
	Year Ended December 31,
In millions	2019		2018		2017
Current Expense:
U.S.	$	(1.1)	$	(1.6)	$	(15.9)
International	(13.5)		(15.7)		(9.2)
Total Current	$	(14.6)	$	(17.3)	$	(25.1)

Deferred (Expense) Benefit:
U.S.	(0.8)		(0.1)		343.8
International	(5.0)		5.6		3.0
Total Deferred	$	(5.8)	$	5.5	$	346.8
Income Tax (Expense) Benefit	$	(20.4)	$	(11.8)	$	321.7

A reconciliation of Income Tax (Expense) Benefit on Income before Income Taxes and Equity Income of Unconsolidated Entity at the federal statutory rate of 21% compared with the Company’s actual Income Tax (Expense) Benefit is as follows:


	Year Ended December 31,
In millions	2019		Percent		2018		Percent		2017		Percent
Income Tax Expense at U.S. Statutory Rate	$	(74.2)	21.0	%	$	(73.1)	21.0	%	$	(88.5)	35.0	%
U.S. State and Local Tax Expense	(0.9)		0.2		(1.5)		0.5		(8.7)		3.4



Permanent Items	(1.0)		0.3		(8.1)		2.3		(2.7)		1.0
Income Taxed at Corporate Partners	65.4		(18.5)		71.3		(20.5)		—		—
U.S. Tax Reform	—		—		—		—		158.5		(62.7)
Change in Valuation Allowance due to Tax Reform	—		—		—		—		(2.0)		0.8
Change in Valuation Allowance	(5.6)		1.5		2.9		(0.8)		(3.5)		1.4
Change in Valuation Allowance due to Tax Status	—		—		—		—		20.3		(8.0)
International Tax Rate Differences	(1.6)		0.5		(1.9)		0.5		3.2		(1.3)
Foreign Withholding Tax	(0.7)		0.2		(0.5)		0.2		(0.4)		0.2


Change in Tax Rates	(0.7)		0.2		(0.5)		0.1		(3.0)		1.2
U.S. Federal & State Tax Credits	—		—		—		—		10.2		(4.0)
Uncertain Tax Positions	(0.1)		0.1		—		—		(0.3)		0.1
Change in Tax Status	—		—		—		—		235.4		(93.0)
Other	(1.0)		0.3		(0.4)		0.1		3.2		(1.3)
Income Tax (Expense) Benefit	$	(20.4)	5.8	%	$	(11.8)	3.4	%	$	321.7	(127.2)	%

The Company is treated as a disregarded entity for U.S. federal and state income tax purposes. As such, income taxes are not recorded with respect to consolidated domestic earnings, resulting in a difference between the effective tax rate and the statutory tax rate. In addition, in 2018, the Company reduced its valuation allowance against certain deferred tax assets. Of the total reduction approximately $2 million was primarily attributable to the release of the valuation allowance against the net deferred tax assets of the Company’s wholly-owned subsidiary in France.

During 2017, the Company executed a series of restructuring steps to facilitate the NACP Combination. As a result of the restructuring steps, on December 29, 2017, GPII converted from a C-corporation to a Delaware limited liability company. As a result of the conversion, the Company’s tax status changed from taxable to disregarded (or non-taxable) for U.S. federal and state income tax purposes and the Company derecognized substantially all of its net deferred tax liability and other income tax balances totaling $255.7 million. In addition, during 2017, the Company recognized a provisional net income tax benefit of $156.5 million as a result of the effect of the enactment of the Tax Cuts and Jobs Act (the “Act”) on December 22, 2017. The Act significantly reduced the U.S. federal corporate income tax rate which resulted in an income tax benefit as a result of the remeasurement of the Company’s domestic net Deferred Tax Liabilities.


