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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | The following table summarizes the loss from continuing operations before benefit for income taxes and share of net income from joint venture.
|  | Year Ended December 31,
|  | 2019 |  | 2018 |  | 2017
Loss before (provision) benefit for income taxes and share of net income from joint venture |  |  |  |  |  |
United States |  | $ | (69,866 | ) |  | $ | (263,499 | ) |  | $ | (71,603 | )
Foreign |  | 18,167 |  |  | 1,489 |  |  | 11,396 |
Total |  | $ | (51,699 | ) |  | $ | (262,010 | ) |  | $ | (60,207 | )
The following table summarizes total income tax benefit recognized in each year.
|  | Year Ended December 31,
|  | 2019 |  | 2018 |  | 2017
Current taxes: |  |  |  |  |  |
U.S. Federal |  | $ | (6,805 | ) |  | $ | 6,819 |  |  | $ | (47,916 | )
State |  | 871 |  |  | 1,103 |  |  | (12,745 | )
Foreign |  | 5,770 |  |  | 3,086 |  |  | 4,310 |
Total current tax expense (benefit) |  | (164 | ) |  | 11,008 |  |  | (56,351 | )
Deferred taxes: |  |  |  |  |  |
U.S. Federal |  | $ | (4,096 | ) |  | $ | (17,773 | ) |  | $ | (25,017 | )
State |  | (2,510 | ) |  | (780 | ) |  | 3,009 |
Deferred tax valuation allowance |  | 4,612 |  |  | (3,565 | ) |  | 710 |
Foreign |  | (1,119 | ) |  | (2,303 | ) |  | (1,896 | )
Total deferred tax expense (benefit) |  | (3,113 | ) |  | (24,421 | ) |  | (23,194 | )
Total income tax expense (benefit) |  | $ | (3,277 | ) |  | $ | (13,413 | ) |  | $ | (79,545 | )
The following table presents a reconciliation of income taxes based on the U.S. federal statutory income tax rate.
|  | Year Ended December 31,
|  | 2019 |  | 2018 |  | 2017
U.S federal statutory income tax rate |  | 21.0 | % |  | 21.0 | % |  | 35.0 | %
Change in valuation allowance, exclusive of state |  | 1.2 | % |  | (0.9 | )% |  | (1.2 | )%
Foreign tax credits, exclusive of tax reform |  | — | % |  | — | % |  | (13.5 | )%
State taxes, net of federal taxes, exclusive of tax reform |  | (8.0 | )% |  | 0.4 | % |  | 8.9 | %
Non-U.S. earnings taxed at different rates |  | 1.0 | % |  | 1.3 | % |  | 1.6 | %
Non-deductible mergers and acquisitions costs |  | — | % |  | (0.2 | )% |  | — | %
GILTI |  | (0.8 | )% |  | (0.5 | )% |  | — | %
Goodwill impairment |  | — | % |  | (14.1 | )% |  | — | %
Nondeductible asset loss |  | (1.3 | )% |  | (0.1 | )% |  | (0.8 | )%
Research and development tax credit |  | 3.1 | % |  | 0.3 | % |  | 0.3 | %
Change in uncertain tax positions |  | 2.6 | % |  | 0.1 | % |  | 0.5 | %
Impact of tax reform: |  |  |  |  |  |
Toll charge, net of foreign tax credit |  | — | % |  | 0.6 | % |  | (11.3 | )%
Remeasurement of deferred taxes pursuant to tax reform |  | — | % |  | (0.9 | )% |  | 64.1 | %
Tax reform impact on divestiture of business segment |  | — | % |  | — | % |  | 33.2 | %
Impact of 2019 Treasury regulations |  | (11.5 | )% |  | — | % |  | — | %
Section 199 domestic production deduction |  | — | % |  | — | % |  | 0.7 | %
Divestiture of business segment, exclusive of tax reform |  | — | % |  | (0.9 | )% |  | 13.3 | %
Return to provision |  | 1.3 | % |  | (0.8 | )% |  | — | %
Other adjustments, net |  | (2.3 | )% |  | (0.2 | )% |  | 1.3 | %
Effective tax rate |  | 6.3 | % |  | 5.1 | % |  | 132.1 | %
The 2019 effective tax rate of 6.3% differs from the U.S. federal statutory income tax rate of 21.0% primarily due to the effects of final tax regulations published by the Department of the Treasury and Internal Revenue Service on February 5, 2019, as well as the minimum tax on GILTI. Based upon analysis of the final regulations, we recognized additional tax expense of $5.9 million for the year ended December 31, 2019, which significantly impacted the effective tax rate. The 2018 effective tax rate of 5.1% differs from the U.S. federal statutory income tax rate of 21.0% primarily due to the impact of goodwill impairment which was nondeductible for tax purposes. In 2018, we recognized an adjustment to the estimated net tax benefit from tax reform, which resulted in additional tax expense of $0.8 million. This adjustment was primarily related to the one-time transition tax on deferred foreign income, the change in valuation of deferred tax assets associated with tax law changes, and the remeasurement of deferred taxes. The 2017 effective tax rate of 132.1% was heavily influenced by the Tax Act which reduced the U.S. federal corporate income tax rate from 35% to 21%, required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, and created new taxes on certain foreign sourced earnings. As a result of the Tax Act, we recognized a $51.8 million net tax benefit in 2017, which included the estimate of transition tax and the remeasurement of our domestic deferred taxes from 35% to 21%. The 2017 tax rate was also impacted by the divestiture of the PBC Business. The following table summarizes the principal components of the deferred tax assets and liabilities.
