Entity information:
 Income Taxes
The following summarizes pretax income:
 
2017
 
2016
 
2015
U.S. 
$
426.6

 
$
593.3

 
$
739.4

International
108.0

 
67.2

 
68.7

Total (before equity earnings)
$
534.6

 
$
660.5

 
$
808.1


The tax provision contains the following components:
 
2017
 
2016
 
2015
Current
 
 
 
 
 
Federal
$
107.3

 
$
158.0

 
$
175.5

State
0.7

 
3.6

 
3.5

Foreign
20.0

 
29.2

 
5.5

Total current
$
128.0

 
$
190.8

 
$
184.5

Deferred
 
 
 
 
 
Federal
$
53.6

 
$
20.0

 
$
(119.1
)
State
(0.2
)
 
(1.0
)
 
(48.9
)
Foreign
(1.4
)
 
(17.7
)
 
4.1

Total deferred
52.0

 
1.3

 
(163.9
)
Total tax provision
$
180.0

 
$
192.1

 
$
20.6



The income tax provision from operations differs from the tax provision computed at the U.S. federal statutory income tax rate due to the following:
 
2017
 
 
 
2016
 
 
 
2015
 
 
Tax at U.S. Federal statutory rate
$
187.1

 
35.0
 %
 
$
231.2

 
35.0
 %
 
$
283.3

 
35.0
 %
State income taxes, net of Federal benefit
8.8

 
1.6

 
11.6

 
1.8

 
15.0

 
1.9

State income tax credits, net of Federal benefit
(9.7
)
 
(1.8
)
 
(9.4
)
 
(1.4
)
 
(4.1
)
 
(0.5
)
Foreign rate differences
(20.6
)
 
(3.8
)
 
(13.5
)
 
(2.0
)
 
(13.5
)
 
(1.7
)
Research and Experimentation
(2.6
)
 
(0.5
)
 
(3.6
)
 
(0.6
)
 
(3.3
)
 
(0.4
)
Domestic Production Activities Deduction
(7.1
)
 
(1.3
)
 
(16.4
)
 
(2.5
)
 
(17.8
)
 
(2.2
)
Interest on assessments
(0.1
)
 
—

 
0.6

 
0.1

 
(1.0
)
 
(0.1
)
Excess tax benefits
(4.8
)
 
(0.9
)
 
(4.6
)
 
(0.7
)
 
—

 
—

Valuation Allowance - U.S. Deferred Tax Asset
—

 
—

 
—

 
—

 
(241.9
)
 
(29.9
)
Transition Tax
44.9

 
8.4

 
—

 
—

 
—

 
—

Re-measurement of Deferred Taxes
(16.2
)
 
(3.0
)
 
—

 
—

 
—

 
—

Other
0.3

 
—

 
(3.8
)
 
(0.6
)
 
