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Income Taxes | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | Note 14—Income taxes:
|  | Years ended December 31, |
|  | 2016 |  |  | 2017 |  |  | 2018 |
|  | (In millions) |
Pre-tax income (loss): |  |  |  |  |  |  |  |  |  |  |  |
United States |  | $ | (8.2 | ) |  | $ | 26.7 |  |  | $ | (22.5 | )
Non-U.S. subsidiaries |  |  | 47.8 |  |  |  | 265.1 |  |  |  | 258.7 |
Total |  | $ | 39.6 |  |  | $ | 291.8 |  |  | $ | 236.2 |
Expected tax expense (benefit) at U.S. federal statutory income tax rate of 35% in 2016 and 2017 and 21% in 2018 |  | $ | 13.8 |  |  | $ | 102.1 |  |  | $ | 49.6 |
Non-U.S. tax rates |  |  | (4.3 | ) |  |  | (13.1 | ) |  |  | 20.8 |
Incremental net tax expense (benefit) on earnings and losses of non-U.S. and non-tax group companies |  |  | 8.2 |  |  |  | 14.8 |  |  |  | (167.8 | )
Valuation allowance |  |  | (2.2 | ) |  |  | (205.4 | ) |  |  | — |
Transition tax |  |  | — |  |  |  | 76.2 |  |  |  | (2.1 | )
Global intangible low-tax income, net |  |  | — |  |  |  | — |  |  |  | 4.0 |
Change in federal tax rate |  |  | — |  |  |  | (77.1 | ) |  |  | 60.6 |
Change in state tax rate |  |  | — |  |  |  | — |  |  |  | (1.8 | )
U.S. state income taxes, net |  |  | 1.7 |  |  |  | 3.5 |  |  |  | .6 |
Adjustment to the reserve for uncertain tax positions, net |  |  | 7.2 |  |  |  | (18.2 | ) |  |  | 4.1 |
Nondeductible expenses |  |  | 1.9 |  |  |  | 2.2 |  |  |  | 3.0 |
Canada – Germany APA |  |  | — |  |  |  | — |  |  |  | (1.4 | )
U.S. – Canada APA |  |  | (3.4 | ) |  |  | — |  |  |  | — |
Domestic production activities deduction |  |  | (3.8 | ) |  |  | (3.8 | ) |  |  | — |
Other, net |  |  | (.5 | ) |  |  | (1.2 | ) |  |  | (.3 | )
Provision for income taxes (benefit) |  | $ | 18.6 |  |  | $ | (120.0 | ) |  | $ | (30.7 | )
Components of income tax expense (benefit): |  |  |  |  |  |  |  |  |  |  |  |
Currently payable (refundable): |  |  |  |  |  |  |  |  |  |  |  |
U.S. federal and state |  | $ | 35.5 |  |  | $ | 87.3 |  |  | $ | 34.1 |
Non-U.S. |  |  | 9.5 |  |  |  | 38.5 |  |  |  | 51.1 |
Total |  |  | 45.0 |  |  |  | 125.8 |  |  |  | 85.2 |
Deferred income taxes (benefit): |  |  |  |  |  |  |  |  |  |  |  |
U.S. federal and state |  |  | (29.1 | ) |  |  | (96.9 | ) |  |  | (145.5 | )
Non-U.S. |  |  | 2.7 |  |  |  | (148.9 | ) |  |  | 29.6 |
Total |  |  | (26.4 | ) |  |  | (245.8 | ) |  |  | (115.9 | )
Provision for income taxes (benefit) |  | $ | 18.6 |  |  | $ | (120.0 | ) |  | $ | (30.7 | )
Comprehensive provision for income taxes (benefit) allocable to: |  |  |  |  |  |  |  |  |  |  |  |
Income (loss) from continuing operations |  | $ | 18.6 |  |  | $ | (120.0 | ) |  | $ | (30.7 | )
Discontinued operations |  |  | (12.6 | ) |  |  | (67.1 | ) |  |  | 23.7 |
Retained earnings-change in accounting principle |  |  | — |  |  |  | — |  |  |  | 1.1 |
Other comprehensive income (loss): |  |  |  |  |  |  |  |  |  |  |  |
Marketable securities |  |  | 2.1 |  |  |  | 2.8 |  |  |  | — |
Currency translation |  |  | (3.4 | ) |  |  | 31.1 |  |  |  | (4.2 | )
Pension plans |  |  | (5.0 | ) |  |  | 8.6 |  |  |  | (4.7 | )
Other |  |  | (.5 | ) |  |  | (.6 | ) |  |  | (.4 | )
Interest rate swap |  |  | .2 |  |  |  | 1.6 |  |  |  | — |
Total |  | $ | (.6 | ) |  | $ | (143.6 | ) |  | $ | (15.2 | )
The amount shown in the above table of our income tax rate reconciliation for non-U.S. tax rates represents the result determined by multiplying the pre-tax earnings or losses of each of our non-U.S. subsidiaries by the difference between the applicable statutory income tax rate for each non-U.S. jurisdiction and the U.S. federal statutory tax rate of 35% and 21% in 2018. The amount shown on such table for incremental net tax (benefit) on earnings and losses on non-U.S. and non-tax group companies includes, as applicable, (i) deferred income taxes (or deferred income tax benefits) associated with the current-year change in the aggregate amount of undistributed earnings of our Chemicals Segment’s Canadian subsidiary and, beginning in 2018, the post-1986 undistributed earnings of our Chemicals Segment’s European subsidiaries (such post-1986 undistributed earnings were subject to a permanent reinvestment plan until December 31, 2017), (ii) current U.S. income taxes (or current income tax benefit), including U.S. personal holding company tax, as applicable, attributable to current-year income (losses) of one of Kronos’ non-U.S. subsidiaries, which subsidiary is treated as a dual resident for U.S. income tax purposes, to the extent the current-year income (losses) of such subsidiary is subject to U.S. income tax under the U.S. dual-resident provisions of the Internal Revenue Code, (iv) deferred income taxes associated with our direct investment in Kronos and (v) current and deferred income taxes associated with distributions and earnings from our investment in LandWell and BMI. The components of the net deferred tax liability at December 31, 2017 and 2018 are summarized below.