|  | As of December 31,
|  | 2019 |  | 2018
Deferred income tax liabilities: |  |  |  |
Tax in excess of book depreciation |  | $ | 44,834 |  |  | $ | 37,425 |
Intangible assets |  | 73,405 |  |  | 80,623 |
Operating lease liabilities |  | 17,527 |  |  | — |
Other deferred tax liabilities |  | 4,857 |  |  | 794 |
Total deferred income tax liabilities |  | 140,623 |  |  | 118,842 |
Deferred income tax assets: |  |  |  |
Interest expense limitation |  | 14,674 |  |  | 9,968 |
Goodwill |  | 304 |  |  | 1,441 |
Inventories |  | 3,466 |  |  | 2,745 |
Interest rate swap |  | 2,839 |  |  | — |
Pension/Personnel accruals |  | 495 |  |  | 1,317 |
Operating lease right-of-use assets |  | 19,313 |  |  | — |
Net operating loss carry forwards |  | 15,876 |  |  | 9,321 |
U.S. foreign tax credit carryforwards |  | 3,360 |  |  | 5,345 |
R&D credit carryforwards |  | 2,654 |  |  | 917 |
Non-U.S. credit carryforwards |  | 3,313 |  |  | 4,130 |
Accruals and reserves |  | 2,299 |  |  | 1,531 |
Other deferred tax assets |  | 5,264 |  |  | 4,749 |
Deferred income tax assets before valuation allowance |  | 73,857 |  |  | 41,464 |
Valuation allowance on deferred tax assets |  | (19,033 | ) |  | (14,460 | )
Total deferred income tax assets |  | 54,824 |  |  | 27,004 |
Net deferred income tax liabilities |  | $ | 85,799 |  |  | $ | 91,838 |
As of December 31, 2019, we had $1.5 million of U.S. federal net operating loss (“NOL”) carryover and $225.4 million of state NOL carryovers. The federal NOL has an indefinite life, but utilization within any tax year is limited to 80% of taxable income. The state NOLs begin to expire in 2030. Management believes that certain of the state NOL carryovers will more likely than not expire prior to utilization. As such, a valuation allowance of $10.8 million has been established to reduce the state attribute balance to the amount expected to be utilized before expiration. We also have $14.1 million of foreign NOL carryovers at December 31, 2019. The foreign NOLs have an indefinite life; however, management believes that benefit for certain of the foreign NOLs may not be realized. Therefore, the Company has established a valuation allowance of $1.0 million to reduce the carrying value of the asset related to foreign NOLs to the amount that has been determined to be more likely than not realized. We have credit carryforwards for U.S. federal income tax purposes of $5.8 million at December 31, 2019. Of this amount, $3.4 million relates to foreign tax credit carryforwards which will begin to expire in 2026, and $2.4 million relates to research and development tax credit carryforwards. Management believes that the U.S. foreign tax credits will more likely than not expire before utilization and therefore has established a full valuation allowance against the credits. We have $0.2 million of state credit carryforwards for which we believe realization is more likely than not. In addition, we have $3.3 million of tax credits in other foreign jurisdictions at December 31, 2019. The tax credits in these other foreign jurisdictions begin to expire in 2026. We have established a valuation allowance of $3.3 million to offset the full carrying value of the asset related to the foreign jurisdictions’ tax credits. We have a U.S. federal and state deferred tax asset related to currency losses on intercompany loans. Management believes it is more likely than not that the benefit for the asset will not be realized based on timing of expected repayment of the intercompany loans. We have established a valuation allowance of $0.5 million to eliminate the carrying value of this asset. Management believes all remaining tax assets will more likely than not be realized. However, the amount of the deferred tax considered realizable could be reduced based on changing conditions. During 2019, the state valuation allowance increased by approximately $5.2 million, primarily due to a valuation allowance recorded to offset the current year generation of separate state loss carryforwards that management does not believe are realizable given anticipated changes in state nexus. In the current year, the U.S. federal valuation allowance decreased by $1.5 million primarily due to previously unanticipated utilization of foreign tax credits upon implementation of the final IRS regulations related to the 2017 transition tax. The foreign valuation allowance increased by $0.9 million in 2019 to offset current year loss generation