Entity information:
Income Taxes
The income tax expense is based on income before income taxes as follows:
 
Year Ended December 31,
 
2017
 
2016
 
2015
U.S.
$
(43.9
)
 
$
(164.6
)
 
$
(125.4
)
Non-U.S.
591.7

 
740.8

 
623.5

 
$
547.8

 
$
576.2

 
$
498.1


During the fourth quarter of 2013, in connection with the centralization of our global supply chain and technical operations in Ireland, our U.S. parent company became a direct partner in a captive foreign partnership. The partnership income, which is derived in foreign jurisdictions, is classified as “non-U.S. income” for purposes of financial reporting. Substantially all non-U.S. income relates to income from our captive foreign partnership.
The components of the income tax expense are as follows:
 
Year Ended December 31,
 
2017
 
2016
 
2015
Domestic
 
 
 
 
 
Current
$
42.9

 
$
3.4

 
$
(87.6
)
Deferred
7.2

 
107.6

 
388.9

 
50.1

 
111.0

 
301.3

Foreign
 
 
 
 
 
Current
107.5

 
69.1

 
49.0

Deferred
(53.1
)
 
(3.3
)
 
3.4

 
54.4

 
65.8

 
52.4

Total
 
 
 
 
 
Current
150.4

 
72.5

 
(38.6
)
Deferred
(45.9
)
 
104.3

 
392.3

 
$
104.5

 
$
176.8

 
$
353.7


We continue to maintain a valuation allowance against certain deferred tax assets where realization is not certain.
We continue to pay cash taxes in U.S. Federal, various U.S. state, and foreign jurisdictions where we have utilized all of our tax attributes or have met the applicable limitation for attribute utilization.
At December 31, 2017, we have tax effected federal and state net operating loss carryforwards of $2.1 and $4.9, respectively. Our NOL’s expire between 2021 and 2036. We also have federal and state income tax credit carryforwards of $449.3 and $6.6, respectively. These income tax credits expire between 2024 and 2037.
The provision (benefit) for income taxes differs from the U.S. federal statutory tax rate. The reconciliation of the statutory U.S. federal income tax rate to our effective income tax rate is as follows:

 
Year Ended December 31,
 
2017
 
2016
 
2015
U.S. federal statutory tax rate
35.0
 %
 
35.0
 %
 
35.0
 %
State and local income taxes
1.5
 %
 
4.1
 %
 
(0.8
)%
Foreign income tax rate differential
(28.7
)%
 
(33.8
)%
 
(32.5
)%
Tax credits, net of nondeductible expenses
(10.7
)%
 
(6.0
)%
 
(7.6
)%
Foreign income tax credits
(6.1
)%
 
(8.4
)%
 
(7.6
)%
Foreign income subject to U.S. taxation
48.2
 %
 
26.6
 %
 
24.3
 %
U.S. deferred taxes on foreign earnings
34.2
 %
 
16.5
 %
 
60.1
 %
Re-measurement of deferred taxes as a result of the Tax Act
(53.4
)%
 
—
 %
 
—
 %
Other permanent differences
(0.9
)%
 
(3.3
)%
 
0.1
 %
Effective income tax rate
19.1
 %
 
30.7
 %
 
71.0
 %

In December 2017, the Tax Cuts and Jobs Act (Tax Act) was enacted into law. The Tax Act decreased the US federal corporate tax rate to 21.0%, imposed a minimum tax on foreign earnings related to intangible assets (GILTI), a one-time transition tax on previously unremitted foreign earnings, and modified the taxation of other income and expense items. With regard to the GILTI minimum tax, foreign earnings are reduced by the profit attributable to tangible assets and a deductible allowance of up to 50.0%, subject to annual limitations. We have elected to account for the impact of the minimum tax in deferred taxes, and to account for the deductible allowance and tangible asset profit reduction in the period realized.
At December 31, 2017, the Tax Act resulted in an increase to tax expense and the effective tax rate of $45.8 and 8.4%, respectively:
(a)
Income tax expense increased $177.9 or 32.5% related to the transition tax on unremitted earnings imposed by the Tax Act. This increase includes foreign income subject to US tax of $195.6, partially offset by a related benefit of foreign tax credits of $17.7.
(b)
The decrease to the U.S. federal tax rate resulted in a decrease to deferred tax expense of $292.4 or (53.4)%. This decrease includes the $121.3 or 22.1% benefit of re-measuring domestic deferred taxes and an additional decrease attributable to re-measuring deferred taxes on foreign earnings of $171.1 or 31.2%.
(c)
Other permanent differences includes a decrease to tax expense of $5.1 or 0.9% related to the re-measurement of income taxes payable as a result of changes in U.S. federal tax rates under the Tax Act.
(d)
The enactment of the GILTI minimum tax increased US deferred taxes on foreign earnings $165.4 or 30.2%. This increase includes deferred tax expense related to the GILTI minimum tax of $236.9. This deferred expense is partially offset by a related decrease to deferred expense for the release of reserves for uncertain tax positions of $71.5.
In addition, in 2017, we concluded the IRS examination of our 2013 and 2014 tax years. Conclusion of the IRS examination resulted in a decrease to our 2017 effective tax rate of approximately 3.6% for the year ended December 31, 2017.
Income tax expense for the year ended December 31, 2016 includes the impact to deferred tax attributable to distributions from our captive foreign partnership of $119.3, which increased our 2016 effective tax rate by 20.7%. Income tax expense for the year ended December 31, 2015 includes a one-time charge of $315.6 related to the integration of Synageva assets into our captive foreign partnership, which increased our 2015 effective tax rate by approximately 63.0%.
We have operations in many foreign tax jurisdictions, which impose income taxes at different rates than the U.S. The impact of these rate differences is included in the foreign income tax rate differential that we disclose in our reconciliation of the U.S. statutory income tax rate to our effective tax rate.
Provisions have been made for deferred taxes based on the differences between the basis of the assets and liabilities for financial statement purposes and the basis of the assets and liabilities for tax purposes using currently enacted tax rates and regulations that will be in effect when the differences are expected to be recovered or settled. The components of the deferred tax assets and liabilities are as follows: 
 
December 31,
 
December 31,
 
2017
 
2016
Deferred tax assets:
 
 
 
Net operating losses
$
4.9

 
$
57.8

Income tax credits
442.5

 
536.5

Stock compensation
66.6

 
89.3

Accruals and allowances
97.7

 
91.1

Unrealized losses
6.6

 
—

Research and development expenses
7.2

 
15.3

Accrued royalties
74.2

 
22.9

 
699.7

 
812.9

Valuation allowance
(3.4
)
 
(3.6
)
Total deferred tax assets
696.3

 
809.3

Deferred tax liabilities:

 

Depreciable assets
(75.2
)
 
(95.3
)
Unrealized gains
—

 
(43.3
)
Investment in foreign partnership
(607.9
)
 
(546.1
)
Intangible assets
(285.6
)
 
(502.4
)
Total deferred tax liabilities
(968.7
)
 
(1,187.1
)
Net deferred tax (liability) asset
$
(272.4
)
 
$
(377.8
)

The decrease in our net operating losses is due to the utilization of historical net operating loss carryforwards. The decrease in income tax credits is primarily attributable to the utilization of foreign tax credits and Orphan Drug credits. The increase in our investment in foreign partnership deferred tax liability is due to the impact of the GILTI minimum tax on our captive foreign partnership.
We follow authoritative guidance regarding accounting for uncertainty in income taxes, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition.
The beginning and ending amounts of unrecognized tax benefits reconciles as follows: 
 
2017
 
2016
 
2015
Beginning of period balance
$
138.9

 
$
113.9

 
$
28.7

Increases for tax positions taken during a prior period
5.6

 
3.4

 
1.9

Decreases for tax positions taken during a prior period
(85.8
)
 
(1.1
)
 
(0.1
)
Increases for tax positions taken during the current period
19.3

 
22.8

 
85.3

Decreases for tax positions related to settlements
(15.8
)
 
—

 
(1.0
)
Decreases for tax positions related to lapse of statute
(1.3
)
 
(0.1
)
 
(0.9
)
 