|  | December 31, |
|  | 2017 |  |  | 2018 |
|  | Assets |  |  | Liabilities |  |  | Assets |  |  | Liabilities |
|  | (In millions) |
Tax effect of temporary differences related to: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Inventories |  | $ | 3.3 |  |  | $ | (.8 | ) |  | $ | 4.7 |  |  | $ | (3.3 | )
Marketable securities |  |  | — |  |  |  | (25.4 | ) |  |  | — |  |  |  | (.2 | )
Property and equipment |  |  | .1 |  |  |  | (71.8 | ) |  |  | — |  |  |  | (69.0 | )
Accrued OPEB costs |  |  | 3.0 |  |  |  | — |  |  |  | 2.8 |  |  |  | — |
Accrued pension costs |  |  | 70.9 |  |  |  | — |  |  |  | 75.5 |  |  |  | — |
Accrued environmental liabilities |  |  | 28.8 |  |  |  | — |  |  |  | 35.8 |  |  |  | — |
Other deductible differences |  |  | 11.7 |  |  |  | — |  |  |  | 10.3 |  |  |  | — |
Other taxable differences |  |  | — |  |  |  | (14.0 | ) |  |  | — |  |  |  | (13.2 | )
Investments in subsidiaries and affiliates |  |  | 2.7 |  |  |  | (175.8 | ) |  |  | 2.6 |  |  |  | (58.8 | )
Tax on unremitted earnings of non-U.S. subsidiaries |  |  | — |  |  |  | (9.5 | ) |  |  | — |  |  |  | (11.3 | )
Tax loss and tax credit carryforwards |  |  | 116.2 |  |  |  | — |  |  |  | 93.9 |  |  |  | — |
Valuation allowance |  |  | (2.8 | ) |  |  | — |  |  |  | (10.0 | ) |  |  | — |
Adjusted gross deferred tax assets (liabilities) |  |  | 233.9 |  |  |  | (297.3 | ) |  |  | 215.6 |  |  |  | (155.8 | )
Netting of items by tax jurisdiction |  |  | (114.1 | ) |  |  | (114.1 | ) |  |  | (114.6 | ) |  |  | (114.6 | )
Net noncurrent deferred tax asset (liability) |  | $ | 119.8 |  |  | $ | (183.2 | ) |  | $ | 101.0 |  |  | $ | (41.2 | )
Tax authorities may in the future examine certain of our U.S. and non-U.S. tax returns and have or may propose tax deficiencies, including penalties and interest. Because of the inherent uncertainties involved in settlement initiatives and court and tax proceedings, we cannot guarantee that these tax matters will be resolved in our favor, and therefore our potential exposure, if any, is also uncertain. Our Chemicals Segment has substantial net operating loss (NOL) carryforwards in Germany (the equivalent of $541 million for German corporate purposes and in Belgium (the equivalent of $16 million for Belgian corporate tax purposes at December 31, 2018), all of which have an indefinite carryforward period. As a result, we have net deferred income tax assets with respect to these two jurisdictions, primarily related to these NOL carryforwards. The German corporate tax is similar to the U.S. federal income tax, and the German trade tax is similar to the U.S. state income tax (our Chemicals Segment’s German trade tax NOLs were fully utilized as of December 31, 2018). Prior to 2017, we concluded that we were required to recognize a non-cash deferred income tax asset valuation allowance under the more-likely-than-not recognition criteria with respect to our Chemicals Segment’s German and Belgian net deferred income tax assets. At December 31, 2016 such valuation allowance aggregated $173 million ($153 million with respect to Germany and $20 million with respect to Belgium). During the first six months of 2017, we recognized an aggregate non-cash deferred income tax benefit of $12.7 million as a result of a net decrease in such deferred income tax asset valuation allowance, due to utilizing a portion of both the German and Belgian NOL during the period. At June 30, 2017, our Chemicals Segment concluded we had sufficient positive evidence under the more-likely-than-not recognition criteria to support reversal of the entire valuation allowance related to our German and Belgian operations. In accordance with the ASC 740-270 guidance regarding accounting for income taxes at interim dates, the amount of