Entity information:
e Taxes

Income before income taxes and the applicable provision for income taxes were :
 
 
Year Ended December 31,
(Amounts in millions) 
2017
 
2016
 
2015
Income before income taxes:
 
 
 
 
 
Domestic
$
227.3

 
$
14.0

 
$
62.9

Foreign
425.3

 
355.1

 
234.6

 
$
652.6

 
$
369.1

 
$
297.5

Provision/(benefit) for income taxes:
 
 
 

 
 

Current:
 

 
 

 
 

Domestic
$
(9.8
)
 
$
1.5

 
$
(22.0
)
Domestic Transition Tax
196.4

 
—

 
—

Foreign
91.3

 
52.0

 
45.2

 
$
277.9

 
$
53.5

 
$
23.2

Deferred:
 

 
 

 
 

Domestic
$
(30.0
)
 
$
(16.0
)
 
$
(3.0
)
Foreign
(18.2
)
 
84.3

 
(8.7
)
 
$
(48.2
)
 
$
68.3

 
$
(11.7
)
 
 
 
 
 
 
Total provision
$
229.7

 
$
121.8

 
$
11.5



The Company conducts business globally and, as a result, it files income tax returns in the U.S. federal, state and local, and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world, including such major jurisdictions as Belgium, Brazil, China, France, Germany, India, the Netherlands, Poland, the United Kingdom and the U.S. The Internal Revenue Service (IRS) has concluded its examination for all years prior to 2015. With no material exceptions, the Company is no longer subject to examinations by foreign tax authorities for years before 2008. During December 2017, the Company received an income tax assessment in India for the 2013 tax year of approximately $67 million related to a capital gain on an intercompany subsidiary transfer. The Company believes no tax is due under the relevant double tax treaty with India and is in the process of appealing the assessment.

The Tax Act

On December 22, 2017, the U.S. government enacted comprehensive tax legislation. The Tax Act includes a reduction in the corporate tax rate to 21%, from 35%, a one-time transition tax on unrepatriated earnings of foreign subsidiaries at reduced tax rates regardless of whether the earnings are repatriated, new taxes on earnings of foreign subsidiaries, a minimum tax on payments to foreign related parties and the modification or repeal of many business deductions and credits.

The SEC staff issued Staff Accounting Bulletin No. 118 (SAB 118) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Act, the Company has made reasonable estimates of the effects and recorded provisional amounts in its financial statements as of December 31, 2017. As the Company collects and prepares necessary data, and interprets the Tax Act and any additional guidance issued by the U.S. Treasury Department, the IRS, and other standard-setting bodies, the Company may make adjustments to the provisional amounts. Those adjustments may materially impact the Company's provision for income taxes and effective tax rate in the period in which the adjustments are made. The accounting for the tax effects of the Tax Act will be completed in 2018.

One-Time Transition Tax

The Tax Act requires the Company to pay U.S. income taxes on accumulated foreign subsidiary earnings not previously subject to U.S. income tax at a rate of 15.5% to the extent of foreign cash and certain other net current assets and 8% on the remaining earnings. During 2017, the Company recognized provisional income tax expense of $100.0 million. The provisional U.S. transition tax is comprised of the estimated transition tax payable with the Company's U.S. tax filings of $196.4 million offset by the reversal of previously recorded deferred tax liabilities on outside basis differences in foreign subsidiaries of $96.4 million. The Company anticipates that it will pay this tax over the eight-year installment period. The Company has recorded provisional amounts based on estimates of the effects of the Tax Act as the analysis requires significant data from our foreign subsidiaries that is not regularly collected or analyzed.