3.9

 
0.5

Total provision for income taxes
$
180.0

 
33.7
 %
 
$
192.1

 
29.1
 %
 
$
20.6

 
2.6
 %

On December 22, 2017, President Trump signed into law legislation referred to as the “Tax Cuts and Jobs Act” (the “TCJA”). Substantially all of the provisions of the TCJA are effective for taxable years beginning after December 31, 2017. The TCJA includes significant changes to the Internal Revenue Code of 1986 (as amended, the Code), including amendments which significantly change the taxation of business entities.
The more significant changes that impact the Company included in the TCJA are reductions in the corporate federal income tax rate from 35% to 21%, the elimination of the domestic manufacturing deduction, the ability to immediately expense certain property for specific tax years, the requirement for companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and new taxes on certain foreign sourced earnings as the U.S. transitions to a territorial tax system.
The staff of the U.S. Securities and Exchange Commission (SEC) has recognized the complexity of reflecting the impacts of the TCJA, and on December 22, 2017 issued guidance in Staff Accounting Bulletin 118 (SAB 118) which clarifies accounting for income taxes under ASC 740 if information is not yet available or complete and provides for up to a one year period in which to complete the required analyses and accounting (the measurement period). SAB 118 describes three scenarios (or “buckets”) associated with a company’s status of accounting for income tax reform: (1) a company is complete with its accounting for certain effects of tax reform, (2) a company is able to determine a reasonable estimate for certain effects of tax reform and records that estimate as a provisional amount, or (3) a company is not able to determine a reasonable estimate and therefore continues to apply ASC 740, based on the provisions of the tax laws that were in effect immediately prior to the TCJA being enacted.
At December 31, 2017, the Company has not completed its accounting for the tax effects of enactment of the TCJA; however, in certain cases, as described below, the Company has made a reasonable estimate of the effects on its existing deferred tax balances and the one-time transition tax. In other cases, the Company has not been able to make a reasonable estimate and continue to account for those items based on its existing accounting under ASC 740, Income Taxes, and the provisions of the tax laws that were in effect immediately prior to enactment. For the items for which the Company was able to determine a reasonable estimate, The Company recognized a provisional amount of $28.7, which is included as a component of income tax expense from continuing operations.
The one-time transition tax is based on its total post-1986 earnings and profits (“E&P”) that the Company previously deferred from U.S. income taxes. The Company recorded a provisional amount for its one-time transition tax liability for all of its operating foreign subsidiaries, resulting in an increase in income tax expense of $44.9, including the anticipated state income tax effect. The Company has analyzed and calculated a provisional estimate for the cumulative post-1986 E&P for these foreign subsidiaries, the impact of certain expense allocations, the potential impact of any recapture of an Overall Foreign Loss balance and an assessment of potential foreign tax credits. Further, the transition tax is based in part on the amount of those earnings held in cash and other specified assets. This amount may change when we finalize the calculation of post-1986 foreign E&P previously deferred from U.S. federal taxation and finalize the amounts held in cash or other specified assets.
The Company re-measured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future. However, the Company is still analyzing certain aspects of the TCJA and refining its calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. Included within its net deferred tax assets and liabilities are state income tax credits, which are recorded net of federal tax expense. With a lower federal income tax rate of 21%, the net value of these credits has increased. The provisional amount recorded related to the re-measurement of its net deferred tax asset balance was a tax benefit recorded as a component of income tax from continuing operations of $16.2.
Significant tax effected temporary differences comprising the net deferred tax asset are as follows:
 
2017
 
2016
Long-term contracts
$
69.0

 
$
127.7

Post-retirement benefits other than pensions
11.2

 
19.1

Pension and other employee benefit plans
(65.1
)
 
(77.5
)
Employee compensation accruals
33.8

 
68.0

Depreciation and amortization
(104.4
)
 
(154.4
)
Inventory
1.9

 
1.7

State income tax credits
89.8

 
71.7

Accruals and reserves
58.3

 
91.7

Deferred production
(1.7
)
 
(3.7
)
Net operating loss carryforward
0.3

 
3.7

Other
(5.9
)
 
(5.7
)
Net deferred tax asset
87.2

 
142.3

Valuation allowance
(15.0
)
 
(13.6
)
Net deferred tax asset
$
72.2

 
$
128.7


Deferred tax detail above is included in the balance sheet and supplemental information as follows:
 
2017
 
2016
Non-current deferred tax assets
72.5

 
128.8

Non-current deferred tax liabilities
(0.3
)
 
(0.1
)
Net non-current deferred tax assets
$
72.2

 
$
128.7

Total deferred tax asset
$
72.2

 
$
128.7


The following is a roll forward of the deferred tax valuation allowance at December 31, 2017, 2016 and 2015:
Deferred Tax Asset Valuation Allowance
2017
 
2016
 
2015
Balance, January 1
$
13.5

 
$
15.1

 
$
257.3

U.S. deferred tax asset
—

 
—

 
(109.3
)
Income tax credits
1.6

 
(0.9
)
 
(57.4
)
Depreciation and amortization
0.1

 
(0.1
)
 
119.6

Long-term contracts
—

 
—

 
(194.6
)
Other
(0.2
)
 
(0.6
)
 
(0.5
)
Balance, December 31
$
15.0

 
$
13.5

 
$
15.1

At December 31, 2017, the Company has not completed its accounting for the tax effects of enactment of the TCJA; however, the Company has made a reasonable estimate of the effects on its existing deferred tax balances.
A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. When determining the amount of net deferred tax assets that are more likely than not to be realized, the Company assess all available positive and negative evidence. The weight given to the positive and negative evidence is commensurate with the extent the evidence may be objectively verified.
The Company continues to maintain $15.0 in valuation allowances primarily against separate company state income tax credit deferred tax assets.
The Company continues to maintain that earnings of all operating foreign subsidiaries are indefinitely invested outside the U.S. on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and its specific plans for reinvestment of those subsidiary earnings to fund working capital requirements, service existing obligations and invest in efforts to secure future business. As a result, no additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the transition tax, or any additional outside basis difference inherent in these entities. The Company has completed analysis regarding potential withholding tax related to potential future dividends and anticipate that any associated withholding taxes would be immaterial based upon current law. Determining the amount of unrecognized deferred tax liability related to any remaining undistributed foreign earnings not subject to the transition tax and additional outside basis difference in these entities (i.e., basis difference in excess of that subject to the one-time transition tax) is not practicable at this time.
The beginning and ending unrecognized tax benefits reconciliation is as follows:
 