the valuation allowance reversed at June 30, 2017 ($149.9 million, of which $141.9 million related to Germany and $8.0 million related to Belgium) associated with our Chemicals Segment’s change in judgment at that date regarding the realizability of the related deferred income tax asset as it relates to future years (i.e. 2018 and after). A change in judgment regarding the realizability of deferred tax assets as it relates to the current year is considered in determining the estimated annual effective tax rate for the year and is recognized throughout the year, including interim periods subsequent to the date of the change in judgment. Accordingly, our income tax benefit in calendar year 2017 included an aggregate non-cash deferred income tax benefit of $186.7 million associated with the reversal of the German and Belgian valuation allowance, comprised of $12.7 million recognized in the first half of 2017 (noted above) associated with the utilization of a portion of both the German and Belgian NOLs during such period, $149.9 million related to the portion of the valuation allowance reversed as of June 30, 2017 and $24.1 million recognized in the second half of 2017 associated with the utilization of a portion of both the German and Belgian NOLs during such period. Our deferred income tax asset valuation allowance increased $13.7 million in 2017 as a result of changes in currency exchange rates, which increase was recognized as part of other comprehensive income (loss). On December 22, 2017, the 2017 Tax Act was enacted into law. This new tax legislation, among other changes, (i) reduces the U.S. Federal corporate income tax rate from 35% to 21% effective January 1, 2018; (ii) implements a territorial tax system and imposes a one-time repatriation tax (Transition Tax) on the deemed repatriation of the post-1986 undistributed earnings of non-U.S. subsidiaries accumulated up through December 31, 2017, regardless of whether such earnings are repatriated; (iii) eliminates U.S. tax on future non-U.S. earnings (subject to certain exceptions); (iv) eliminates the domestic production activities deduction beginning in 2018; (v) eliminates the net operating loss carryback and provides for an indefinite carryforward period subject to an 80% annual usage limitation; (vi) allows for the expensing of certain capital expenditures; (vii) imposed GILTI beginning in 2018; (viii) imposed a base erosion anti-abuse tax (BEAT) beginning in 2018; and (ix) amended the rules limiting the deduction for business interest expense beginning in 2018. Following the enactment of the 2017 Tax Act, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) 118 to provide guidance on the accounting and reporting impacts of the 2017 Tax Act. SAB 118 states that companies should account for changes related to the 2017 Tax Act in the period of enactment if all information is available and the accounting can be completed. In situations where companies do not have enough information to complete the accounting in the period of enactment, a company must either 1) record an estimated provisional amount if the impact of the change can be reasonably estimated; or 2) continue to apply the accounting guidance that was in effect immediately prior to the 2017 Tax Act if the impact of the change cannot be reasonably estimated. If estimated provisional amounts are recorded, SAB 118 provides a measurement period of no longer than one year during which companies should adjust those amounts as additional information becomes available in the reporting period within the measurement period in which such adjustment is determined. Under GAAP, we were required to revalue our net deferred tax asset associated with our U.S. net deductible temporary differences in the period in which the new tax legislation was enacted based on deferred tax balances as of the enactment date, to reflect the effect of such reduction in the corporate income tax rate. Our temporary differences as of December 31, 2017 were not materially different from our temporary differences as of the enactment date, accordingly revaluation of our net deductible temporary differences was based on our net deferred tax assets as of December 31, 2017. Such revaluation was recognized in continuing operations and was not material to us. Such revaluation resulted in a provisional non-cash deferred income tax benefit of $77.1 million