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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | 13. Income Taxes Income (loss) from continuing operations before income taxes for the years ended December 31, 2019, 2018 and 2017 is summarized as follows:
|  | 2019 |  |  | 2018 |  |  | 2017 |
Income (loss) from continuing operations before income taxes: |  |  |  |  |  |  |  |  |  |  |  |
U.S. |  | $ | (10.0 | ) |  | $ | (76.4 | ) |  | $ | (98.5 | )
Non-U.S. |  |  | 69.0 |  |  |  | 4.7 |  |  |  | 59.0 |
Total |  | $ | 59.0 |  |  | $ | (71.7 | ) |  | $ | (39.5 | )
Income tax provision (benefit) for the years ended December 31, 2019, 2018 and 2017 is summarized as follows:
|  | 2019 |  |  | 2018 |  |  | 2017 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
U.S. Federal and state |  | $ | (0.7 | ) |  | $ | (7.3 | ) |  | $ | (12.8 | )
Non-U.S. |  |  | 11.6 |  |  |  | 13.6 |  |  |  | 7.4 |
Total current |  | $ | 10.9 |  |  | $ | 6.3 |  |  | $ | (5.4 | )
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
U.S. Federal and state |  | $ | 0.2 |  |  | $ | (6.2 | ) |  | $ | (7.0 | )
Non-U.S. |  |  | 1.3 |  |  |  | (4.9 | ) |  |  | (37.1 | )
Total deferred |  | $ | 1.5 |  |  | $ | (11.1 | ) |  | $ | (44.1 | )
Income tax provision (benefit) |  | $ | 12.4 |  |  | $ | (4.8 | ) |  | $ | (49.5 | )
The U.S. federal statutory income tax rate is reconciled to the Company’s effective income tax rate for continuing operations for the years ended December 31, 2019, 2018 and 2017 as follows:
|  | 2019 |  |  | 2018 |  |  | 2017 |
U.S. federal income tax at statutory rate |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 35.0 | %
U.S. state income tax provision |  |  | (0.2 | ) |  |  | 4.3 |  |  |  | 16.3 |
Manufacturing & research incentives |  |  | (5.2 | ) |  |  | 2.4 |  |  |  | 7.9 |
Taxes on non-U.S. income which differ from the U.S. statutory rate |  |  | (4.4 | ) |  |  | (3.2 | ) |  |  | 41.5 |
Adjustments for unrecognized tax benefits |  |  | (2.2 | ) |  |  | 9.6 |  |  |  | 0.5 |
Adjustments for valuation allowances |  |  | 7.6 |  |  |  | (1.8 | ) |  |  | 287.7 |
U.S. Tax Reform |  |  | 6.9 |  |  |  | 2.5 |  |  |  | (228.3 | )
Goodwill impairment |  |  | — |  |  |  | (24.6 | ) |  |  | — |
Other items |  |  | (2.5 | ) |  |  | (3.6 | ) |  |  | (35.4 | )
Effective income tax rate |  |  | 21.0 | % |  |  | 6.6 | % |  |  | 125.2 | %
On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (the “Tax Reform Act”). This legislation significantly changed U.S. tax law by, among other things, lowering corporate income tax rates, and imposing a repatriation tax on deemed repatriated earnings of non-U.S. subsidiaries. The Tax Reform Act permanently reduced the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. The Tax Reform Act provided for a one-time deemed mandatory repatriation of post-1986 undistributed foreign subsidiary earnings and profits through the year ended December 31, 2017. The Transition Tax, which was completed in 2018, resulted in recording a total Transition Tax obligation of $57.2 million, however there was no U.S. cash tax impact due to net operating loss utilization. On January 15, 2019, the U.S. Treasury released final regulations under amended Internal Revenue Code Section 965. The Company accounted for the effects of the new regulations during the first quarter of 2019, the period in which the regulations were issued. There was no material change resulting from application of the new regulations. Beginning in 2018, the Tax Reform Act includes two new U.S. corporate tax provisions, the global intangible low-taxed income (“GILTI”) and the base-erosion and anti-abuse tax (“BEAT”) provisions. The GILTI provision requires the Company to include in its U.S. income tax return non-U.S. subsidiary earnings in excess of an allowable return on the non-U.S. subsidiary’s tangible assets. The Company has elected to treat GILTI as a period cost. The BEAT provision in the Tax Reform Act eliminate s the deduction of certain base-erosion payments made to related non-U.S. corporat ions, and impose s a minimum tax if the amount is greater than the regular tax. The Company evaluated the GILTI and BEAT provisions, resulting in no financial statement impact for the year ended December 31, 201 9, and $0.0 and $0.4 million, respectively, for the year ended December 31, 2018. While GILTI result ed in an inclusion of non-U.S. earnings of $19.9 and $30.4 million, respectively, for the years ended December 31, 2019 and 2018, because of the Company’s net operating losses and valuation allowance, there was no net financial statement impact. The 2019 and 2018 effective tax rates were favorably impacted by income earned in jurisdictions where the statutory rate was less than the federal income tax rate of 21%. The 2017 effective tax rates were