Entity information:
Income Taxes

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (“Tax Reform Act”) was enacted into law.  The Tax Reform Act includes a reduction in the federal tax rate for corporations from 35% to 21% as of January 1, 2018, a one-time transition tax on the cumulative undistributed earnings of foreign subsidiaries as of December 31, 2017, a repeal of the corporate alternative minimum tax, and more extensive limitations on deductibility of performance-based compensation for named executive officers.  Other provisions effective as of January 1, 2018, which could materially impact the Company in the near-term, include the creation of a new U.S. minimum tax on foreign earnings called the Global Intangible Low-Taxed Income (“GILTI”) and limitations on the deductibility of interest expense. 

Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Reform Act, the Company has recorded provisional amounts as of December 31, 2017, in accordance with Staff Accounting Bulletin No. 118 (“SAB 118”).  We recorded a provisional one-time non-cash charge of $92 million in the fourth quarter of 2017 to remeasure the deferred tax assets for the new rate and for other legislative changes.  We do not expect a U.S. federal current tax liability for the transition tax due to our high-tax foreign income, but we have recorded a provisional $31.1 million foreign tax credit offset with a full valuation allowance related to the transition tax. We did not record a current state tax liability related to the transition tax in accordance with the interpretation of existing state laws and the provisional estimates. The Company has not yet adopted an accounting policy related to the provision of deferred taxes related to GILTI.  We did not change our assertion on the determination of which subsidiaries that we consider to be permanently invested and for which we do not expect to repatriate to the U.S. as a result of the Tax Reform Act.  We will continue to collect and analyze data, including the undistributed earnings of foreign subsidiaries and related taxes, interpret the Tax Reform Act and apply the additional guidance and legislative changes to be issued by the U.S. federal and state authorities and may be required to make adjustments to these provisional amounts.  The accounting for the Tax Reform Act will be completed by the end of 2018 in accordance with SAB 118.
 
Years Ended December 31,
(In millions)
2017
 
2016
 
2015
 
 
 
 
 
 
Income (loss) from continuing operations before income taxes
 
 
 
 
 
U.S.
$
(41.6
)
 
(28.3
)
 
(23.2
)
Foreign
223.1

 
153.3

 
64.3

Income from continuing operations before income taxes
$
181.5

 
125.0

 
41.1


Provision (benefit) for income taxes from continuing operations
 
 
 
 
 
Current tax expense (benefit)
 
 
 
 
 
U.S. federal
$
(33.7
)
 
(3.3
)
 
(1.0
)
State
0.4

 
0.5

 
(0.2
)
Foreign
96.8

 
84.2

 
60.6

Current tax expense
63.5

 
81.4

 
59.4

 
 
 
 
 
 
Deferred tax expense (benefit)
 
 
 
 
 
U.S. federal
106.2

 
0.6

 
7.7

State
(4.9
)
 
(0.1
)
 
—

Foreign
(7.1
)
 
(3.4
)
 
(0.6
)
Deferred tax expense (benefit)
94.2

 
(2.9
)
 
7.1

Provision for income taxes of continuing operations
$
157.7

 
78.5

 
66.5


 
Years Ended December 31,
(In millions)
2017
 
2016
 
2015
 
 
 
 
 
 
Comprehensive provision (benefit) for income taxes allocable to
 
 
 
 
 
Continuing operations
$
157.7

 
78.5

 
66.5

Discontinued operations
(0.1
)
 
(1.1
)
 
(1.0
)
Other comprehensive income (loss)
(1.8
)
 
0.9

 
(0.7
)
Equity
—

 
(0.2
)
 
1.8

Comprehensive provision for income taxes
$
155.8

 
78.1

 
66.6



Rate Reconciliation
The following table reconciles the difference between the actual tax rate on continuing operations and the statutory U.S. federal income tax rate of 35%.
 
Years Ended December 31,
(In percentages)
2017
 
2016
 
2015
 
 
 
 
 
 
U.S. federal tax rate
35.0
 %
 
35.0
 %
 
35.0
 %
Increases (reductions) in taxes due to:
 
 
 
 
 
Venezuela devaluation
—

 
2.9

 
61.3

Tax on accelerated U.S. income(a)
(0.2
)
 
—

 
57.3

Adjustments to valuation allowances
3.4

 
18.2

 
18.9

Foreign income taxes
1.8

 
4.2

 
(18.2
)
Tax reform
47.4

 
—

 
—

French business tax
2.0

 
3.0

 
8.9

Taxes on undistributed earnings of foreign affiliates
0.9

 
0.7

 
(1.2
)
State income taxes, net
(1.3
)
 
(1.0
)
 
(4.1
)
Share-based compensation
(3.5
)
 
(1.4
)
 
—

Other
1.4

 
1.2

 
3.9

Actual income tax rate on continuing operations
86.9
 %
 
62.8
 %
 
161.8
 %

(a)
In the fourth quarter of 2015, we recognized a $23.5 million increase to current tax expense related to a transaction that accelerated U.S. taxable income. In 2017, we recognized a benefit of $0.4 million related to that transaction.