recognized as of December 31, 2017 in continuing operations, reducing our net deferred income tax liability. The amounts recorded as of December 31, 2017 as a result of the 2017 Tax Act represented estimates based on information currently available. During the third quarter of 2018, in conjunction with finalizing our federal income tax return we were able to obtain, prepare and analyze the necessary information to complete the accounting under ASC 740 related to the revaluation of our net deferred tax liability associated with our U.S. net taxable temporary differences as of December 31, 2017, which resulted in a measurement period adjustment and recognition of a non-cash deferred income tax expense of $59.7 million, decreasing the provisional amount recognized at December 31, 2017. Such adjustment is almost entirely attributable to the re-measurement of our deferred income taxes with respect to the excess of the financial reporting carrying amount over the income tax basis of our direct investment in Kronos common stock discussed below. Accordingly, we completed our analysis related to such revaluation as of September 30, 2018. Under GAAP, we were required to revalue our net deferred tax asset associated with our U.S. net deductible temporary differences in the period in which the new tax legislation is enacted based on deferred tax balances as of the enactment date, to reflect the effect of such reduction in the corporate income tax rate. Our temporary differences as of December 31, 2017 were not materially different from our temporary differences as of the enactment date, accordingly revaluation of our net deductible temporary differences was based on our net deferred tax assets as of December 31, 2017. Such revaluation was recognized in continuing operations and was not material to us. Prior to the enactment of the 2017 Tax Act, the undistributed earnings of our Chemicals Segment’s European subsidiaries were deemed to be permanently reinvested (we had not made a similar determination with respect to the undistributed earnings of our Chemicals Segment’s Canadian subsidiary). Pursuant to the Transition Tax provisions imposing a one-time repatriation tax on post-1986 undistributed earnings, we recognized a provisional current income tax expense of $76.2 million in the fourth quarter of 2017. The amounts recorded as of December 31, 2017 as a result of the 2017 Tax Act represented estimates based on information available at that date. We elected to pay such tax over an eight year period beginning in 2018, including approximately $6.1 million which was paid in April 2018 (for the 2017 tax year) and $5.8 million which was paid in 2018 (for the 2018 tax year). During the third quarter of 2018, in conjunction with finalizing our federal income tax return and based on additional information that became available (including proposed regulations issued by the IRS in August 2018 with respect to the Transition Tax), we recognized a provisional income tax benefit of $2.1 million which amount is recorded as a measurement-period adjustment, reducing the provisional income tax expense of $76.2 million recognized in the fourth quarter of 2017. As a result, at December 31, 2018, taking into account the prior Transition Tax installments payments of $11.9 million (noted above), the balance of our unpaid Transition Tax aggregates $62.2 million, which will be paid in quarterly installments over the remainder of the eight year period. Of such $62.2 million, $56.3 million is recorded as a noncurrent payable to affiliate (income taxes payable to Contran) classified as a noncurrent liability in our Consolidated Balance Sheet, and $5.9 million is included with our current payable to affiliate (income taxes payable to Contran) classified as a current liability (a portion of our noncurrent income tax payable to affiliate was reclassified to our current payable to affiliate for the portion of our 2019 Transition Tax installment due within the next twelve months). We have completed our analysis of the Transition Tax provisions within the prescribed measurement period ending December 22, 2018 pursuant to the guidance under SAB 118. Prior to the enactment of the 2017 Tax Act the undistributed earnings of our Chemicals Segment’s European subsidiaries were deemed to be permanently reinvested (we had not made a similar determination with respect to the