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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes
10. Income Taxes
Income Tax Provision (Benefit)
U.S. and foreign income before income taxes consist of the following (in millions):
Year Ended December 31,
202320222021
United States$(34.8)$(90.3)$(47.7)
Foreign101.5 235.4 147.8 
Income (loss) before income taxes$66.7 $145.1 $100.0 
Our total income tax provision (benefit) related to income before income taxes consists of the following components (in millions):
Year Ended December 31,
202320222021
Current:
U.S. federal statutory tax$8.9 $4.2 $4.4 
State2.4 2.2 1.4 
Foreign23.4 42.9 22.4 
Current income tax expense (benefit)34.8 49.2 28.2 
Deferred:
U.S. federal statutory tax(12.7)(4.6)2.2 
State(1.1)0.6 2.7 
Foreign(16.9)(14.5)(12.5)
Deferred income tax expense (benefit)(30.7)(18.5)(7.6)
Non-current tax expense (income) (1)
8.9 (1.5)5.3 
Total provision for income taxes$13.0 $29.2 $25.8 
(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.
Income Tax Rate Reconciliation
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,
202320222021
Tax provision based on U.S. federal statutory tax rate$14.0 $30.5 $21.0 
Foreign rates varying from federal statutory tax rate(1.5)(5.4)(10.3)
State income taxes, net of U.S. federal income tax benefit7.5 0.7 1.8 
U.S. taxes on foreign earnings and other tax reform impacts9.4 29.7 11.1 
Uncertain tax positions8.9 (1.5)5.3 
Statutory adjustments, including foreign currency and tax rate changes(9.2)(3.8)0.6 
Non-taxable interest income & non-deductible interest expense(3.3)2.1 (2.1)
Valuation allowances(10.9)(13.3)(6.6)
Non-deductible officer compensation1.8 1.0 1.5 
Withholding tax
8.0 7.8 6.2 
Foreign tax credit(13.2)(25.0)(5.6)
Other
1.5 6.6 2.9 
Total provision for income taxes$13.0 $29.2 $25.8 
For the year ended December 31, 2023, our income tax provision was $13.0 million and our effective income tax rate was 19.5%. Our income tax provision for the year ended December 31, 2023 includes a net discrete income tax benefit of $5.4 million, which includes a benefit of $7.5 million related to the reversal of valuation allowances previously recorded against deferred tax assets of certain foreign subsidiaries and states, as well as a benefit of $4.8 million related to return-to-provision adjustments, partially offset by a net expense of $6.9 million related to the remeasurement of uncertain tax positions and other worldwide adjustments.
For the year ended December 31, 2022, our income tax provision was $29.2 million and our effective income tax rate was 20.2%. Our income tax provision for the year ended December 31, 2022 included a net discrete income tax benefit of $15.5 million, of which a benefit of $14.9 million related to the reversal of valuation allowances previously recorded against the deferred tax assets of certain foreign subsidiaries and a benefit of $2.7 million related to the remeasurement of uncertain tax positions, partially offset by other worldwide tax adjustments.
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, 2023, $1.1 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 $227.3 million in foreign withholding tax. We also have $724.1 million of accumulated foreign earnings that are actually or deemed repatriated, for which we have estimated the associated foreign withholding and state income tax effects to be $12.0 million for the year ended December 31, 2023.
Deferred Tax Assets and Liabilities
The temporary differences which comprise our net deferred tax liabilities are as follows (in millions):
As of December 31,
20232022
Gross Deferred Tax Assets:
Bad debt reserve and accrued expenses$15.8 $12.0 
Net operating loss69.1 56.7 
Accrued and other share-based compensation26.0 26.1 
U.S. foreign income tax credits15.8 8.3 
Interest expense limitations45.8 26.6 
Other7.1 7.2 
Total gross deferred tax assets179.6 136.8 
Less: Valuation allowance (1)
15.2 26.1 
Gross deferred tax assets, net of valuation allowance164.5 110.7 
Gross Deferred Tax Liabilities:  
Depreciation(32.2)(26.7)
Goodwill and intangible assets(84.4)(70.8)
Unrealized foreign exchange, derivatives, and cash flow hedges(6.7)(7.0)
Deferred tax costs on foreign unrepatriated earnings(12.0)(11.8)
Other(4.9)(4.3)
Total gross deferred tax liabilities(140.3)(120.6)
Net deferred tax liability$— $9.9 
Net deferred tax asset$24.2 $— 
Reported on the Consolidated Balance Sheets as:  
Other non-current assets for deferred tax assets, non-current$83.4 $68.0 
Non-current income tax liabilities, net for deferred tax liabilities, non-current$59.2 $77.9 
(1)During the year ended December 31, 2023, we recognized additional valuation allowances of $0.2 million relating primarily to the 2023 results of certain our worldwide entities and released valuation allowances totaling $11.1 million relating to certain of our US and non-US entities.
As of December 31, 2023 and 2022, we had gross net operating losses ("NOLs") of approximately $451.2 million and $455.7 million, respectively. The NOLs as of December 31, 2023 originated in various U.S. states and non-U.S. countries. We have recorded a deferred tax asset of $69.1 million reflecting the benefit of the NOL carryforward as of December 31, 2023. This deferred tax asset expires as follows (in millions):
Net Operating LossExpiration DateDeferred Tax Asset
US States2024-2043$8.5 
US StatesIndefinite3.8 
Foreign2024-20438.1 
ForeignIndefinite48.7 
Total$69.1 
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, 2023, a valuation allowance of $15.2 million exists on the deferred tax assets that are not expected to be realized, $9.6 million of which relates to the deferred tax asset for NOLs. The amount of the deferred tax asset considered realizable could be adjusted if estimates of future taxable income during the carryforward period change or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as growth projections.
