Entity information:
Income Taxes

Income taxes have been based on the following components of earnings (loss) before income taxes and equity in loss of unconsolidated entities for the years ended December 31, 2017, 2016 and 2015:

 
2017
 
2016
 
2015
United States
$
65.6

 
$
48.4

 
$
(855.1
)
Foreign
25.6

 
10.9

 
(63.3
)
Total
$
91.2

 
$
59.3

 
$
(918.4
)


The components of income tax (benefit) expense for the years ended December 31, 2017, 2016 and 2015, were as follows:

 
2017
 
2016
 
2015
Federal:
 
 
 
 
 
Current
$
1.4

 
$
32.0

 
$
5.6

Deferred
(5.5
)
 
(20.0
)
 
(281.4
)
State:
 
 
 
 
 
Current
2.7

 
3.9

 
0.5

Deferred
(0.5
)
 
(5.3
)
 
(13.9
)
Foreign:
 
 
 
 
 
Current
2.4

 
3.7

 
3.6

Deferred
(16.5
)
 
(1.3
)
 
2.8

Total income tax (benefit) expense
$
(16.0
)
 
$
13.0

 
$
(282.8
)


The Company recorded $808.3 million of non-cash goodwill impairment charges during the year ended December 31, 2015, of which $743.0 million was nondeductible for income tax purposes. The tax benefit related to goodwill impairment charges of $265.9 million was composed of the following: (1) a $241.4 million deferred tax benefit associated with the reduction of the deferred tax liability related to the investments in United States subsidiaries due to the lower estimated fair value of the United States Print and Related Services segment; and (2) a $24.5 million tax benefit on the $65.3 million of deductible goodwill. The deferred tax liability related to the investments in United States subsidiaries was originally established when the former World Color Press entities emerged from bankruptcy in 2009.

The following table outlines the reconciliation of differences between the Federal statutory tax rate and the Company's effective tax rate for the years ended December 31, 2017, 2016 and 2015:

 
2017
 
2016
 
2015
Federal statutory rate
35.0
 %
 
35.0
 %
 
35.0
 %
Federal rate change
(31.6
)
 
—

 
—

Adjustment to valuation allowances
(22.0
)
 
1.7

 
(1.0
)
Foreign rate differential
(3.2
)
 
(8.4
)
 
0.2

Adjustment of uncertain tax positions
(2.9
)
 
1.6

 
(0.1
)
Adjustment of deferred tax liabilities
(1.9
)
 
3.7

 
(0.1
)
Domestic production activity deduction
(1.0
)
 
(5.6
)
 
—

Impact from foreign branches
7.8

 
6.1

 
(0.3
)
State taxes, net of federal benefit
2.2

 
(3.5
)
 
—

Loss on foreign investment
—

 
(7.9
)
 
—

Investment in United States subsidiaries
—

 
—

 
26.3

Nondeductible goodwill impairment
—

 
—

 
(28.3
)
Other
0.1

 
(0.8
)
 
(0.9
)
Effective income tax rate
(17.5
)%
 
21.9
 %
 
30.8
 %


The 22.0% adjustment to valuation allowances primarily relates to an income tax credit to be utilized by the Company's Polish subsidiaries due to sustainable profitability.  The Company determined the utilization of the credit is sufficient to record a reduction in the valuation allowance in order to reflect the current net realizable value of related deferred tax assets based on estimated credit utilization through 2026, the year the credit expires.

Deferred Income Taxes

The significant deferred tax assets and liabilities as of December 31, 2017 and 2016, were as follows:
 
2017
 
2016
Deferred tax assets:
 
 
 
Net operating loss and other tax carryforwards
$
129.6

 
$
150.9

Interest limitation
43.7

 
84.6

Pension and workers compensation benefits
42.7

 
82.9

Accrued compensation
20.2

 
39.0

Accrued liabilities
19.3

 
21.4

Goodwill and intangible assets
7.5

 
11.6

Allowance for doubtful accounts
7.3

 
18.0

Other
9.4

 
17.9

Total deferred tax assets
279.7

 
426.3

Valuation allowance
(126.9
)
 
(155.9
)
 
 
 
 
Net deferred tax assets
$
152.8

 
$
270.4

 
 
 
 
Deferred tax liabilities:
 
 
 
Property, plant and equipment
$
(165.0
)
 
$
(293.0
)
Other
(8.5
)
 
(12.7
)
Total deferred tax liabilities
(173.5
)
 
(305.7
)
 
 
 
 
Net deferred tax liabilities
$
(20.7
)
 
$
(35.3
)


The Company has recorded deferred income tax liabilities of $41.9 million and $35.3 million as of December 31, 2017 and 2016, respectively, which were included in deferred income taxes in the consolidated balance sheets. As of December 31, 2017, the Company has also recorded deferred income tax assets of $21.2 million, which were included in other long-term assets in the consolidated balance sheets.

