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Income Taxes | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Earnings (loss) before taxes and equity in net earnings (loss) of affiliate for the years 2023, 2022 and 2021 were taxed under the following jurisdictions (in millions of dollars):
| 2023 |  | 2022 |  | 2021
Domestic | $ | 29.9 |  |  | $ | (39.4) |  |  | $ | 27.5 |
Foreign | (5.0) |  |  | (31.8) |  |  | 158.3 |
Total | $ | 24.9 |  |  | $ | (71.2) |  |  | $ | 185.8 |
The provision for income taxes was as follows (in millions of dollars):
| 2023 |  | 2022 |  | 2021
Current tax expense: |  |  |  |  |
U.S. federal | $ | 1.0 |  |  | $ | 1.3 |  |  | $ | 1.0 |
U.S. state and local | 2.5 |  |  | 1.4 |  |  | 2.1 |
Foreign | 9.9 |  |  | 61.5 |  |  | 10.4 |
Total current | 13.4 |  |  | 64.2 |  |  | 13.5 |
Deferred tax (benefit) expense: |  |  |  |  |
U.S. federal | (36.8) |  |  | (2.5) |  |  | (11.9) |
U.S. state and local | (3.6) |  |  | 0.7 |  |  | (0.7) |
Foreign | 15.5 |  |  | (70.3) |  |  | 34.2 |
Total deferred | (24.9) |  |  | (72.1) |  |  | 21.6 |
Total provision | $ | (11.5) |  |  | $ | (7.9) |  |  | $ | 35.1 |
Deferred income taxes reflect the temporary differences between the asset and liability basis for financial reporting purposes and the amounts used for income tax purposes, at the relevant tax rate. The deferred tax assets and liabilities are comprised of the following (in millions of dollars):
| 2023 |  | 2022
Fixed assets and right-of-use assets | $ | (19.0) |  |  | $ | (21.8) |
Intangible assets and goodwill | 19.0 |  |  | 20.7 |
Employee compensation and benefit plans | 71.5 |  |  | 62.0 |
Outside basis difference on held for sale assets | 34.7 |  |  | — |
Operating lease liabilities | 18.3 |  |  | 19.3 |
Loss carryforwards | 36.7 |  |  | 33.4 |
Credit carryforwards | 208.7 |  |  | 200.7 |
Other, net | 15.4 |  |  | 18.9 |
Valuation allowance | (60.5) |  |  | (34.0) |
Net deferred tax assets | $ | 324.8 |  |  | $ | 299.2 |
As of year-end 2023, the net deferred tax asset balance totaled $324.8 million with $321.1 million in deferred taxes, $4.1 million in assets held for sale (see Held for Sale footnote), and $0.4 million in other long-term liabilities in the consolidated balance sheet. As of year-end 2022, the net deferred tax asset balance totaled $299.2 million, with $299.7 million in deferred taxes and $0.5 million in other long-term liabilities in the consolidated balance sheet. The Company has U.S. general business credit carryforwards of $185.0 million which will expire from 2034 to 2043, foreign tax credit carryforwards of $23.5 million which will expire from 2026 to 2033 and minimal state and foreign credit carryforwards which are either indefinite or will expire from 2024 to 2043. The net tax effect of federal, state and foreign loss carryforwards at year-end 2023 totaled $36.7 million, which expire as follows (in millions of dollars):
Year |  | Amount
2024 - 2029 |  | 4.9
2030 - 2039 |  | 1.1
2040 - 2049 |  | 0.1
No expiration |  | 30.6
Total |  | 36.7
The Company has established a valuation allowance for certain loss carryforwards, future deductible items, outside basis differences, and for a portion of its U.S. foreign tax credit carryforwards. The increase in the valuation allowance in 2023 was primarily due to establishing a $19.1 million valuation allowance in the United Kingdom, establishing an $19.8 million valuation allowance on outside basis differences in held for sale assets, releasing a $5.6 million valuation allowance in Germany, and releasing $9.0 million of the valuation allowance on U.S. foreign tax credits. The United Kingdom valuation allowance resulted from restructuring the business in preparation for sale and will increase the gain on the transaction in the first quarter of 2024. The outside basis difference is on held for sale assets that will create a capital loss in the first quarter of 2024 and a valuation allowance has been established for the carry-forward portion. The partial release of the foreign tax credit valuation allowance is based on current information, which will continue to be monitored. A $14.5 million foreign tax credit valuation allowance will remain after the partial release. The valuation allowance is determined in accordance with the provisions of ASC 740, "Income Taxes," which requires an assessment of both negative and positive evidence when measuring the need for a valuation allowance. The Company’s recent losses in these jurisdictions, uncertainty of the ability to create future capital gains, and its recent lack of adequate U.S. foreign source income to fully utilize foreign tax credit carryforwards, represented sufficient negative evidence to require a valuation allowance under ASC 740. The Company intends to maintain a valuation allowance until sufficient positive evidence exists to support realization of the deferred tax assets. The differences between income taxes from continuing operations for financial reporting purposes and the U.S. statutory rate of 21% in 2023, 2022, and 2021 are as follows (in millions of dollars):
| 2023 |  | 2022 |  | 2021
Income tax based on statutory rate | $ | 5.2 |  |  | $ | (14.9) |  |  | $ | 39.0 |
State income taxes, net of federal benefit | (0.9) |  |  | 1.6 |  |  | 1.1 |
Foreign tax rate differential | 4.6 |  |  | 1.6 |  |  | 12.2 |
General business credits | (8.5) |  |  | (10.7) |  |  | (9.7) |