favorably impacted by income earned in jurisdictions where the statutory rate was less than the federal income tax rate of 35%. The rate reconciling items included above, when adjusted for actual dollar values, are consistent with prior year. The percentage impact is higher in 2017 due to the lower consolidated pretax loss and the higher 2017 U.S. federal rate. As of each reporting date, the Company's management considers new evidence, both positive and negative, that could impact management's view with regard to future realization of deferred tax assets. The Company has recorded valuation allowances on the deferred tax assets in Brazil, China Leasing, Germany, India, Netherland Antilles, U.K., and the U.S. as it is more likely than not that they will not be utilized. During 2018, the Company partially released the valuation allowance in the U.K. resulting in a $12.3 million tax benefit. The 2018 tax provision was impacted by a net increase of $1.3 million primarily related to additional valuation allowances recorded in the U.S., partially offset by the U.K. valuation allowance release noted above. The 2019 tax provision was impacted by a net increase of $4.5 million related to additional valuation allowances recorded in the various jurisdictions noted above. The Company will continue to periodically evaluate its valuation allowance requirements in light of changing facts and circumstances and may adjust its deferred tax asset valuation allowances accordingly. It is reasonably possible that the Company will either add to or reverse a portion of its existing deferred tax asset valuation allowances in the future. Such changes in the deferred tax asset valuation allowances will be reflected in the current operations through the Company’s income tax provision and could have a material effect on operating results. For 2019, the only significant item included in Other items was the favorable resolution of the German income tax audit. For 2018, the only significant item included in Other items was the $1.7 million of deferred taxes related to the update of the Company’s permanent reinvestment of foreign earnings assertion (discussed further below). For 2017, the only significant item included in Other items was the IRS audit resolution. Temporary differences and carryforwards that give rise to deferred tax assets and liabilities include the following items:
|  | 2019 |  |  | 2018 |
Non-current deferred income tax assets (liabilities): |  |  |  |  |  |  |  |
Inventories |  | $ | 24.3 |  |  | $ | 22.7 |
Accounts receivable |  |  | (3.7 | ) |  |  | (4.2 | )
Property, plant and equipment |  |  | (8.2 | ) |  |  | (14.0 | )
Intangible assets |  |  | (34.1 | ) |  |  | (34.8 | )
Deferred employee benefits |  |  | 39.8 |  |  |  | 40.7 |
Product warranty reserves |  |  | 8.6 |  |  |  | 6.6 |
Product liability reserves |  |  | 3.0 |  |  |  | 4.0 |
Tax credits |  |  | 5.4 |  |  |  | 7.1 |
Loss and other tax attribute carryforwards |  |  | 125.7 |  |  |  | 137.8 |
Deferred revenue |  |  | 5.8 |  |  |  | 5.1 |
Other |  |  | 11.9 |  |  |  | 4.2 |
Total non-current deferred income tax assets |  |  | 178.5 |  |  |  | 175.2 |
Less valuation allowance |  |  | (157.1 | ) |  |  | (153.1 | )
Net deferred income tax assets, non-current |  | $ | 21.4 |  |  | $ | 22.1 |
The net deferred tax assets are reflected in the Consolidated Balance Sheets for the years ended December 31, 2019 and 2018 as follows:
|  | 2019 |  |  | 2018 |
Long-term income tax assets, included in other non-current assets |  | $ | 26.9 |  |  | $ | 27.8 |
Long-term deferred income tax liability |  |  | (5.5 | ) |  |  | (5.7 | )
Net deferred income tax asset |  | $ | 21.4 |  |  | $ | 22.1 |
With the enactment of the Tax Reform Act, the Company believes that its offshore cash can be accessed in a more tax efficient manner. Therefore, in 2018, the Company updated its assertion that foreign earnings are permanently reinvested such that jurisdictions where cash can be tax efficiently repatriated are no longer permanently reinvested. As of December 31, 2019, $1.8 million of deferred taxes were provided on approximately $255.3 million of unremitted earnings of non-U.S. subsidiaries that may be remitted to the U.S. As of December 31, 2018, $1.7 million of deferred taxes were provided on approximately $322.0 million of unremitted earnings of Non-U.S. subsidiaries that may be remitted to the U.S. The Company has approximately $430.9 million of additional unremitted earnings of non-U.S. subsidiaries for which it has not currently provided deferred taxes, as of December 31, 2019. These earnings, if repatriated to the U.S., would not result in a material tax expense. As of December 31, 2017, the Company did not record a deferred tax liability related to its non-U.S. earnings that could have been