None |  | 2020 - 2022
Singapore | None |  | 2018 - 2022
Other non-U.S. | None |  | 2013 - 2022

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI https://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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