Entity information:
Income Taxes
In accounting for the impacts of the Tax Cuts and Jobs Act (the “Act”), we followed the SEC guidance in Staff Accounting Bulletin (“SAB”) 118 issued in late December 2017. The SEC recognizes that companies may not have completed their accounting for the income tax effects of the Act in the period of enactment, and prescribes guidance to perform the accounting during a one-year measurement period and related disclosures. Specifically, SAB 118 prescribes guidance for reporting the income tax effects of the Act in the period of the enactment by classifying items into one of three separate categories: those for which the accounting is complete, those for which the accounting is incomplete but the company has a reasonable estimate, and those for which the accounting is incomplete and the company does not have a reasonable estimate.
Included in our 2017 tax provision was a $175.3 million net benefit to income tax expense for the effects of the Act. At December 31, 2017, we had not completed the accounting for the tax effects for certain aspects of the Act. However, we were able to calculate or make reasonable estimates of the effects on the existing deferred tax balances and the impact of the one-time transition tax, including the following:
•
The U.S. federal corporate tax rate reduction from 35% to 21%: We revalued all relevant domestic deferred tax assets and liabilities at the new 21% rate, including related state amounts. We recorded a $182.9 million net deferred income tax benefit for this item. We also made a reasonable estimate of all the differences between the financial statement basis and tax basis in domestic assets and liabilities originating in 2017 and recorded a $4.3 million estimated deferred income tax expense for these items. This estimate is subject to change over the measurement period, as we perform additional analysis on them in connection with filing our 2017 tax returns.
•
The federal and state impacts of the one-time deemed mandatory repatriation tax: We recorded a $33.5 million estimated current income tax expense for this item. This estimate is subject to change over the measurement period, as the federal and state tax authorities issue clarifying guidance on this provision and as we finalize our estimates and documentation necessary for the calculations. Specifically, we need to further gather, verify and document the underlying earnings and profits, foreign taxes and other data required for all relevant historical years.
•
Our assertion for unremitted earnings and other outside basis differences in foreign subsidiaries taxed under the one-time deemed mandatory repatriation tax provision: Since all of these earnings have now been taxed under the Act, there is no longer a need for any federal and state reserves on unremitted earnings of certain foreign subsidiaries. As such, we released the reserves and recorded a $31.5 million estimated net deferred income tax benefit for this item. This estimate is also subject to change over the measurement period, as we finalize the impact of the Act on the outside basis differences in certain foreign subsidiaries.
We have not completed our analysis, nor could we establish a reasonable estimate to record a federal and state Global Intangible Low Taxed Income (“GILTI”) provision in 2017. Further, the FASB has indicated it will issue guidance clarifying an accounting policy election for the treatment of GILTI in 2018. Accordingly, we have not made an election. During 2018, we will consider any clarifying guidance from the FASB and taxing authorities and complete our analysis.
During 2018, we will continue to analyze other aspects of the Act, which we currently believe will not have a material impact, and will consider any clarifying guidance from the FASB and taxing authorities relative to all aspects of the Act.  We will complete our analysis in 2018.
The provision (benefit) for income taxes consisted of the following:
 
Twelve Months Ended December 31,
(in millions)
2017
 
2016
 
2015
Federal
 
 
 
 
 
Current
$
82.3

 
$
53.9

 
$
3.8

Deferred
(221.8
)
 
(21.3
)
 
(8.2
)
State
 
 
 
 
 
Current
8.4

 
6.9

 
(0.3
)
Deferred
9.9

 
10.6

 
(5.5
)
Foreign
 
 
 
 
 
Current
43.0

 
35.4

 
25.1

Deferred
(0.9
)
 
(11.5
)
 
(3.6
)
Total (benefit) provision for income taxes
$
(79.1
)
 
$
74.0

 
$
11.3


The components of income before income taxes consisted of the following:
 
Twelve Months Ended December 31,
(in millions)
2017
 
2016
 
2015
Domestic
$
265.7
 
 
$
128.0
 
 
$
(30.5
)
Foreign
106.8
 
 
77.4
 
 
57.1
 
Income before income taxes
$
372.5
 
 
$
205.4
 
 
$
26.6
 

The effective income tax rate reconciliation consisted of the following:
 
Twelve Months Ended December 31,
(in millions)
2017
 
2016
 
2015
Income taxes at 35% statutory rate
$
130.4

 
35.0
 %
 
$
71.9

 
35.0
 %
 
$
9.3

 
35.0
 %
Increase (decrease) resulting from:
 
 
 
 
 
 
 
 
 
 
 
     State taxes, net of federal benefit
5.6

 
1.5
 %
 
15.4

 
7.5
 %
 
(5.8
)
 
(21.8
)%
     Foreign rate differential
(5.3
)
 
(1.4
)%
 
(1.8
)
 
(0.9
)%
 
(2.6
)
 
(9.9
)%
     Current year tax impact of unremitted foreign earnings
9.3

 
2.5
 %
 
7.7

 
3.7
 %
 
11.1

 
41.8
 %
     Impact of foreign dividends
4.1

 
1.1
 %
 
0.1

 
—
 %
 
0.1

 
0.2
 %
     DPAD & R&D tax credit
(3.8
)
 
(1.0
)%
 
(5.0
)
 
(2.4
)%
 
—

 
—
 %
     International restructuring
(9.9
)
 
(2.7
)%
 
(13.6
)
 
(6.6
)%
 
—

 
—
 %
     Tax Reform Impact
(175.3
)
 
(47.1
)%
 
—

 
—
 %
 
—

 
—
 %
     Excess Tax Benefit on stock-based compensation
(39.3
)
 
(10.5
)%
 
—

 
—
 %
 
—

 
—
 %
     Other
5.1

 
1.4
 %
 
(0.7
)
 
