Entity information:
Income Taxes

Pre-tax income was taxed in the following jurisdictions (in millions):
 
Fiscal Year Ended September 30,
 
2017
 
2016
 
2015
Domestic
$
392.7

 
$
277.1

 
$
316.4

Foreign
18.6

 
29.9

 
9.7

 
$
411.3

 
$
307.0

 
$
326.1



Significant components of the provision for income taxes were as follows (in millions):
 
Fiscal Year Ended September 30,
 
2017
 
2016
 
2015
Allocated to Income Before Equity in Earnings of Unconsolidated Affiliates
 
 
 
 
 
Current:
 
 
 
 
 
Federal
$
104.9

 
$
103.6

 
$
108.8

Foreign
13.5

 
3.2

 
1.5

State
1.0

 
2.6

 
1.1

Total current
119.4

 
109.4

 
111.4

Deferred:
 
 
 
 
 
Federal
6.6

 
(18.5
)
 
(10.8
)
Foreign
4.2

 
2.0

 
(1.3
)
State
(3.0
)
 
(0.5
)
 
(0.1
)
Total deferred
7.8

 
(17.0
)
 
(12.2
)
 
$
127.2

 
$
92.4

 
$
99.2

 
 
 
 
 
 
Allocated to Other Comprehensive Income (Loss)
 
 
 
 
 
Deferred federal, state and foreign
$
15.1

 
$
(14.2
)
 
$
(1.2
)


The reconciliation of income tax computed at the U.S. federal statutory tax rates to income tax expense was:
 
Fiscal Year Ended September 30,
 
2017
 
2016
 
2015
Effective Rate Reconciliation
 
 
 
 
 
U.S. federal tax rate
35.0
 %
 
35.0
 %
 
35.0
 %
State income taxes, net
1.3

 
1.3

 
2.5

Foreign taxes
0.6

 
(1.7
)
 
(2.4
)
Tax audit settlements
—

 
0.1

 
(2.6
)
Valuation allowance
0.5

 
(0.6
)
 
0.4

Domestic tax credits
(4.2
)
 
(1.5
)
 
(1.3
)
Manufacturing deduction
(2.8
)
 
(3.0
)
 
(2.8
)
Share-based compensation
(1.3
)
 
—

 
—

Other, net
1.8

 
0.5

 
1.6

 
30.9
 %
 
30.1
 %
 
30.4
 %


During fiscal 2017, the Company recorded discrete tax benefits of $20.1 million (4.9% of pre-tax income), which included benefits related to excess tax benefit from share-based compensation, provision to return adjustments for federal, state, and foreign jurisdictions, tax reserve releases due to expiration of statutes of limitations and other resolutions, and releases of valuation allowances on deferred tax assets for federal capital loss and state net operating loss carryforwards. During fiscal 2016, the Company recorded discrete tax benefits of $7.5 million (2.4% of pre-tax income), which included benefits related to the reinstatement of the U.S. research and development tax credit for periods prior to fiscal 2016, provision to return adjustments for federal, state, and foreign jurisdictions, and tax reserve releases due to expiration of statutes of limitations. During fiscal 2015, the Company recorded discrete tax benefits of $13.8 million (4.2% of pre-tax income), which included benefits related to the reinstatement of the U.S. research and development tax credit for periods prior to fiscal 2015 and settlement of audits and expiration of statutes of limitations.

Deferred income tax assets and liabilities were comprised of the following (in millions):
 
September 30,
 
2017
 
2016
Deferred tax assets:
 
 
 
Other long-term liabilities
$
81.0

 
$
109.9

Losses and credits
31.2

 
36.4

Accrued warranty
31.8

 
27.0

Other current liabilities
24.5

 
31.1

Payroll-related obligations
34.9

 
28.2

Receivables
7.0

 
6.3

Other
12.4

 
(0.8
)
Gross deferred tax assets
222.8

 
238.1

Less valuation allowance
(10.4
)
 
(8.6
)
Deferred tax assets, net
212.4

 
229.5

 
 
 
 
Deferred tax liabilities:
 
 
 
Intangible assets
154.8

 
167.0

Property, plant and equipment
52.4

 
47.4

Inventories
17.6

 
15.5

Other
3.6

 
2.5

Deferred tax liabilities
228.4

 
232.4

Deferred tax liabilities, net of deferred tax assets
$
(16.0
)
 
$
(2.9
)