undistributed earnings of our Chemicals Segment’s Canadian subsidiary). As a result of the implementation of a territorial tax system under the 2017 Tax Act, effective January 1, 2018, and the Transition Tax which in effect taxes the post-1986 undistributed earnings of our non-U.S. subsidiaries accumulated up through December 31, 2017, we have now determined that all of the post-1986 undistributed earnings of our European subsidiaries are not permanently reinvested. Accordingly, in the fourth quarter of 2017 we recognized an aggregate provisional non-cash deferred income tax expense of $5.3 million based on our reasonable estimates of the U.S. state and non-U.S. income tax and withholding tax liability attributable to all of such previously-considered permanently reinvested undistributed earnings through December 31, 2017. The amounts recorded as of December 31, 2017 as a result of the 2017 Tax Act represented estimates based on information available at that date. We have not made any measurement-period adjustments to the provisional amounts recorded at December 31, 2017 for this item during 2018 because no new information became available during the period that required an adjustment. However, we recorded a non-cash deferred income tax expense of $1.8 million for the U.S. state and non-U.S. income tax and withholding tax liability attributable to the 2018 undistributed earnings of our Chemicals Segment’s non-U.S. subsidiaries in 2018, including withholding taxes related to the undistributed earnings of our Chemicals Segment’s Canadian subsidiary. We have completed our analysis as it relates to the implementation of a territorial tax system under the 2017 Tax Act within the prescribed measurement period ending December 22, 2018 pursuant to the guidance under SAB 118. Under U.S. GAAP, as it relates to the new GILTI tax rules, we are allowed to make an accounting policy choice of either (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”) or (2) factoring such amounts into the measurement of our deferred taxes (the “deferred method”). While our future global operations depend on a number of different factors, we do expect to have future U.S. inclusions in taxable income related to GILTI. We did not record any adjustment related to GILTI during the first nine months of 2018 based on our determination that the impact was not material, and based on the guidance available to us at the time. During the fourth quarter of 2018, and taking into consideration proposed regulations issued by the IRS in November 2018 with respect to various related U.S. tax credit provisions, we recognized a current cash income tax expense of $4.0 million for GILTI. In conjunction with the issuance of the proposed regulations, taking into consideration the complexities related to an election to recognize deferred taxes for basis differences that are expected to have a GILTI impact in future years, we have concluded that the appropriate accounting policy election for Kronos is to record GILTI tax as a current-period expense when incurred under the period cost method. As such, we have completed our policy election within the prescribed measurement period ended December 22, 2018 pursuant to the guidance under SAB 118. Similarly, we have evaluated the tax impact of BEAT, taking into consideration proposed regulations issued by the IRS in December 2018 with respect to BEAT, and determined that the tax law imposed under BEAT has no material impact to us as we have historically not entered into international payments between related parties that are unrelated to cost of goods sold. Our determinations under the GILTI, BEAT and related non-U.S. tax credit provisions are based on the relevant statutes and guidance provided under the proposed regulations. Given the complexity of the international provisions, it is possible that final regulations could differ from the proposed regulations and materially impact our determinations with respect to such items. Any material change will be recognized in the period in which the final regulations are published. Certain U.S. deferred tax attributes of one of our non-U.S. subsidiaries, which subsidiary is treated as a dual resident for U.S. income tax purposes, were subject to various limitations. As a result, we had previously concluded that a deferred income tax asset valuation allowance was required to be recognized