Deferred Tax Effects

The Company has remeasured its deferred taxes as of December 31, 2017 to reflect the reduced rate of 21% that will apply in future periods when these deferred taxes are settled or realized. The Company recognized a deferred tax benefit of $32.4 million to reflect the reduced U.S. tax rate and other effects of the Tax Act. Although the tax rate reduction is known, the Company has not collected the necessary data to complete our analysis of the effect of the Tax Act on the underlying deferred taxes and as such, the amounts recorded as of December 31, 2017 are provisional. As the Company completes its analysis of the Tax Act and incorporates additional guidance that may be issued by the U.S. Treasury Department, the IRS or other standard-setting bodies, the Company may identify additional effects not reflected as of December 31, 2017.

Belgium Tax Reform

On December 25, 2017, Belgium enacted tax legislation including a reduction in the corporate tax rate, decreasing from 33.99% to 29.58% in 2018 and then to 25.00% beginning in 2020. During 2017, the Company recognized income tax expense of $13.8 million related to the legislation for the remeasurement of our net deferred tax assets in Belgium.

Reconciliation of Effective Income Tax Rate

A reconciliation between the actual income tax expense provided and the income taxes computed by applying the statutory federal income tax rate of 35.0% in 2017, 2016 and 2015 to the income before income taxes is as follows:
 
 
Year Ended December 31,
(Amounts in millions) 
2017
 
2016
 
2015
Tax provision at statutory rate
$
228.3

 
$
129.2

 
$
104.1

State income taxes, net
8.9

 
0.2

 
1.1

Foreign earnings taxed at other than 35%
(21.6
)
 
(28.5
)
 
(22.6
)
(Decrease)/increase in valuation allowance
(1.8
)
 
(0.4
)
 
5.4

Unremitted foreign earnings
—

 
(0.5
)
 
(5.9
)
Uncertain tax position for 2012-14 EPR/PID
—

 
69.3

 
—

Patent Income Deduction (PID)
(21.7
)
 
(20.8
)
 
(16.9
)
High & New Technology Enterprise (HNTE) grant
(10.5
)
 
(7.6
)
 
(6.0
)
Hybrid financing structure
(11.5
)
 
(11.1
)
 
(10.9
)
Notional Interest Deduction (NID)
(1.7
)
 
(2.9
)
 
(4.0
)
Change in other uncertain tax positions
0.6

 
(10.6
)
 
(32.6
)
Equity compensation
(2.4
)
 
4.6

 
3.8

Belgium tax rate changes
13.8

 
—

 
—

US tax rate changes
(32.4
)
 
—

 
—

Net US transition tax
100.0

 
—

 
—

Other, net
(18.3
)
 
0.9

 
(4.0
)
Total provision
$
229.7

 
$
121.8

 
$
11.5



The effective income tax rates for 2017, 2016 and 2015 were 35.2%, 33.0% and 3.9%, respectively.

The Company has operations and a taxable presence in countries outside the United States and all of these countries have a tax rate that is different than the rate in the U.S. The countries in which the Company has a material presence and where the foreign earnings are taxed at a rate significantly other than 35% include Belgium, China, Germany, India, the Netherlands and Poland.

Deferred Tax Assets and Liabilities

The following table details the gross deferred tax liabilities and assets and the related valuation allowances:
 
Year Ended December 31,
(Amounts in millions) 
2017
 
2016
Deferred tax liabilities:
 
 
 
Basis difference in noncontrolling interest
$
—

 
$
9.0

Facilities (accelerated depreciation, capitalized interest and purchase accounting differences)
22.0

 
14.1

Basis difference in subsidiaries
66.8

 
96.3

Intangibles
15.9

 
9.4

 
$
104.7

 
$
128.8

 
 
 
 
Deferred tax assets:
 
 
 
Net operating losses and tax credits
$
28.3

 
$
33.5

Post-retirement and other employee benefits
143.3

 
117.6

Capitalized assets
50.2

 
42.1

Inventory
1.6

 
2.0

Warranties
3.0

 
2.0

Unrealized foreign exchange losses
13.2

 
—

Other
13.3

 
14.2

 
$
252.9

 
$
211.4

 
 
 
 
Valuation allowances
(12.4
)
 
(12.6
)
Net deferred tax assets
$
135.8

 
$
70.0



Management has determined that $12.4 million of its deferred tax assets in certain jurisdictions will not be realized since evidence such as historical operating profits resulted in a lack of taxable earnings during the most recent three-year period ended December 31, 2017, the lack of projected earnings and an arbitration claim related to tax deductions taken in a previous year provided sufficient negative evidence to record a valuation allowance against such deferred tax assets related to carryforwards for net operating losses.