Life insurance cash surrender value | (6.5) |  |  | 7.8 |  |  | (5.2) |
Foreign items | 3.0 |  |  | 0.1 |  |  | 1.5 |
Foreign-derived intangible income deduction | (2.3) |  |  | (2.3) |  |  | (0.6) |
Sale of foreign subsidiaries | — |  |  | 3.9 |  |  | — |
Foreign business taxes | 1.1 |  |  | 1.8 |  |  | 2.1 |
Tax law change | — |  |  | — |  |  | (5.2) |
Change in deferred tax realizability | 4.4 |  |  | — |  |  | (0.7) |
Non-deductible expenses | 0.7 |  |  | — |  |  | 0.1 |
Uncertain tax positions | (0.3) |  |  | 0.1 |  |  | 0.2 |
Stock compensation | 0.7 |  |  | 0.6 |  |  | (0.4) |
Outside basis difference on held for sale assets | (13.1) |  |  | — |  |  | — |
Non-deductible goodwill impairment | — |  |  | 2.7 |  |  | — |
Other | 0.4 |  |  | (0.2) |  |  | 0.7 |
Total | $ | (11.5) |  |  | $ | (7.9) |  |  | $ | 35.1 |
Our tax benefit or expense is affected by recurring items, such as the amount of pretax income and its mix by jurisdiction, U.S. work opportunity credits and the change in cash surrender value of non-taxable investments in life insurance policies. It is also affected by discrete items that may occur in any given period but are not consistent from period to period, such as tax law changes or changes in judgment regarding the realizability of deferred tax assets. Several items have contributed to the variance in our income tax benefit or expense over the last three years. 2023 benefited from recording a $15.0 million federal and state benefit on the outside basis difference in held for sale assets, and a $6.5 million benefit from tax-exempt life insurance cash surrender value gains. 2022 benefited from lower pretax earnings, benefits of $16.9 million from changes in the fair value of the Company's investment in Persol Holdings and $7.1 million from the impairment of tax-deductible goodwill. These benefits were offset by a $7.8 million charge from tax exempt life insurance cash surrender value losses. Income tax expense for 2021 included charges of $37.3 million from changes in the fair value of the Company's investment in Persol Holdings and $4.8 million from the gain on insurance settlement, offset by benefits of $5.2 million from a change in tax rate in the United Kingdom and $5.2 million from tax exempt life insurance cash surrender value gains. General business credits primarily represent U.S. work opportunity credits. Foreign items include foreign tax credits, foreign non-deductible expenses and non-taxable income. Foreign business taxes include the French business tax and other taxes based on revenue less certain expenses and are classified as income taxes under ASC 740. Provision has not been made for additional income taxes on an estimated $48.1 million of foreign subsidiary undistributed earnings which are indefinitely reinvested. If these earnings were to be repatriated, the Company could be subject to foreign withholding tax, federal and state income tax, net of federal benefit, and income taxes on foreign exchange gains or losses, of $4.0 million. The new Organization for Economic Cooperation and Development (OECD) Pillar Two global minimum tax rules become effective in 2024 in several jurisdictions in which the Company does business. We do not expect a material impact to the Company based on current law and will continue to evaluate developments. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in millions of dollars):
| 2023 |  | 2022 |  | 2021
Balance at beginning of the year | $ | 0.5 |  |  | $ | 0.6 |  |  | $ | 0.5 |
Additions for prior years’ tax positions | 0.3 |  |  | — |  |  | 0.2 |
Reductions for prior years’ tax positions | — |  |  | — |  |  | — |
Additions for settlements | — |  |  | — |  |  | — |
Reductions for settlements | — |  |  | — |  |  | — |
Reductions for expiration of statutes | (0.2) |  |  | (0.1) |  |  | (0.1) |
Balance at end of the year | $ | 0.6 |  |  | $ | 0.5 |  |  | $ | 0.6 |
If the $0.6 million in 2023, $0.5 million in 2022 and $0.6 million in 2021 of unrecognized tax benefits were recognized, they would have a favorable effect of $0.5 million in 2023, $0.4 million in 2022 and $0.5 million in 2021 on income tax expense. The Company recognizes both interest and penalties as part of the income tax provision. The Company recognized expense of $0.1 million in 2023 for interest and penalties. The benefit recognized in 2022 was not significant. The Company recognized expense of $0.1 million in 2021 for interest and penalties. Accrued interest and penalties were $0.2 million at year-end 2023 and $0.1 million at year-end 2022. The Company files income tax returns in the U.S. and in various states and foreign countries. The tax periods open to examination by the major taxing jurisdictions to which the Company is subject include the U.S. for fiscal years 2020 forward, Canada for fiscal years 2016 forward, France for fiscal years 2014 forward, Netherlands for fiscal years 2017 forward, Portugal for fiscal years 2020 forward, Puerto Rico for fiscal years 2019 forward and Switzerland for fiscal years 2019 forward. The Company and its subsidiaries have various income tax returns in the process of examination. The unrecognized tax benefit and related interest and penalty balances include approximately $0.3 million for 2023, related to tax positions which are reasonably possible to change within the next twelve months due to income tax audits, settlements and statute expirations.

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