remitted. Because of immateriality, the associated deferred tax liability is included with other items on the schedule of temporary differences and carryforwards above. The Company has approximately $39.5 million of interest expense carryforwards that is not subject to any time restrictions for future use. The utilization of the interest expense carryforwards is annually limited to 30% of adjusted taxable income. The carryforward is offset by a valuation allowance. The Company has approximately $677.4 million of U.S. state net operating loss carryforwards, which are available to reduce future U.S. state tax liabilities. These U.S. state net operating loss carryforwards expire at various times through 2039. The Company has recorded a full valuation allowance related to the U.S. state net operating losses. The Company has approximately $327.2 million of non-U.S. loss carryforwards, which are available to reduce future non-U.S. tax liabilities. Substantially all of the non-U.S. loss carryforwards are not subject to any time restrictions on their future use, and $160.1 million are offset by a valuation allowance. The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, U.S. state and non-U.S. jurisdictions. The following table provides the open tax years for which the Company could be subject to income tax examination by the tax authorities in its major jurisdictions:
Jurisdiction |  | Open Years
U.S. Federal |  | 2016 — 2019
China |  | 2009 — 2019
France |  | 2016 — 2019
Germany |  | 2015 — 2019
Among other regular and ongoing examinations by U.S. federal, U.S. state and non- U.S. jurisdictions globally, the Company closed the audit with German tax authorities for calendar years 2011 to 2014. German tax authorities are scheduled to begin an audit of 2015 to 2017 in 2020. There have been no significant developments with respect to the Company’s ongoing tax audits in other jurisdictions. The Company regularly assesses the likelihood of an adverse outcome resulting from examinations to determine the adequacy of its tax reserves. As of December 31, 2019, the Company believes that it is more likely than not that the tax positions it has taken will be sustained upon the resolution of its audits resulting in no material impact on its consolidated financial position and the results of operations and cashflows. However, the final determination with respect to any tax audits, and any related litigation, could be materially different from the Company’s estimates and/or from its historical income tax provisions and accruals and could have a material effect on operating results and/or cashflows in the periods for which that determination is made. In addition, future period earnings may be adversely impacted by litigation costs, settlements, penalties, and/or interest assessments. During the years ended December 31, 2019, 2018 and 2017, the Company recorded a change to gross unrecognized tax benefits including interest and penalties of $1.7 million, $7.6 million, and $1.7 million, respectively. During the years ended December 31, 2019, 2018 and 2017, the Company recognized provision (benefit) for income taxes in the Consolidated Statements of Operations of $(0.3) million, $(1.0) million, and $0.3 million, respectively, for interest and penalties related to uncertain tax liabilities. As of December 31, 2019, 2018, and 2017, the Company has accrued interest and penalties of $6.4 million and $6.7 million, and $7.7 million, respectively. A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2019, 2018 and 2017 is as follows:
|  | 2019 |  |  | 2018 |  |  | 2017 |
Balance at beginning of year |  | $ | 12.8 |  |  | $ | 19.5 |  |  | $ | 21.5 |
Additions based on tax positions related to the current year |  |  | 0.5 |  |  |  | 0.3 |  |  |  | 0.9 |
Additions for tax positions of prior years |  |  | 0.3 |  |  |  | 0.5 |  |  |  | 4.9 |
Reductions for tax positions of prior years |  |  | — |  |  |  | (1.7 | ) |  |  | (0.5 | )
Reductions based on settlements with taxing authorities |  |  | (0.6 | ) |  |  | (0.6 | ) |  |  | (6.7 | )
Reductions for lapse of statute |  |  | (1.5 | ) |  |  | (5.2 | ) |  |  | (0.6 | )
Balance at end of year |  | $ | 11.5 |  |  | $ | 12.8 |  |  | $ | 19.5 |
Approximately $7.2 million, $7.2 million, and $13.1 million of the Company’s unrecognized tax benefits as of December 31, 2019, 2018, and 2017, respectively, would impact the effective tax rate. During the next twelve months, the unrecognized tax benefits are not expected to significantly increase or decrease because the Company’s tax positions are sustained on audit or settled, or the applicable statute of limitations closes.

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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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