As of December 31, 2016, the deferred tax liability for basis difference in subsidiaries included $86.6 million for earnings not permanently reinvested which has been reversed during 2017 as part of the provisional U.S. transition tax included in tax expense. As of December 31, 2017, a deferred tax liability of $91.4 million, reduced by $31.8 million for U.S. tax rate changes, has been recorded related to the remeasurement gain on the Meritor WABCO equity investment.

Tax Loss Carryforwards

As of December 31, 2017, the Company has $320.9 million of net operating loss carry forwards (NOLs) available for utilization in future years. Approximately $307.6 million of such NOLs have an unlimited life and the remainder of $13.3 million is available for periods of up to 20 years. The net operating loss carryforwards include $270.0 million for which unrecognized tax benefits have been recorded at December 31, 2017.

Unrecognized Tax Benefits
 
Unrecognized tax benefits as of December 31, 2017 amounted to $72.0 million of which $70.1 million has been offset against deferred tax assets as stated above. The Company is currently unable to estimate the timing of payment of the remaining unrecognized tax benefit of $1.9 million. Total accrued interest as of December 31, 2017, 2016 and 2015 was approximately $0.4 million, $0.8 million and $1.7 million, respectively. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense.

A reconciliation of the beginning and ending balances of unrecognized tax benefits is as follows (exclusive of interest):
 
Year Ended December 31,
(Amounts in millions) 
2017
 
2016
 
2015
Beginning balance, January 1
$
69.4

 
$
14.6

 
$
41.5

Additions for tax positions related to current year
1.7

 
66.7

 
5.1

Additions for tax positions related to prior years
4.2

 
—

 
—

Reductions for tax positions related to prior years
(3.4
)
 
(1.1
)
 
(27.3
)
Cash settlements
(0.2
)
 
—

 
(2.3
)
Expirations of statute of limitations
(0.1
)
 
(10.8
)
 
(2.4
)
Ending balance, December 31
$
71.6

 
$
69.4

 
$
14.6



During 2017, the Company reduced its unrecognized tax benefit related to the Excess Profit Runling (EPR) / Patent Income Deduction (PID) clawback by $8.0 million as the result of Belgian tax rate changes; however, the unrecognized tax benefit increased by $9.0 million as the result of foreign currency translation. During 2016, the Company recorded an unrecognized tax benefit related to the EPR/PID clawback of $69.3 million net of $4.1 million of cumulative translation adjustments. Further, during 2016, the Company reversed unrecognized tax benefits due primarily to the expiration of the applicable statute of limitation of $11.9 million net of $0.6 million of cumulative translation adjustments. In 2015, the Company reversed $32.0 million of unrecognized benefits due mainly to the settlement of a U.S. tax audit.

As of December 31, 2017 and 2016, there were $71.6 million and $69.4 million of unrecognized tax benefits that, if recognized, would impact the annual effective tax rate.

Non-U.S. income taxes are provided for the reversal of basis differences on investments in foreign subsidiaries not deemed to be indefinitely reinvested in the local countries. Non-U.S. income taxes have not been provided on the excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries that are indefinitely reinvested of $261.3 million as of December 31, 2017 and approximately $1.1 billion as of December 31, 2016. Determination of the amount of any unrecognized deferred income tax liability on this temporary difference is not practicable because of the complexities of the hypothetical calculation related to how income basis differences would be repatriated.