At December 31, 2017, the Company had the following gross amounts of tax-related carryforwards:

•
Net operating loss carryforwards of $108.8 million and $481.6 million for foreign and state, respectively. Of the foreign net operating loss carryforwards, $38.4 million are available without expiration, while the remainder expire through 2037. The state net operating loss carryforwards expire in varying amounts through 2037.

•
Capital loss carryforwards of $20.8 million and $10.7 million for federal and state, respectively. Of the federal capital loss carryforwards, $6.2 million expires in 2019, $1.1 million expires in 2021 and $13.5 million expires in 2022; and of the state capital loss carryforwards, $3.9 million expires in 2019, $0.5 million expires in 2021 and $6.3 million expires in 2022.

•
Various credit carryforwards of $32.3 million and $47.0 million for foreign and state, respectively. The foreign credit carryforward expires in 2026. The state credit carryforwards include $31.9 million that are available without expiration, while the remainder expire through 2032

As of December 31, 2017, the Company has recorded a valuation allowance of $126.9 million on its consolidated balance sheet primarily related to the tax-affected amounts of the above carryforwards. The valuation allowance includes $4.4 million, $64.5 million and $58.0 million of federal, foreign and state deferred tax assets, respectively, that are not expected to be realized.

Uncertain Tax Positions

The following table summarizes the activity of the Company's liability for unrecognized tax benefits at December 31, 2017, 2016 and 2015:

 
2017
 
2016
 
2015
Balance at beginning of period
$
29.6

 
$
29.8

 
$
31.1

Additions for tax positions of the current year
2.3

 
0.3

 
0.7

Additions for tax positions of prior years
1.3

 
1.0

 
1.4

Reductions for tax positions of prior years
(11.3
)
 
(0.7
)
 
(0.9
)
Lapses of applicable statutes of limitations
(0.3
)
 
(0.8
)
 
(1.6
)
Settlements during the period
—

 
—

 
(0.8
)
Foreign exchange and other
—

 
—

 
(0.1
)
Balance at end of period
$
21.6

 
$
29.6

 
$
29.8



As of December 31, 2017, $21.6 million of unrecognized tax benefits would impact the Company's effective tax rate, if recognized. Of that amount, it is reasonably possible that $7.5 million of the total amount of unrecognized tax benefits will decrease within the next twelve months due to resolution of income tax audits or statute expirations.

The Company classified interest (income) expense and any related penalties related to income tax uncertainties as a component of income tax (benefit) expense. The following table summarizes the Company's interest (income) expense related to tax uncertainties and penalties recognized during the years ended December 31, 2017, 2016 and 2015:

 
2017
 
2016
 
2015
Interest (income) expense
$
(2.5
)
 
$
1.0

 
$
—

Penalties recognized
0.1

 
—

 
(0.1
)


Accrued interest and penalties related to income tax uncertainties are reported as components of other current liabilities and other long-term liabilities in the consolidated balance sheets. The following table summarizes the Company's liabilities for accrued interest and penalties related to income tax uncertainties at December 31, 2017 and 2016:

 
December 31, 2017
 
December 31, 2016
 
Accrued interest
 
Accrued penalties
 
Accrued interest
 
Accrued penalties
Other current liabilities
$
0.1

 
$
0.2

 
$
—

 
$
—

Other long-term liabilities
3.2

 
0.3

 
5.9

 
0.4

Total liabilities
$
3.3

 
$
0.5

 
$
5.9

 
$
0.4



The Company has tax years from 2014 through 2017 that remain open and subject to examination by the Internal Revenue Service. Tax years from 2012 through 2017 remain open and subject to examination in the Company's various major state jurisdictions within the United States.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, the following: (1) reducing the U.S. federal corporate tax rate from 35 percent to 21 percent; (2) requiring companies to pay a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations, or also referred to as global intangible low taxed income ("GILTI"); (5) creating a new limitation on deductible interest expense; (6) creating the base erosion anti-abuse tax ("BEAT"), a new minimum tax; (7) repealing the domestic production activity deduction; and (8) establishing bonus depreciation that will allow for full expensing of qualified property.