$
60.9

 
$
138.9

 
$
113.9


The total amount of accrued interest and penalties was not significant as of December 31, 2017. The total amount of tax benefit recorded during 2017, 2016, and 2015 which related to unrecognized tax benefits was $27.1, $21.5, and $82.7, respectively. All of our unrecognized tax benefits, if recognized, would have a favorable impact on the effective tax rate.
The $85.8 decrease for tax positions taken during a prior period is primarily related to the impact of tax reform on the deferred tax accounting for our foreign captive partnership. The $15.8 decrease for tax positions related to settlements is primarily related to settlement of the routine IRS audit of the 2013 and 2014 tax years. This decrease includes amounts recorded for 2015 and 2016 positions that were effectively settled as a result of concluding the audit.
It is reasonably possible that a portion of our unrecognized tax benefits could reverse within the next twelve months. Reversal of these amounts is contingent upon the completion of field audits by the taxing authorities in several jurisdictions, whether a tax adjustment is proposed, the nature and amount of any adjustment, and the administrative path to resolving the proposed adjustment. We cannot reasonably estimate the range of the potential change.
We have incorporated the impact of the Tax Act in our results or have calculated provisional amounts for the tax effects of the Tax Act that can be reasonably estimated, but not completed, for the year ended December 31, 2017. Our accounting for the Tax Act is incomplete as follows:
(a)
We have calculated a reasonable estimate of the one-time transition tax on previously unremitted earnings, which resulted in an increase to U.S. Federal tax expense of $177.9 and an increase to taxes payable, net of tax credits, of $28.0. Our initial accounting for the transition tax is incomplete because there is uncertainty regarding the calculation of the amounts subject to the tax. Additional analysis of this provision of the law, as well as recently released interpretive guidance and its application to the Company are required to complete our accounting.
(b)
We have calculated a reasonable estimate of the impact of the GILTI minimum tax on deferred taxes, which resulted in an increase to U.S. Federal tax expense and the deferred tax liability of $236.9. Our initial accounting for the minimum tax is incomplete because there is uncertainty regarding the calculation of the temporary differences that will be subject to the minimum tax. Additional analysis regarding the computation of these temporary differences and the expected timing and manner of their realization is required to complete our accounting.
(c)
We have calculated a reasonable estimate of the Tax Act’s limits on deductions for employee remuneration, including remuneration in kind, which resulted in an insignificant impact to tax expense, taxes payable, and deferred taxes. Our initial accounting for these limits is incomplete because there is uncertainty regarding the value of the deduction-limited remuneration. Additional analysis regarding whether employee remuneration arrangements and agreements are deductible under the Tax Act is required to complete our accounting. We do not anticipate this item to have a material impact on our financial condition and results of operations.
(d)
We have calculated a reasonable estimate of the impact of the Tax Act to U.S. state income taxes, which resulted in an increase to tax expense, taxes payable, and deferred taxes of $2.9, $2.2, and $0.7, respectively. We have interpreted the effect of the Tax Act’s changes to federal law on each U.S. state’s system of taxation as of the date of enactment. However, additional analysis is required to determine the effect of modifications to federal deductions and income inclusions on these systems.
(e)
We have calculated the deferred tax liability related to our interest in the foreign captive partnership consistent with prior periods.  We are considering the indirect effects of the Tax Act on this calculation.  As a result, the deferred tax liability we have recorded as of December 31, 2017 of $533.4 related to our foreign captive partnership is provisional.  Additional analysis of the direct and indirect effects of the Tax Act is required to complete our accounting for this item.
We file federal and state income tax returns in the U.S. and in numerous foreign jurisdictions. The U.S. and foreign jurisdictions have statutes of limitations ranging from 3 to 6 years. However, the limitation period could be extended due to our tax attribute carryforward position in a number of our jurisdictions. The tax authorities generally have the ability to review income tax returns for periods where the limitation period has previously expired and can subsequently adjust tax attribute values.
In 2017, the IRS commenced an examination of our U.S. income tax returns for 2015. We anticipate this audit will conclude within the next twelve months. We have not been notified of any significant adjustments proposed by the IRS.
We have recorded tax on the undistributed earnings of our controlled foreign corporation (CFC) subsidiaries. In the fourth quarter 2017, we recorded a one-time U.S. federal transition tax of $177.9 imposed on the undistributed earnings of our CFC subsidiaries as required by the Tax Act. In addition, we recorded an immaterial tax expense related to the incremental withholding, foreign local and U.S. state income taxes we would expect to incur on a dividend distribution of these earnings to the U.S. To the extent CFC earnings may not be repatriated to the U.S. as a dividend distribution due to limitations imposed by law, we have not recorded the related potential withholding, foreign local, and U.S. state income taxes. This impact of the Tax Act, and others, have been recorded on a provisional basis.