In millions	2019		2018
Deferred Income Tax Assets:
Compensation Based Accruals	$	3.7	$	2.8
Net Operating Loss Carryforwards	30.5		29.4
Postretirement Benefits	0.7		0.8
Tax Credits	0.7		1.5
Other	1.9		1.9
Valuation Allowance	(31.8)		(26.1)
Total Deferred Income Tax Assets	$	5.7	$	10.3
Deferred Income Tax Liabilities:





Property, Plant and Equipment	(16.3)		(14.8)
Goodwill	(1.8)		(1.5)
Other Intangibles	(12.1)		(12.2)
Other	(0.3)		—
Net Noncurrent Deferred Income Tax Liabilities	$	(30.5)	$	(28.5)
Net Deferred Income Tax Liability	$	(24.8)	$	(18.2)

According to the Income Taxes topic of the FASB Codification, a valuation allowance is required to be established or maintained when, based on currently available information and other factors, it is more likely than not that all or a portion of a deferred tax asset will not be realized. The FASB Codification provides important factors in determining whether a deferred tax asset will be realized, including whether there has been sufficient pretax income in recent years and whether sufficient income can reasonably be expected in future years in order to utilize the deferred tax asset. The Company has evaluated the need to maintain a valuation allowance for deferred tax assets based on its assessment of whether it is more likely than not that deferred tax assets will be realized through the generation of future taxable income. Appropriate consideration was given to all available evidence, both positive and negative, in assessing the need for a valuation allowance.

The Company reviewed its deferred income tax assets as of December 31, 2019 and 2018, respectively, and determined that it is more likely than not that a portion will not be realized. A valuation allowance of $31.8 million and $26.1 million at December 31, 2019 and 2018, respectively, is maintained on the deferred income tax assets for which the Company has determined that realization is not more likely than not. Of the total valuation allowance at December 31, 2019, $31.8 million relates to net deferred tax assets in certain foreign jurisdictions. The need for a valuation allowance is made on a jurisdiction-by-jurisdiction basis. As of December 31, 2019, the Company concluded that due to cumulative pretax losses and the lack of sufficient future taxable income of the appropriate character, realization is less than more likely than not on the net deferred income tax assets related primarily to the Company’s Australia, Brazil, China and Germany operations as well as the Company's previously discontinued Canadian operations.


	December 31,
In millions	2019		2018		2017
Balance Beginning of Period	$	26.1	$	31.2	$	45.5
Charges to Costs and Expenses	5.6		(2.9)		(14.8)
Additions (Deductions)	0.1		(2.2)		0.5
Balance at End of Period	$	31.8	$	26.1	$	31.2


In millions	2019		2018		2017
Balance at January 1,	$	1.8	$	1.8	$	1.8
Additions for Tax Positions of Current Year	0.1		—		—
Additions for Tax Positions of Prior Years	0.1		0.1		0.1
Reductions for Tax Positions of Prior Years	—		(0.1)		(0.1)
Balance at December 31,	$	2.0	$	1.8	$	1.8

The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits within its global operations in Income Tax Expense. The Company had an accrual for the payment of interest and penalties of $0.1 million and $0.1 million at December 31, 2019 and 2018, respectively.

The Company’s domestic operations are included in U.S. federal and state income tax returns filed by its direct and indirect parent companies. In addition, the Company’s foreign subsidiaries file income tax returns in their respective foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local tax examinations for years before 2014 or non-U.S. income tax examinations for years before 2008.

As of December 31, 2019, the Company has not provided for deferred income taxes on any of its undistributed earnings in international subsidiaries because the Company is classified as a disregarded entity for U.S. income tax purposes and as such is not subject to federal income tax and additionally has determined that no withholding tax should apply to certain potential distributions. The Company intends to indefinitely reinvest the earnings of its foreign subsidiaries outside the U.S, with the exception of earnings attributable to the Company's equity investment in the joint venture, Rengo Riverwood Packaging, Ltd. and with respect to any excess cash on hand after consideration of working capital needs and other debt settlement, of its Canadian subsidiary, Graphic Packaging International Canada, ULC.