Entity information:
Income Taxes
A summary of income (loss) before taxes related to U.S. and Foreign operations are as follows:
 
 
Years Ended December 31,
(In millions)
 
2017
 
2016
 
2015
U.S.
 
$
278.2

 
$
(69.8
)
 
$
(305.7
)
Foreign
 
(17.5
)
 
176.6

 
23.2

Income (loss) before income tax (benefit) provision
 
$
260.7

 
$
106.8

 
$
(282.5
)

The components of the income tax (benefit) provision consist of the following:
 
 
Years Ended December 31,
(In millions)
 
2017
 
2016
 
2015
Current:
 
 
 
 
 
 
U.S. Federal
 
$
2.2

 
$
(10.6
)
 
$
(34.2
)
State
 
(2.9
)
 
6.3

 
8.8

Foreign
 
58.9

 
47.5

 
26.4

Total current income tax provision
 
$
58.2

 
$
43.2

 
$
1.0

Deferred:
 
 
 
 
 
 
U.S. Federal (1)
 
$
(134.6
)
 
$
1.3

 
$
(58.1
)
State
 
(1.9
)
 
(2.5
)
 
(18.2
)
Foreign (2)
 
(21.2
)
 
(19.7
)
 
(15.6
)
Total deferred income tax (benefit)
 
(157.7
)
 
(20.9
)
 
(91.9
)
Total income tax (benefit) provision
 
$
(99.5
)
 
$
22.3

 
$
(90.9
)

(1)
On December 22, 2017, the “H.R.1”, formally known as the Tax Cuts and Jobs Act (the “Act”) was signed into law. The Act includes numerous changes to existing tax law, including a permanent reduction in the federal corporate income tax rate from 35% to 21%. The rate reduction is effective January 1, 2018. As a result, the Company recorded a tax benefit of $173.1 million in the fourth quarter of 2017 related to the revaluation of its net deferred tax liabilities. At this time, the Company has not made any adjustments related to potential Global Intangible Low-Taxed Income (“GILTI”) tax in its financial statements and has not made a policy decision regarding whether to record deferred taxes on GILTI. The Act also requires a one-time tax on the “mandatory deemed repatriation” of accumulated foreign earnings as of December 31, 2017. Based on provisional calculations, the Company does not expect to incur a tax liability on the mandatory repatriation. Based on a continued analysis of the estimates and further guidance on the application of the law, it is anticipated that additional revisions may occur throughout the allowable measurement period.
(2)
On December 31, 2017, a law was published in France enacting a rate reduction from 34.43% to 25.83% to be phased in over five years starting in 2018. On December 29, 2017, a law was published in Belgium enacting a tax rate reduction from 33.99% to 25% to be phased in over three years starting in 2018. Consequently, the Company recorded a tax benefit of $9.8 million in the fourth quarter of 2017 related to the revaluation of its net deferred tax liabilities.
The effective tax rate reconciliations are as follows:
 
 
Years Ended December 31,
 
 
2017
 
2016
 
2015
U.S. Federal statutory tax rate
 
35.0
 %
 
35.0
 %
 
35.0
 %
State taxes, net of U.S. Federal benefit
 
(1.2
)
 
4.8

 
2.2

Foreign rate differential
 
(6.7
)
 
(13.2
)
 
1.9

Foreign operations (1)
 
(0.1
)
 
2.4

 
(5.1
)
Valuation allowance
 
0.8

 
11.2

 
—

Changes in uncertain tax positions
 
5.1

 
(0.1
)
 
0.2

Effect of law changes (2)
 
(70.2
)
 
(12.3
)
 
—

Stock-based compensation
 
(3.3
)
 
(4.7
)
 
—

Other
 
2.4

 
(2.2
)
 
(2.0
)
Effective tax rate
 
(38.2
)%
 
20.9
 %
 
32.2
 %

(1)
Foreign operations include the net impact of the changes to foreign valuation allowances, the cost of foreign inclusion net of foreign tax credits, and permanent items related to foreign operations.
(2)
2017 U.S., France, and Belgium tax rate changes; 2016 France tax rate change.
Components of the Net Deferred Tax Asset or Liability
The tax effects of temporary differences that give rise to significant portions of the deferred tax asset and deferred tax liability are as follows:
 
 
Years Ended December 31,
(In millions)
 
2017
 
2016
Deferred tax asset
 
 
 
 
Net operating loss and other tax attribute carryforwards
 
$
191.0

 
$
235.1

Accrued expenses
 
65.4

 
115.8

Pension and other retirement obligations
 
25.8

 
59.6

Other
 
63.5

 
71.9

Total deferred tax asset
 
345.7

 
482.4

Valuation allowance
 
(92.6
)
 
(83.1
)
Total deferred tax asset, net
 
253.1

 
399.3

Deferred tax liability
 
 
 
 
Intangible assets
 
(371.3
)
 