with respect to such subsidiary’s U.S. net deferred income tax asset because such assets did not meet the more-likely-than-not recognition criteria primarily due to (i) the various limitations regarding use of such attributes due to the dual residency; (ii) the dual resident subsidiary had a history of losses and absent distributions from our non-U.S. subsidiaries, which were previously not determinable, such subsidiary was expected to continue to generate losses; and (iii) a limited NOL carryforward period for U.S. tax purposes. Because we had concluded the likelihood of realization of such subsidiary’s net deferred income tax asset was remote, we had not previously disclosed such valuation allowance or the associated amount of the subsidiary’s net deferred income tax assets (exclusive of such valuation allowance). Primarily due to changes enacted under the 2017 Tax Act, we concluded we had sufficient positive evidence under the more-likely-than-not recognition criteria to support reversal of the entire valuation allowance related to such subsidiary’s net deferred income tax asset, which evidence included, among other things, (i) the inclusion under Transition Tax provisions of significant earnings for U.S. income tax purposes which significantly and positively impacts the ability of such deferred tax attributes to be utilized by us; (ii) the indefinite carryforward period for U.S. net operating losses incurred after December 31, 2017; (iii) an expectation of continued future profitability for our U.S. operations; and (iv) a positive taxable income basket for U.S. tax purposes in excess of the U.S. deferred tax asset related to the U.S. attributes of such subsidiary. Accordingly, in the fourth quarter of 2017 we recognized an $18.7 million non-cash deferred income tax benefit as a result of the reversal of such valuation allowance. The 2017 Tax Act amended the rules limiting the deduction for business interest expense beginning in 2018. The limitation applies to all taxpayers and our annual deduction for business interest expense is limited to the sum of our business interest income and 30% of our adjusted taxable income as defined under the 2017 Tax Act. Any business interest expense not allowed as a deduction as a result of the limitation may be carryforward indefinitely and is treated as interest paid in the carryforward year subject to the respective year’s limitation. We have determined that our interest expense for 2018 is limited under these provisions, because of the loss we recognized on the sale of WCS for income tax purposes. We have concluded that we are required to recognize a non-cash deferred income tax asset valuation allowance under the more-likely-than-not recognition criteria with respect to a portion of our deferred tax asset attributable to the nondeductible amount of business interest expense carryforward. Consequently, our provision for income taxes in 2018 includes a non-cash deferred income tax expense of $6.8 million for the amount of such deferred income tax asset that we have determined does not meet the more-likely-than-not recognition criteria (the nondeductible portion of our business interest expense for the full year 2018 is higher than the amount recognized in the third quarter of 2018 primarily due to a decrease in our adjusted taxable income and depreciation expense as compared to our estimates at the end of the third quarter). In accordance with the ASC 740 guidance regarding intra-period allocation of income taxes, the full amount of non-cash deferred income tax expense is classified as part of the income taxes associated with the pre-tax gain we recognized for financial reporting purposes on the sale of WCS which is classified as part of discontinued operations (see Note 3 to our Consolidated Financial Statements and Discontinued Operations —Waste Control Specialists LLC). None of our U.S. and non-U.S. tax returns are currently under examination. As a result of prior audits in certain jurisdictions, which are now settled, in 2008 we filed Advance Pricing Agreement Requests with the tax authorities in the U.S., Canada and Germany. These requests have been under review with the respective tax authorities since 2008 and prior to 2016, it was uncertain whether an agreement would be reached between the tax authorities and whether we would agree to execute and finalize such agreements.