in jurisdictions where realization of the asset is not more likely than not. During 2018, the valuation allowance increased by approximately $6.9 million to $14.5 million, as a result of an increase in foreign and state NOLs and U.S. foreign tax credits. During 2017, the valuation allowance increased by approximately $3.5 million to $7.6 million, as a result of a $2.3 million increase due to the uncertainty of realizing certain state NOL carryforwards, and a $1.2 million increase for foreign NOLs. As a result of the deemed mandatory repatriation provisions in the Tax Act, we included undistributed earnings in income subject to U.S. tax at reduced tax rates in 2017. Subsequently, we have recognized in income GILTI as part of the changes from the Tax Act. Therefore, we do not have material basis differences related to cumulative unremitted earnings for U.S. income tax purposes. However, we continue to evaluate quarterly the impact that repatriation of foreign earnings would have on withholding and other taxes. As of December 31, 2019, we have recorded a liability of $2.3 million for the anticipated withholding taxes which would be due upon repatriation of the unremitted earnings of those subsidiaries for which management does not intend to permanently reinvest all earnings. We are subject to U.S. federal income tax as well as tax in several foreign jurisdictions. We are also subject to tax by various state authorities. The tax years subject to examination vary by jurisdiction. We are no longer subject to U.S. federal examination for periods before 2016. We are currently working with tax authorities in France to complete an audit for the 2016 tax year. We regularly assess the outcomes of both ongoing and future examinations for the current or prior years to ensure our provision for income taxes is sufficient. We recognize liabilities based on estimates of whether additional taxes will be due, and we believes our reserves are adequate in relation to any potential assessments. The outcome of any one examination, some of which may conclude during the next twelve months, is not expected to have a material impact on our financial position or results of operations. Interest and penalties related to federal, state, and foreign income tax matters are recorded as a component of the provision for income taxes in our Consolidated Statements of Operations and Comprehensive Income (Loss). Accrued interest and penalties of $1.5 million, $1.3 million and $1.4 million are included in other non-current liabilities as of December 31, 2019, 2018, and 2017, respectively. The following table presents a reconciliation of the beginning and ending amounts of unrecognized tax benefits, excluding interest and penalties.
|  | Year Ended December 31,
|  | 2019 |  | 2018 |  | 2017
Balance at beginning of year |  | $ | 4,609 |  |  | $ | 5,655 |  |  | $ | 4,741 |
Additions for tax positions of prior years |  | — |  |  | 304 |  |  | 1,404 |
Settlements for tax positions of prior years |  | (275 | ) |  | — |  |  | — |
Reductions for tax positions of prior years |  | (1,745 | ) |  | (1,350 | ) |  | (490 | )
Balance at end of year |  | $ | 2,589 |  |  | $ | 4,609 |  |  | $ | 5,655 |
In addition to settlements, the reduction to unrecognized tax benefits in 2019 is primarily related to expiring statutes of limitations in certain U.S. state jurisdictions. As of December 31, 2019, the unrecognized tax benefits would, if recognized, impact our effective tax rate by $3.6 million, inclusive of the impact of interest and penalties. Management believes that it is reasonably possible that the amount of unrecognized income benefits, including interest and penalties, may decrease during the next twelve months by approximately $1.4 million, related to the expiration of the statutes of limitations. We operate under tax holidays in other countries, which are effective through December 31, 2026, and may be extended if certain additional requirements are satisfied. The tax holidays are conditional upon our meeting certain employment and investment thresholds. The impact of these tax holidays decreased foreign taxes by $0.8 million for 2017. The benefit of the tax holidays on net income per share (diluted) was $0.03 for 2017. The tax holidays had no impact on our 2019 and 2018 foreign taxes.

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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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