Singapore Tax Concession
We have operated under a special income tax concession in Singapore since 2008, which is subject to renewal. Our current five-year income tax concession period ended on December 31, 2022 and was renewed for an additional five-year period beginning January 1, 2023. It remains conditional upon our meeting certain employment and investment thresholds which, if not met in accordance with our agreement, may eliminate the benefit beginning with the first year in which the conditions are not satisfied. The income tax concession reduces the income tax rate on qualified sales and derivative gains and losses.
The decrease to our foreign income taxes from the Singapore tax concession was as follows (in millions, except per share amounts):
Year Ended December 31,
202320222021
Singapore tax concession impact on foreign income tax$(2.1)$(3.3)$(1.1)
Impact on basic earnings per share$(0.03)$(0.05)$(0.02)
Impact on diluted earnings per share$(0.03)$(0.05)$(0.02)
Income Tax Contingencies
We record gross assets and liabilities for unrecognized income tax benefits ("Unrecognized Tax Assets" and "Unrecognized Tax Liabilities", respectively) in our Consolidated Balance Sheets.
During the year ended December 31, 2023, we recorded a net increase of Unrecognized Tax Liabilities of $5.0 million and a net increase to Unrecognized Tax Assets of $2.8 million. In addition, during the year ended December 31, 2023, we recorded an increase of $1.9 million to our Unrecognized Tax Liabilities related to a foreign currency translation loss, which is included in Other income (expense), net in the accompanying Consolidated Statements of Income and Comprehensive Income. As of December 31, 2023, our Unrecognized Tax Liabilities, including penalties and interest, were $106.4 million and our Unrecognized Tax Assets were $21.1 million.
During the year ended December 31, 2022, we recorded a net decrease of $7.0 million of liabilities related to Unrecognized Tax Liabilities and a net decrease of $5.6 million in assets related to Unrecognized Tax Assets. 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.
The following is a tabular reconciliation of the total amounts of gross Unrecognized Tax Liabilities for the year (in millions):
 202320222021
Gross Unrecognized Tax Liabilities – opening balance$68.1 $75.1 $78.2 
Gross increases – tax positions in prior period7.7 2.2 2.4 
Gross decreases – tax positions in prior period(0.4)(8.0)(6.1)
Gross increases – tax positions in current period1.4 2.0 3.5 
Settlements(0.5)(1.6)— 
Payments— 1.6 — 
Lapse of statute of limitations(3.2)(3.3)(2.9)
Gross Unrecognized Tax Liabilities – ending balance$73.1 $68.1 $75.1 
If our gross Unrecognized Tax Liabilities, net of our Unrecognized Tax Assets of $21.1 million, as of December 31, 2023, are settled by the taxing authorities in our favor or otherwise resolved, our income tax expense would be reduced by $52.0 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 2023 effective income tax rate by 78.6%. As of December 31, 2023, it is reasonably possible that approximately $4.5 million of our unrecognized income tax liabilities may decrease within the next twelve months due to the expiration of statutes of limitations.
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 $5.1 million, $2.0 million and $2.6 million during the years ended December 31, 2023, 2022, and 2021, respectively. For penalties, we recorded expense of $2.8 million, expense of $0.3 million, and income of $0.3 million during the years ended December 31, 2023, 2022, and 2021, respectively. As of December 31, 2023 and 2022, we had recognized liabilities of $25.9 million and $20.8 million for interest and $7.5 million and $4.6 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 years, where one of our subsidiaries has been under audit since 2018. Through December 31, 2023, 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 $14.2 million (DKK 96.1 million), and proposed tax assessments for the 2016 and 2017 tax years of approximately $19.8 million (DKK 133.8 million) and $23.0 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.
In April 2023, we received notification that the U.S. examinations of our 2017 and 2018 tax years are closed as expected. The U.S. IRS examination for our 2019 tax year was closed during the year ended December 31, 2022, without any adjustments.
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
JurisdictionExamination
in progress		Examination not
yet initiated
Denmark2013-20192020-2023
United StatesNone2020-2023
United KingdomNone2020-2023
SingaporeNone2020-2023
Other non-U.S.None2013-2023
On October 4, 2021, 136 members of the Organization for Economic Co-operation and Development (“OECD”) agreed to a global minimum tax rate of 15%. On December 20, 2021, OECD published its model rules on the agreed minimum tax known as the Global Anti-Base Erosion (“GloBE”) rules. The GloBE rules provide a framework for a coordinated multi-country system of taxation intended to ensure large multinational enterprise groups pay a minimum level of tax on the income arising in each of the jurisdictions where they operate. On December 14, 2022, the European Council approved its directive to implement Pillar Two of the GloBE rules regarding a 15% global minimum tax rate. Many EU countries have already indicated they plan to enact certain provisions of this directive as of January 1, 2024. In addition, many G20 nations have indicated their plan to follow the OECD guidance as early as January 1, 2024. Pillar Two legislation has been enacted or substantively enacted in certain jurisdictions in which the Company operates. The legislation will be effective for the Company’s financial year beginning January 1, 2024.
The assessment of the Company’s potential exposure to Pillar Two is based on the most recent tax filings, country-by-country reporting, and financial statements. While the Company has identified no material exposure from Pillar Two income taxes, we continue to assess the exposure and expects to complete the assessment in the first quarter of 2024.