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Income taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income taxes | Income taxes Following is the total income (loss) before income taxes and the provision (benefit) for income taxes for the three years ended December 31, 2019.
Year ended December 31, |  | 2019 |  |  | 2018 |  |  | 2017 |
Income (loss) before income taxes |  |  |  |  |  |
United States |  | $ | (48.1 | ) |  | $ | (53.6 | ) |  | $ | (152.7 | )
Foreign |  | 87.8 |  |  | 196.8 |  |  | 80.6 |
Total income (loss) before income taxes |  | $ | 39.7 |  |  | $ | 143.2 |  |  | $ | (72.1 | )
Provision for income taxes |  |  |  |  |  |
Current |  |  |  |  |  |
United States |  | $ | 7.6 |  |  | $ | 4.7 |  |  | $ | (42.8 | )
Foreign |  | 41.0 |  |  | 51.4 |  |  | 33.9 |
Total |  | 48.6 |  |  | 56.1 |  |  | (8.9 | )
Deferred |  |  |  |  |  |
Foreign |  | 4.4 |  |  | 8.2 |  |  | 3.4 |
Total provision (benefit) for income taxes |  | $ | 53.0 |  |  | $ | 64.3 |  |  | $ | (5.5 | )
Following is a reconciliation of the provision (benefit) for income taxes at the United States statutory tax rate to the provision for income taxes as reported:
Year ended December 31, |  | 2019 |  |  | 2018 |  |  | 2017 |
United States statutory income tax provision (benefit) |  | $ | 8.3 |  |  | $ | 30.1 |  |  | $ | (25.2 | )
Income and losses for which no provision or benefit has been recognized |  | 28.2 |  |  | 22.2 |  |  | 70.3 |
Foreign rate differential and other foreign tax expense |  | 3.2 |  |  | 9.5 |  |  | (11.3 | )
Income tax withholdings |  | 17.6 |  |  | 19.3 |  |  | 16.8 |
Permanent items |  | (2.5 | ) |  | (5.0 | ) |  | (3.0 | )
Enacted rate changes |  | 0.5 |  |  | (2.3 | ) |  | (0.4 | )
Change in uncertain tax positions |  | 0.2 |  |  | (1.2 | ) |  | 2.3 |
Change in valuation allowances due to changes in judgment |  | (2.3 | ) |  | (5.9 | ) |  | (4.6 | )
Income tax credits, U.S. |  | (0.2 | ) |  | (2.4 | ) |  | (50.4 | )
Provision (benefit) for income taxes |  | $ | 53.0 |  |  | $ | 64.3 |  |  | $ | (5.5 | )
The Tax Cuts & Jobs Act (TCJA) reduced the U.S. federal income tax rate from 35% to 21% effective January 1, 2018, with no net financial statement impact due to the valuation allowance recorded against all U.S. deferred tax assets. Included in 2017 was a benefit of $50.4 million principally related to the TCJA’s elimination of the corporate Alternative Minimum Tax (AMT) and refund of all remaining AMT credits. The 2018 provision for income taxes included $(2.2) million due to a reduction in the Netherlands income tax rate, which was enacted in the fourth quarter of 2018 and reduced the rate from 25% to 20.5% effective January 1, 2021. The tax effects of temporary differences and carryforwards that give rise to significant portions of deferred tax assets and liabilities at December 31, 2019 and 2018 were as follows:
As of December 31, |  | 2019 |  |  | 2018 |
Deferred tax assets |  |  |  |
Tax loss carryforwards |  | $ | 841.1 |  |  | $ | 860.0 |
Postretirement benefits |  | 434.4 |  |  | 440.3 |
Foreign tax credit carryforwards |  | 211.5 |  |  | 221.6 |
Other tax credit carryforwards |  | 30.3 |  |  | 29.8 |
Deferred revenue |  | 42.8 |  |  | 37.1 |
Employee benefits and compensation |  | 31.2 |  |  | 31.1 |
Purchased capitalized software |  | 31.2 |  |  | 22.9 |
Depreciation |  | 28.1 |  |  | 20.1 |
Warranty, bad debts and other reserves |  | 5.9 |  |  | 4.8 |
Capitalized costs |  | 7.1 |  |  | 5.1 |
Other |  | 27.9 |  |  | 30.4 |
|  | 1,691.5 |  |  | 1,703.2 |
Valuation allowance |  | (1,524.7 | ) |  | (1,547.5 | )
Total deferred tax assets |  | $ | 166.8 |  |  | $ | 155.7 |
Deferred tax liabilities |  |  |  |
Capitalized research and development |  | $ | 44.7 |  |  | $ | 36.1 |
Other |  | 29.0 |  |  | 30.2 |
Total deferred tax liabilities |  | $ | 73.7 |  |  | $ | 66.3 |
Net deferred tax assets |  | $ | 93.1 |  |  | $ | 89.4 |
At December 31, 2019, the company has tax effected tax loss carryforwards as follows:
As of December 31, |  | 2019 |
U.S. Federal |  | $ | 348.2 |
State and local |  | 247.8 |
Foreign |  | 245.1 |
Total tax loss carryforwards |  | $ | 841.1 |
These carryforwards will expire as follows:
Year |
2020 | $ | 23.9 |
2021 | 13.5 |
2022 | 15.8 |
2023 | 13.3 |
2024 | 12.2 |
Thereafter | 762.4 |
Total | $ | 841.1 |
The company also has available tax credit carryforwards, which will expire as follows:
Year |
2020 | $ | 31.5 |
2021 | 35.0 |
2022 | 38.1 |
2023 | 27.0 |
2024 | 22.5 |
Thereafter | 87.7 |
Total | $ | 241.8 |