2017
 
2016
 
2015
Beginning balance
$
6.3

 
$
6.2

 
$
5.9

Gross increases related to current period tax positions
—

 
—

 
—

Gross increases related to prior period tax positions
0.4

 
0.1

 
0.3

Gross decreases related to prior period tax positions
—

 
—

 
—

Statute of limitations' expiration
—

 
—

 
—

Settlements
—

 
—

 
—

Ending balance
$
6.7

 
$
6.3

 
$
6.2


Included in the December 31, 2017 balance was $5.3 in unrecognized tax benefits which, if ultimately recognized, will reduce the Company's effective tax rate. The Internal Revenue Service's examination of the Company's 2016 U.S. Federal income tax return is substantially complete. The Company will continue to participate in the Compliance Assurance Process ("CAP") program for its 2017 and 2018 tax years. The CAP program's objective is to resolve issues in a timely, contemporaneous manner and eliminate the need for a lengthy post-filing examination. There are no open audits in the Company’s state and foreign jurisdictions and the statute of limitations has lapsed on its 2014 U.K. tax return.  While a change could result from the ongoing examinations, the Company expects no material change in its recorded unrecognized tax liability in the next 12 months.
The Company reports interest and penalties, if any, related to unrecognized tax benefits in the income tax provision. As of December 31, 2017, and December 31, 2016, there was no accrued interest on the unrecognized tax benefit liability included in the balance sheets and there was no impact of interest on the Company’s unrecognized tax benefit liability during 2017 and 2016.
The Company continues to operate under a tax holiday in Malaysia effective through September 2024. In 2014, the Company received formal approval of the tax holiday from the Malaysian tax authorities, with conditional renewals once every five years beginning in September 2014. The Company expects to meet the requirements for the conditional renewals. The Company’s 2017 income tax expense reflects $7.2 of Malaysia tax holiday benefit for the year ended December 31, 2017.
At December 31, 2017, the Company had total North Carolina state net operating loss carryforwards of $17.0 which begin to expire in 2026.
Included in the deferred tax assets at December 31, 2017 are $62.4 in Kansas High Performance Incentive Program ("HPIP") Credit, $10.0 in Kansas Research & Development ("R&D") Credit, and $3.3 in Kansas Business and Jobs Development Credit, totaling $75.7 in gross Kansas state income tax credit carryforwards, net of federal benefit. The HPIP Credit provides a 10% investment tax credit for qualified business facilities located in Kansas for which $8.8 expires in 2028, $14.3 expires in 2029, $10.8 expires in 2030, $6.4 expires in 2031, $10.8 expires in 2032, and $11.3 expires in 2033. The R&D Credit provides a credit for qualified research and development expenditures conducted within Kansas. This credit can be carried forward indefinitely. The Business and Jobs Development Credit provides a tax credit for increased employment in Kansas. This credit can be carried forward indefinitely.
Included in the deferred tax assets at December 31, 2017 are $6.9 in North Carolina Investing in Business Property Credit, $4.0 in North Carolina Investment in Real Property Credit, and $3.3 in North Carolina Creating Jobs Credit, totaling $14.2 in gross North Carolina state income tax credit carryforwards, net of federal benefit. The Investing in Business Property Credit provides a 7% investment tax credit for property located in a North Carolina development area and the Investment in Real Property Credit provides a 30% investment tax credit for real property located in a North Carolina development area. The Creating Jobs Credit provides a tax credit for increased employment in North Carolina. These North Carolina state income tax credits can be carried forward 20 years. It is management's opinion that none of these North Carolina state income tax credits will be utilized before they expire and a $14.2 valuation allowance is recorded against the deferred tax asset, net of federal benefit.
The Company had $27.1 and $7.4 of income tax receivable as of December 31, 2017 and December 31, 2016, respectively, which is reflected within other current assets on the balance sheet. The Company had $38.6 of non-current income tax payable as of December 31, 2017, which is reflected within other liabilities on the balance sheet.