(515.7
)
Property & equipment
 
(255.0
)
 
(392.7
)
Other
 
(37.9
)
 
(60.6
)
Total deferred tax liability
 
(664.2
)
 
(969.0
)
Net deferred tax liability
 
$
(411.1
)
 
$
(569.7
)

The deferred tax asset and liability above are reflected in the Consolidated Balance Sheets as follows:
 
 
December 31,
(In millions)
 
2017
 
2016
Deferred tax asset
 
$
7.7

 
$
2.7

Deferred tax liability
 
(418.8
)
 
(572.4
)
Net deferred tax liability
 
$
(411.1
)
 
$
(569.7
)

Investments in Foreign Subsidiaries
The Act includes a mandatory one-time tax on accumulated earnings of foreign subsidiaries, and as a result, all previously unremitted earnings for which no U.S. deferred tax liability had been accrued have now been subject to U.S. tax. We intend to continue to invest all of these earnings, as well as our capital in these subsidiaries, indefinitely outside of the U.S. and do not expect to incur any significant taxes related to such amounts.
Operating Loss and Tax Credit Carryforwards
At December 31, 2017 and 2016, the Company had federal net operating losses for all U.S. operations (including those of minority owned subsidiaries) of $188.1 million and $284.4 million, respectively, expiring at various times between 2024 and 2037. At December 31, 2017 and 2016, the tax effect (before federal benefit) of the Company’s state net operating losses was $32.9 million and $38.2 million, respectively, expiring at various times between 2018 and 2038.
At December 31, 2017 and 2016, the Company had federal tax credit carryforwards of $34.4 million and $25.3 million, respectively, expiring at various times starting in 2032 with certain credits having an unlimited carryforward period. At December 31, 2017, the Company had state tax credit carryforwards of $9.6 million expiring at various times between 2018 and 2031. At December 31, 2016, the Company had state tax credit carryforwards of $4.2 million expiring at various times between 2017 and 2028.
At December 31, 2017 and 2016, the Company’s foreign net operating losses that are available to offset future taxable income were $332.3 million and $296.5 million, respectively. These foreign loss carryforwards will expire at various times beginning in 2018 with some losses having an unlimited carryforward period.
Valuation Allowance
The Company has evaluated the available positive and negative evidence and concluded, for some of its deferred tax assets, it is more likely than not that these assets will not be realized in the foreseeable future. Based on the Company’s assessment, as of December 31, 2017, total valuation allowances of $92.6 million were recorded against deferred tax assets. Although realization is not assured, the Company has concluded that it is more likely than not that the remaining deferred tax assets will be realized and as such no valuation allowance has been provided on these assets. The Company’s valuation allowance increased by $9.5 million during the year ended December 31, 2017.
The following table presents a rollforward of the valuation allowance for the years ended December 31, 2017, 2016, and 2015, respectively:
(In millions)
 
Balance at Beginning of Year
 
Additions
 
Reductions/Charges
 
Balance at End of Year
Valuation allowance
 
 
 
 
 
 
 
 
Year Ended December 31, 2017
 
$
83.1

 
$
29.0

 
$
(19.5
)
 
$
92.6

Year Ended December 31, 2016
 
67.6

 
15.5

 
—

 
83.1

Year Ended December 31, 2015
 
7.1

 
60.5

 
—

 
67.6


Unrecognized Tax Benefits (UTB)
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
 
 
Years Ended December 31,
(In millions)
 
2017
 
2016
 
2015
Beginning balance
 
$
14.6

 
$
11.5

 
$
6.2

Additions for tax positions of prior years
 
16.8

 
0.6

 
0.2

Additions for tax positions from acquisitions
 
—

 
10.3

 
6.1

Additions for tax positions of the current period
 
2.4

 
0.1

 
0.5

Reductions due to the statute of limitations
 
(8.8
)
 
(7.9
)
 
(1.5
)
Ending balance
 
$
25.0

 
$
14.6

 
$
11.5

Interest and penalties
 
5.2

 
4.8

 
4.6

Gross unrecognized tax benefits
 
$
30.2

 
$
19.4

 
$
16.1

 
 
 
 
 
 
 
Total UTB that, if recognized, would impact the effective income tax rate as of the end of the year
 
$
22.8

 
$
11.4

 
$
8.1


During the next twelve months, it is reasonably possible that the Company could reflect a reduction to unrecognized tax benefits of $3.2 million due to the statute of limitations lapsing on positions or because tax positions are sustained on audit.
The Company is subject to taxation in the United States, various states, and foreign jurisdictions. As of December 31, 2017, the Company has no tax years under examination by the IRS. The Company has various U.S. state and local examinations and non-U.S. examinations in process. The U.S. Federal returns after 2010, state and local returns after 2009, and non-U.S. returns after 2007 are open under relevant statutes of limitations and are subject to audit.