Components of Deferred Tax Assets and Liabilities
 
December 31,
(In millions)
2017
 
2016
 
 
 
 
Deferred tax assets
 
 
 
Pension liabilities
$
56.2

 
74.5

Retirement benefits other than pensions
71.3

 
87.2

Workers’ compensation and other claims
29.1

 
41.7

Property and equipment, net
5.2

 
6.6

Other assets and liabilities
88.6

 
107.3

Net operating loss carryforwards
41.1

 
42.4

Alternative minimum and other tax credits(a)
68.2

 
62.0

Subtotal
359.7

 
421.7

Valuation allowances
(98.9
)
 
(62.8
)
Total deferred tax assets
260.8

 
358.9

 
 
 
 
Deferred tax liabilities
 
 
 
Property and equipment, net
3.7

 
—

Retirement benefits other than pensions
2.0

 
2.1

Other assets and miscellaneous
54.0

 
36.5

Deferred tax liabilities
59.7

 
38.6

Net deferred tax asset
$
201.1

 
320.3

 
 
 
 
Included in:
 
 
 
Noncurrent assets
226.2

 
327.9

Noncurrent liabilities
(25.1
)
 
(7.6
)
Net deferred tax asset
$
201.1

 
320.3


(a)
U.S. foreign tax credits of $64.2 million have a 10 year carryforward period and the remaining credits of $4.0 million have various carryforward periods.  The foreign tax credits include an estimated $31.1 million related to the Tax Reform Act. The U.S. foreign tax credits and other U.S. tax credits have a full valuation allowance.

Valuation Allowances
Valuation allowances relate to deferred tax assets for certain federal credit carryforwards, certain state and non-U.S. jurisdictions.  Based on our analysis of positive and negative evidence including historical and expected future taxable earnings, and a consideration of available tax-planning strategies, we believe it is more-likely-than-not that we will realize the benefit of the existing deferred tax assets, net of valuation allowances, at December 31, 2017.
 
Years Ended December 31,
(In millions)
2017
 
2016
 
2015
 
 
 
 
 
 
Valuation allowances:
 
 
 
 
 
Beginning of year
$
62.8

 
45.7

 
40.1

Expiring tax credits
(0.4
)
 
(0.4
)
 
(0.3
)
Acquisitions and dispositions
(3.4
)
 
(0.3
)
 
—

Changes in judgment about deferred tax assets(a)
(1.8
)
 
2.6

 
1.5

Other changes in deferred tax assets, charged to:
 
 
 
 
 
Income from continuing operations
43.9

 
20.5

 
8.4

Other comprehensive income (loss)
0.2

 
0.7

 
0.3

Retained earnings(b)
—

 
2.5

 
—

Foreign currency exchange effects
(2.4
)
 
(8.5
)
 
(4.3
)
End of year
$
98.9

 
62.8

 
45.7


(a)
Changes in judgment about valuation allowances are based on a recognition threshold of “more-likely-than-not” of realizing beginning-of-year balances of deferred tax assets. Amounts are recognized in income from continuing operations.
(b)
In 2016, we recognized $2.5 million in retained earnings as a result of the early adoption of ASU 2016-09.

Net Operating Losses
The gross amount of the net operating loss carryforwards as of December 31, 2017, was $372.2 million.  The tax benefit of net operating loss carryforwards, before valuation allowances, as of December 31, 2017, was $41.1 million, and expires as follows:
(In millions)
Federal
 
State
 
Foreign
 
Total
 
 
 
 
 
 
 
 
Years of expiration
 
 
 
 
 
 
 
 2018-2022
$
—

 
0.1

 
6.1

 
6.2

 2023-2027
—

 
0.6

 
4.3

 
4.9

 2028 and thereafter
—

 
15.8

 
1.1

 
16.9

 Unlimited
—

 
—

 
13.1

 
13.1

 
$
—

 
16.5

 
24.6

 
41.1



Uncertain Tax Positions
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
 
Years Ended December 31,
(In millions)
2017
 
2016
 
2015
 
 
 
 
 
 
Uncertain tax positions:
 
 
 
 
 
Beginning of year
$
6.4

 
6.9

 
7.2

Increases related to prior-year tax positions
0.1

 
0.6

 
—

Decreases related to prior-year tax positions
(0.5
)
 
(0.4
)
 
(0.3
)
Increases related to current-year tax positions
1.4

 
1.2

 
1.1

Increases related to acquisitions
4.2

 
—

 
—

Settlements
(0.1
)
 
(0.8
)
 
—

Effect of the expiration of statutes of limitation
(0.8
)
 
(0.8
)
 
(0.7
)
Foreign currency exchange effects
(0.3
)
 
(0.3
)
 
(0.4
)
End of year
$
10.4

 
6.4

 
6.9



Included in the balance of unrecognized tax benefits at December 31, 2017, are potential benefits of approximately $9.7 million that, if recognized, will reduce the effective tax rate on income from continuing operations.

We recognize accrued interest and penalties related to unrecognized tax benefits in provision (benefit) for income taxes. We reverse interest and penalties accruals when a statute of limitation lapses or when we otherwise conclude the amounts should not be accrued.  Net increase (reversal) included in provision (benefit) for income taxes amounted to ($0.3) million in 2017, $0.1 million in 2016, and ($0.1) million in 2015. We had accrued interest and penalties of $0.8 million at December 31, 2017, and $0.9 million at December 31, 2016.

We file income tax returns in the U.S. federal and various state and foreign jurisdictions. With a few exceptions, as of December 31, 2017, we were no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2014. Additionally, due to statute of limitations expirations and audit settlements, it is reasonably possible that approximately $1.4 million of currently remaining unrecognized tax positions may be recognized by the end of 2018.