The net deferred tax liability is classified in the Consolidated Balance Sheets as follows (in millions):
 
September 30,
 
2017
 
2016
Long-term net deferred tax asset
$
4.2

 
$
8.4

Long-term net deferred tax liability
(20.2
)
 
(11.3
)
Net deferred tax liabilities
$
(16.0
)
 
$
(2.9
)


As of September 30, 2017, the Company had $50.4 million of net operating loss carryforwards available to reduce future taxable income of certain foreign subsidiaries in countries which allow such losses to be carried forward anywhere from eight years to an unlimited period. In addition, the Company had $227.8 million of state net operating loss carryforwards, which are subject to expiration in 2018 to 2037 and state credit carryforwards of $16.1 million, which are subject to expiration in 2022 to 2031. Deferred tax assets for foreign net operating loss carryforwards, state net operating loss carryforwards and state credit carryforwards were $15.0 million, $7.6 million and $8.6 million, respectively. Amounts are reviewed for recoverability based on historical taxable income, the expected reversals of existing temporary differences, tax-planning strategies and projections of future taxable income. The Company maintains a valuation allowance against foreign deferred tax assets and state deferred tax assets of $8.3 million and $2.1 million, respectively, as of September 30, 2017.

The Company provides for U.S. income taxes on undistributed earnings of its foreign operations except to the extent that they are considered to be indefinitely reinvested. On a quarterly basis, the Company examines its reinvestment plan, evaluating the profitability and cash requirements for its U.S. and overseas operations and its ability to mobilize funds. To the extent that the Company's assessment of the earnings and funding needs of its foreign subsidiaries changes, deferred U.S. and foreign income taxes, and foreign withholding taxes may need to be accrued. At September 30, 2017, the Company had undistributed earnings generated by foreign operations of $184.4 million, all of which is considered to be indefinitely reinvested. If these earnings were repatriated to the United States, the Company would be required to accrue and pay U.S. federal income taxes and foreign withholding taxes, as adjusted for foreign tax credits. Determination of the amount of any unrecognized deferred income tax liability on these earnings is not practicable.

A reconciliation of gross unrecognized tax benefits, excluding interest and penalties, was as follows (in millions):
 
Fiscal Year Ended September 30,
 
2017
 
2016
 
2015
Balance at beginning of year
$
37.4

 
$
27.0

 
$
33.5

Additions for tax positions related to current year
1.2

 
7.6

 
4.6

Additions for tax positions related to prior years
6.0

 
8.4

 
2.1

Reductions for tax positions related to prior years
(5.5
)
 
(1.1
)
 
—

Settlements
—

 
(3.0
)
 
(8.6
)
Lapse of statutes of limitations
(1.9
)
 
(1.5
)
 
(4.5
)
Foreign currency translation
—

 
—

 
(0.1
)
Balance at end of year
$
37.2

 
$
37.4

 
$
27.0



As of September 30, 2017, net unrecognized tax benefits of $18.5 million would affect the Company’s effective tax rate if recognized. The Company recognizes accrued interest and penalties, if any, related to unrecognized tax benefits in the “Provision for income taxes” in the Consolidated Statements of Income. During fiscal 2017, 2016 and 2015, the Company recognized income of $0.4 million, $1.2 million and $3.0 million related to interest and penalties, respectively. At September 30, 2017 and 2016, the Company had accruals for the payment of interest and penalties of $9.8 million and $10.0 million, respectively. During fiscal 2018, it is reasonably possible that federal, state and foreign tax audit resolutions could reduce unrecognized tax benefits by approximately $7.0 million, either because the Company’s tax positions are sustained on audit, because the Company agrees to their disallowance or the statute of limitations closes.

The Company files federal income tax returns, as well as multiple state, local and non-U.S. jurisdiction tax returns. The Company is regularly audited by federal, state and foreign tax authorities. During fiscal 2016, the U.S. Internal Revenue Service completed its audit of the Company for the taxable years ended September 30, 2012 and 2013. As of September 30, 2017, tax years open for examination under applicable statutes were as follows:
Tax Jurisdiction
 
Open Tax Years
Australia
 
2013 - 2017
Belgium
 
2014 - 2017
Brazil
 
2011 - 2017
Canada
 
2013 - 2017
China
 
2012 - 2017
Romania
 
2011 - 2017
The Netherlands
 
2012 - 2017
United States (federal)
 
2014 - 2017
United States (state and local)
 
2006 - 2017