| • | During 2016, Contran, as the ultimate parent of our U.S. Consolidated income tax group, executed and finalized an Advance Pricing Agreement with the U.S. Internal Revenue Service and our Canadian subsidiary executed and finalized an Advance Pricing Agreement with the Competent Authority for Canada (collectively, the “U.S.-Canada APA”) effective for tax years 2005 - 2015. Pursuant to the terms of the U.S.-Canada APA, the U.S. and Canadian tax authorities agreed to certain prior year changes to taxable income of our U.S. and Canadian subsidiaries. As a result of such agreed-upon changes, we recognized a $3.4 million current U.S. income tax benefit in 2016. In addition, our Canadian subsidiary incurred a cash income tax payment of approximately CAD $3 million (USD $2.3 million) related to the U.S.-Canada APA, but such payment was fully offset by previously provided accruals, and such income tax was paid in the third quarter of 2017.
| • | During the third quarter of 2017, Kronos’ Canadian subsidiary executed and finalized an Advance Pricing Agreement with the Competent Authority for Canada (the “Canada-Germany APA”) effective for tax years 2005 - 2017. Pursuant to the terms of the Canada-Germany APA, the Canadian and German tax authorities agreed to certain prior year changes to taxable income of our Canadian and German subsidiaries. As a result of such agreed-upon changes, we reversed a significant portion of our reserve for uncertain tax positions and recognized a non-cash income tax benefit of $8.6 million related to such reversal ($8.1 million recognized in the third quarter of 2017). In addition, we recognized a $2.6 million non-cash income tax benefit related to an increase in our German NOLs and a $.6 million German cash tax refund related to the Canada-Germany APA in the third quarter of 2017.
| • | During the first quarter of 2018, Kronos’ German subsidiary executed and finalized the related Advance Pricing Agreement with the Competent Authority for Germany (the “Germany-Canada APA”) effective for tax years 2005 - 2017. In the first quarter of 2018, we recognized a net $1.4 million non-cash income tax benefit related to an APA tax settlement payment between Kronos’ German and Canadian subsidiaries.
We recognized a non-cash deferred income tax benefit of $1.8 million in 2018 related to a decrease in our effective state income tax rate; this decrease is a direct result of the sale of our interest in the Amalgamated Sugar Company LLC which will reduce the number of state jurisdictions in which we are required to file (our non-cash deferred tax benefit recognized for the full year 2018 is lower than the amount recognized in the third quarter of 2018 primarily due to a decrease in our estimate of taxable income as compared to our estimates at the end of the third quarter). We recognize deferred income taxes with respect to the excess of the financial reporting carrying amount over the income tax basis of our direct investment in Kronos common stock because the exemption under GAAP to avoid such recognition of deferred income taxes is not available to us. At December 31, 2017, we had recognized a deferred income tax liability with respect to our direct investment in Kronos of $157.6 million. There is a maximum amount (or cap) of such deferred income taxes we are required to recognize with respect to our direct investment in Kronos. The maximum amount of such deferred income tax liability we would be required to have recognized (the cap) is $155.4 million (the cap was reduced as a result of the decrease in our effective state tax rate in the third quarter of 2018 discussed above). During 2018, we recognized a non-cash deferred income tax expense with respect to our direct investment in Kronos of $4.9 million for the increase in the deferred income taxes required to be recognized with respect to the excess of the financial reporting carrying amount over the income tax basis of our direct investment in Kronos common stock, to the extent such increase related to our equity in Kronos’ net income during such period. We recognized a similar non-cash deferred income tax expense of $22.1 million in 2017 and $6.5 million in 2016. A portion of the net change with respect to the excess of the financial reporting carrying amount over the income tax basis of our direct investment in Kronos common stock during such periods related to our equity in Kronos’ other comprehensive income (loss) items, and the amounts shown in the table above for income tax expense (benefit) allocated to other comprehensive income (loss) items includes amounts related to our equity in Kronos’ other comprehensive income (loss) items. Due to uncertainties and complexities of the new legislation, we were still evaluating the impact of the one-time deemed repatriation of the post-1986 undistributed earnings of our