(0.3
)%
 
(0.8
)
 
(2.9
)%
Total
$
(79.1
)
 
(21.2
)%
 
$
74.0

 
36.0
 %
 
$
11.3

 
42.4
 %

For 2017, we reported a negative 21.2% effective tax rate, which is lower than the 35.0% U.S. federal statutory rate due primarily to the one-time decreases resulting from enactment of the Act in December 2017 and the excess tax benefits on stock-based compensation that is now recorded to income tax expense due to our adoption of ASU 2016-09 on January 1, 2017.
For 2016, we reported a 36.0% effective tax rate, which is higher than the 35.0% U.S. federal statutory rate due primarily to increases resulting from changes to our state tax assumptions and tax on our foreign earnings that are not considered permanently reinvested outside the United States, partially offset by decreases resulting from the impact of international restructuring and Internal Revenue Code Section 199 Domestic Productions Activities Deduction (“DPAD”) and Research and Development (“R&D”) tax credits.
For 2015, we reported a 42.4% effective tax rate, which is higher than the 35.0% U.S. federal statutory rate due primarily to tax on our foreign earnings that are not considered permanently reinvested outside the United States, partially offset by a favorable foreign tax rate differential and a credit to deferred state tax expense for changes in state tax rates.
As of December 31, 2017, in connection with the one-time mandatory deemed repatriation tax mandated under the Act, we recorded a $33.5 million estimated current income tax expense on our cumulative unremitted foreign earnings. We have recorded $5.9 million of foreign withholding taxes on unremitted earnings from foreign subsidiaries that are not permanently reinvested at the foreign operating subsidiary level that are payable once those earnings are remitted to the foreign parent, and foreign capital gains taxes of $6.8 million on the outside basis difference in excess of unremitted earnings for an investment in a non-consolidated foreign affiliate. No incremental foreign withholding tax liability has been made beyond the $5.9 million noted above. The company has not accrued a provision for any incremental U.S. tax due on unremitted earnings that are permanently reinvested outside of the U.S., which is subject to change as we finalize our analysis of the impact of the Act.

Components of net deferred income tax consisted of the following:
(in millions)
December
 31, 2017
 
December
 31, 2016
Deferred income tax assets:
 
 
 
     Compensation
$
16.4

 
$
20.1

     Employee benefits
2.5

 
4.9

     Legal reserves and settlements
5.2

 
7.4

     Hedge investments
1.1

 
4.8

     Financing related costs
—

 
4.2

     Loss and credit carryforwards
105.7

 
84.9

     Other
7.7

 
10.0

Gross deferred income tax assets
138.6

 
136.3

Valuation allowance
(85.3
)
 
(59.2
)
Total deferred income tax assets, net
$
53.3

 
$
77.1

Deferred income tax liabilities:
 
 
 
     Depreciation and amortization
$
(454.7
)
 
$
(604.5
)
     Taxes on undistributed foreign earnings
(7.3
)
 
(49.7
)
     Other
(8.8
)
 
(1.9
)
Total deferred income tax liability
(470.8
)
 
(656.1
)
Net deferred income tax liability
$
(417.5
)
 
$
(579.0
)

Deferred tax assets and liabilities result from temporary differences between tax and accounting policies. Our balance sheet includes a deferred tax asset of $1.9 million that is included in other assets.
If certain deferred tax assets are not likely to be recovered in future years, a valuation allowance is recorded. During 2017, our valuation allowance increased $26.1 million primarily due to the current year foreign tax credit carryforward. As of December 31, 2017 and 2016, a valuation allowance of $85.3 million and $59.2 million, respectively, reduced deferred tax assets generated by capital loss, U.S. federal net operating loss, foreign loss, foreign tax credit and certain state net operating loss carryforwards. Capital loss carryforwards over two to four years, U.S. federal net operating losses over nine to nineteen years, foreign loss carryforward over six to an indefinite numbers of years, foreign tax credit carryforward over the next ten years, state net operating loss carryforwards over the next four to eighteen years.
The total amount of unrecognized tax benefits as of December 31, 2017 and 2016, was $12.3 million and $4.8 million, respectively. The amounts that would affect the effective tax rate if recognized are $8.2 million and $4.8 million, respectively.
The total amount of unrecognized tax benefits consisted of the following:
(in millions)
December 31,
 2017
 
December 31,
 2016
Balance as of beginning of period
$
4.8

 
$
1.9

Increase in tax positions of prior years
2.8

 
0.7

Increase for tax positions of current year
4.7

 
2.5

Decrease in tax positions due to settlement and lapse of statute
—

 
(0.3
)
Balance as of end of period
$
12.3

 
$
4.8


We classify interest on unrecognized tax benefits as interest expense and income tax penalties as other income or expense in the consolidated statements of income. We classify any interest or income tax penalties related to unrecognized tax benefits as other liabilities in the consolidated balance sheets. There was no significant interest expense related to taxes for the years ended December 31, 2017, 2016 or 2015, and no significant liability recorded for interest payable as of December 31, 2017 or 2016. There was no significant expense recognized for tax penalties for the years ended December 31, 2017, 2016 or 2015, and no significant liability recorded for tax penalties as of December 31, 2017 or 2016.
We are regularly audited by federal, state and foreign taxing authorities. Given the uncertainties inherent in the audit process, it is reasonably possible that certain audits could result in a significant increase or decrease in the total amounts of unrecognized tax benefits. An estimate of the range of the increase or decrease in unrecognized tax benefits due to audit results cannot be made at this time. Tax years 2008 and forward remain open for examination in some state and foreign jurisdictions, and tax years 2012 and forward remain open for examination for U.S. federal purposes.