The SEC staff issued Staff Accounting Bulletin No. 118 ("SAB 118"), which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under Accounting Standards Codification 740 ("ASC 740"). In accordance with SAB 118, in the period the Tax Act is enacted, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company's accounting for certain income tax effects of the Tax Act is incomplete, but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

In connection with the initial analysis of the impact of the Tax Act, the Company has recorded a discrete net tax benefit of $28.8 million for the corporate rate reduction as of December 31, 2017. While the assessment for the income tax effects of the Tax Act is ongoing, the Company has recorded a provisional adjustment for certain elements of the Tax Act where reasonable estimates of the tax effects were determinable. Adjustments were not recorded for those elements where the Company was unable to reasonably estimate the impact, and the Company has continued accounting for those items in accordance with ASC 740 on the basis of the tax laws in effect before the Tax Act.

The Company was able to reasonably estimate certain effects of the Tax Act and has recorded provisional adjustments as follows:

•
Reduction of US federal corporate rate: The Tax Act reduces the corporate tax rate to 21 percent, effective January 1, 2018. The Company has recorded a provisional decrease of $23.7 million to its deferred income taxes, with a corresponding net adjustment to deferred income tax expense and a $5.1 million decrease to uncertain tax positions with a corresponding net adjustment to current income tax expense for the year ended December 31, 2017. While the Company was able to make a reasonable estimate of the impact of the reduction in corporate rate, it may be affected by other analyses related to the Tax Act which are not yet able to be completed, as indicated below.

•
Deemed Repatriation Transition Tax: The Deemed Repatriation Transition Tax ("Transition Tax") is a tax on previously untaxed accumulated and current earnings and profits ("E&P") of certain foreign subsidiaries. To determine the amount of the Transition Tax, the Company must determine, in addition to other factors, the amount of post-1986 E&P of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. The Company is able to make a reasonable estimate that the Transition Tax will be zero based on an estimated aggregate post-1986 foreign earnings and profits deficit of the relevant subsidiaries.  While the Company was able to make a reasonable estimate of the Transition Tax, the Company is continuing to gather additional information to more precisely compute the amount of aggregate foreign earnings and profits and related amount of Transition Tax, if any.

•
Cost recovery: While the Company has not yet completed all of the computations necessary or completed an inventory of 2017 expenditures that qualify for immediate expensing, the Company has recorded a provisional benefit for this temporary difference based on the current intent to fully expense all qualifying expenditures.

The Company was unable to reasonably estimate certain effects of the Tax Act and has not recorded provisional adjustments for the following elements of the Tax Act:

•
Global intangible low taxed income: The Tax Act creates a new requirement that certain income (i.e. GILTI) earned by controlled foreign corporations ("CFCs") must be included currently in the gross income of the CFCs' U.S. shareholder. GILTI is the excess of the Shareholder's "net CFC tested income" over the net deemed tangible income return.

Because of the complexity of the new GILTI tax rules, the Company is continuing to evaluate this provision of the Tax Act and the application of ASC 740. Under GAAP, the Company is allowed to make an accounting policy choice of either (1) treating taxes due on future U.S. inclusions beginning January 1, 2018 in taxable income related to GILTI as current-period expense when incurred (the "period cost method") or (2) factoring such amounts into a company's measurement of its deferred taxes ("deferred method") as of December 31, 2017. The Company's election of an accounting policy with respect to the new GILTI tax rules will depend, in part, on analyzing global income to determine whether future U.S. inclusions in taxable income related to GILTI are expected and, if so, what the impact is expected to be. Because whether the Company expects to have future U.S. inclusions in taxable income related to GILTI depends not only on the Company's current structure and estimated future results of global operations, but also the intent and ability to modify the structure and/or the business, the Company is not yet able to reasonably estimate the effect of this provision of the Tax Act. Therefore, the Company has not made any adjustments related to potential GILTI tax in the financial statements and has not made a policy decision regarding whether to record deferred taxes on GILTI.

•
Valuation allowances: The Company must assess whether valuation allowances assessments are affected by various aspects of the Tax Act (e.g. GILTI inclusions). Since, as discussed herein, the Company has recorded no amounts related to certain portions of the Tax Act, any corresponding determination of the need for or change in valuation allowance has not been completed, and no changes to valuation allowances as a result of the Tax Act have been recorded.

As a result of the Tax Act, historical earnings in certain foreign subsidiaries became subject to the U.S. Transition Tax, as described above. However, an actual repatriation from these subsidiaries could be subject to additional foreign and U.S. state income taxes. The Company considers its foreign earnings to be indefinitely invested. Accordingly, the Company does not provide for, nor expect to incur, any significant, additional taxes which could become payable upon repatriation of such amounts.