non-U.S. subsidiaries up through December 31, 2017 as it relates to the income tax basis of our direct investment in Kronos at December 31, 2017. Our deferred income tax liability with respect to our direct investment in Kronos and the deferred income taxes recognized at December 31, 2017 represented our reasonable estimate and, in accordance with the guidance in SAB 118, such amounts were provisional and subject to adjustment as we obtain additional information and complete our analysis of the impact of the new legislation as it relates to the income tax basis of our direct investment in Kronos. During the third quarter of 2018, in conjunction with finalizing our federal income tax return and based on additional information that became available (including proposed regulations issued by the IRS in August 2018 with respect to the Transition Tax), we recognized an adjustment, which is treated as a measurement period adjustment, to the deferred income taxes we recognized at December 31, 2017 associated with our direct investment in Kronos common stock (before revaluation of our deferred tax liability related to the decrease in the corporate income tax rate). Such adjustment resulted in an investment basis adjustment under the income tax regulations which increased the income tax basis of our direct investment in Kronos attributable to the income recognition related to the deemed repatriation of the post-1986 undistributed earnings of our non-U.S. subsidiaries in 2017. Such adjustment resulted in a non-cash deferred tax measurement period adjustment decreasing the deferred income taxes we recognize with respect to the excess of the financial reporting carrying amount over the income tax basis of our direct investment in Kronos common stock. Including the impact of the non-cash deferred tax revaluation adjustment discussed above, we recognized a net non-cash deferred income tax benefit of $112 million in the third quarter of 2018 related to the incremental tax on Kronos. We completed our analysis related to the impact of the new legislation as it related to the income tax basis of our direct investment in Kronos as of September 30, 2018. We believe we have adequate accruals for additional taxes and related interest expense which could ultimately result from tax examinations. We believe the ultimate disposition of tax examinations should not have a material adverse effect on our consolidated financial position, results of operations or liquidity. The following table shows the changes in the amount of our uncertain tax positions (exclusive of the effect of interest and penalties) during 2016, 2017 and 2018:
|  | Years ended December 31, |
|  | 2016 |  |  | 2017 |  |  | 2018 |
|  | (In millions) |
Unrecognized tax benefits: |  |  |  |  |  |  |  |  |  |  |  |
Amount beginning of year |  | $ | 28.8 |  |  | $ | 35.6 |  |  | $ | 17.1 |
Net increase (decrease): |  |  |  |  |  |  |  |  |  |  |  |
Tax positions taken in prior periods |  |  | (.6 | ) |  |  | (13.3 | ) |  |  | 1.3 |
Tax positions taken in current period |  |  | 11.0 |  |  |  | 4.5 |  |  |  | 4.5 |
Lapse due to applicable statute of limitations |  |  | (1.6 | ) |  |  | (8.1 | ) |  |  | (1.8 | )
Settlement with taxing authorities |  |  | (2.3 | ) |  |  | (2.3 | ) |  |  | — |
Changes in currency exchange rates |  |  | .3 |  |  |  | .7 |  |  |  | (.1 | )
Amount at end of year |  | $ | 35.6 |  |  | $ | 17.1 |  |  | $ | 21.0 |
If our uncertain tax positions were recognized, a benefit of $19.1 million at December 31, 2018, would affect our effective income tax rate. We currently estimate that our unrecognized tax benefits will decrease by approximately $3.7 million, excluding interest, during the next twelve months related to the expiration of certain statutes of limitations. We and Contran file income tax returns in U.S. federal and various state and local jurisdictions. We also file income tax returns in various foreign jurisdictions, principally in Germany, Canada, Belgium and Norway. Our U.S. income tax returns prior to 2015 are generally considered closed to examination by applicable tax authorities. Our foreign income tax returns are generally considered closed to examination for years prior to: 2009 for Norway; 2013 for Canada; 2014 for Germany; and 2015 for Belgium. We accrue interest and penalties on our uncertain tax positions as a component of our provision for income taxes. We accrued interest and penalties of $1.6 million during 2016 and $2.1 million during 2017 and $1.3 million during 2018, and at December 31, 2017 and 2018 we had $1.5 million and $2.2 million, respectively, accrued for interest and an immaterial amount accrued for penalties for our uncertain tax positions.

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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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