Failure to achieve forecasted taxable income might affect the ultimate realization of the company’s net deferred tax assets. Factors that may affect the company’s ability to achieve sufficient forecasted taxable income include, but are not limited to, the following: increased competition, a decline in sales or margins, loss of market share, the impact of the economic environment, delays in product availability and technological obsolescence. Under U.S. tax law effective through December 31, 2017, undistributed earnings of foreign subsidiaries were generally taxable upon repatriation to the U.S shareholder. Under the TCJA, effective January 1, 2018, distributions from foreign subsidiaries to U.S. shareholders are generally exempt from taxation. With this change in U.S. taxation of earnings of foreign subsidiaries under the TCJA, future distributions of earnings from foreign subsidiaries will generally be exempt from U.S. taxation. Consequently, the deferred income tax liability on undistributed earnings is generally limited to any foreign withholding or other foreign taxes that will be imposed on such distributions. As the company currently intends to indefinitely reinvest the earnings of certain foreign subsidiaries, no provision has been made for income taxes that may become payable upon distribution of the earnings of such subsidiaries. The unrecognized deferred income tax liability at December 31, 2019 approximated $29.2 million. As of January 1, 2018 the U.S. taxable income included GILTI, which essentially includes net foreign subsidiaries’ earnings above a routine 10% return on their aggregate specified tangible assets. At December 31, 2017, the company made an accounting policy election to treat the GILTI as a period cost when included in U.S. taxable income. Cash paid for income taxes, net of refunds, for the three years ended December 31, 2019, was as follows:
Year ended December 31, |  | 2019 |  |  | 2018 |  |  | 2017 |
Cash paid for income taxes, net of refunds |  | $ | 37.6 |  |  | $ | 39.1 |  |  | $ | 34.3 |
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Year ended December 31, |  | 2019 |  |  | 2018 |  |  | 2017 |
Balance at January 1 |  | $ | 18.9 |  |  | $ | 27.9 |  |  | $ | 35.8 |
Additions based on tax positions related to the current year |  | 11.1 |  |  | 2.6 |  |  | 4.2 |
Changes for tax positions of prior years |  | (0.6 | ) |  | (6.1 | ) |  | (11.2 | )
Reductions as a result of a lapse of applicable statute of limitations |  | (2.3 | ) |  | (2.4 | ) |  | (2.7 | )
Settlements |  | (1.1 | ) |  | (1.5 | ) |  | (0.2 | )
Changes due to foreign currency |  | (0.4 | ) |  | (1.6 | ) |  | 2.0 |
Balance at December 31 |  | $ | 25.6 |  |  | $ | 18.9 |  |  | $ | 27.9 |
The company recognizes penalties and interest accrued related to income tax liabilities in the provision for income taxes in its consolidated statements of income. At December 31, 2019 and 2018, the company had an accrual of $3.0 million and $2.6 million, respectively, for the payment of penalties and interest. At December 31, 2019, all of the company’s liability for unrecognized tax benefits, if recognized, would affect the company’s effective tax rate. Within the next 12 months, the company believes that it is reasonably possible that the amount of unrecognized tax benefits may significantly change; however, various events could cause this belief to change in the future. The company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. Several U.S. state and foreign income tax audits are in process. The company is under an audit in India, for which years prior to 2009 are closed. For the most significant jurisdictions outside the U.S., the audit periods through 2014 are closed for Brazil, and the audit periods through 2015 are closed for the United Kingdom. All of the various ongoing income tax audits throughout the world are not expected to have a material impact on the company’s financial position. Internal Revenue Code Sections 382 and 383 provide annual limitations with respect to the ability of a corporation to utilize its net operating loss (as well as certain built-in losses) and tax credit carryforwards, respectively (Tax Attributes), against future U.S. taxable income, if the corporation experiences an “ownership change.” In general terms, an ownership change may result from transactions increasing the ownership of certain stockholders in the stock of a corporation by more than 50 percentage points over a three-year period. The company regularly monitors ownership changes (as calculated for purposes of Section 382). The company has determined that, for purposes of the rules of Section 382 described above, an ownership change occurred in February 2011. Any future transaction or transactions and the timing of such transaction or transactions could trigger additional ownership changes under Section 382. As a result of the February 2011 ownership change, utilization for certain of the company’s Tax Attributes, U.S. net operating losses and tax credits, is subject to an overall annual limitation of $70.6 million. The cumulative limitation as of December 31, 2019 is approximately $470.3 million. This limitation will be applied first to any recognized built in losses, then to any net operating losses, and then to any other Tax Attributes. Any unused limitation may be carried over to later years. Based on presently available information and the existence of tax planning strategies, the company does not expect to incur a U.S. cash tax liability in the near term. The company maintains a full valuation allowance against the realization of all U.S. deferred tax assets as well as certain foreign deferred tax assets in excess of deferred tax liabilities.

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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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