

Components of the income tax provision:
Current:
United States	$	105.6		$	475.3	$	67.3
Non-United States	112.1			131.4		109.9
State and local	16.5			18.1		0.7
Total current	234.2			624.8		177.9
Deferred:
United States	(27.0		)	118.6		44.6
Non-United States	(0.1		)	48.0		(14.1		)
State and local	(1.9		)	3.9		3.3
Total deferred	(29.0		)	170.5		33.8
Income tax provision	$	205.2		$	795.3	$	211.7

Total income taxes paid	$	293.3		$	222.9	$	211.9

On December 22, 2017, the Tax Act was enacted. The Tax Act significantly changed U.S. tax law by, among other things, lowering the statutory corporate income tax rate, implementing a modified territorial tax system, and imposing a one-time transition tax on accumulated earnings of foreign subsidiaries that were previously deferred from U.S. tax (“transition tax”). As a fiscal year taxpayer, certain provisions of the Tax Act impacted us in fiscal year 2018, including the change in the federal statutory rate and the one-time transition tax, while other provisions became effective in fiscal year 2019, including the tax on global intangible low-tax income (“GILTI”) of foreign subsidiaries, the deduction for foreign derived intangible income (“FDII”), and the elimination of the domestic manufacturing deduction.

The FASB allows companies to adopt an accounting policy to either recognize deferred taxes on GILTI or treat it as a cost in the year incurred. The Company has adopted an accounting policy to treat tax on GILTI as a tax cost in the year incurred.

Our base rate reflects the change in the U.S. federal statutory rate from 35 percent to 21 percent resulting from the enactment of the Tax Act. The statutory rate for our fiscal year 2019 is 21 percent.

In December 2017, the SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on how a company may recognize provisional estimates related to the effects of the Tax Act. During the first quarter of fiscal year 2019, the Company completed its analysis of the impact of the Tax Act in accordance with SAB 118 and the amounts are no longer considered provisional. This resulted in no change to the provisional amounts recorded in fiscal year 2018 related to the revaluation of U.S. deferred tax assets and liabilities and the one-time transition tax liability on earnings of our foreign subsidiaries that were previously deferred from U.S. income tax.



	2019		2018		2017
Statutory tax rate	21.0	%	24.5	%	35.0	%
State and local income taxes	0.1		1.0		0.7
Non-United States taxes	(4.8	)	(4.4	)	(9.3	)
Repatriation of foreign earnings	2.8		4.2		0.5
Foreign-derived intangible income	(1.6	)	—		—
Impact of the Tax Act	—		36.6		—
Foreign currency transaction loss	—		—		(1.9	)
Change in valuation allowance^(a)	7.6		0.7		0.1
Share-based compensation	(0.9	)	(1.3	)	(2.8	)
Research and development tax credit	(1.2	)	(1.3	)	(0.6	)
Other	(0.2	)	(0.2	)	(1.3	)
Effective income tax rate	22.8	%	59.8	%	20.4	%

^(a) During fiscal year 2019, we recorded a valuation allowance against deferred tax assets associated with the loss in fair value of the PTC Shares. This resulted in an increase to the effective tax rate of 7.5% and a corresponding valuation allowance of $67.3 million, as described further in the table below.

We operate in certain non-U.S. tax jurisdictions under government-sponsored tax incentive programs, which may be extended if certain additional requirements are met. The program which generates the primary benefit will expire in 2022. The tax benefit attributable to these programs was $55.1 million ($0.46 per diluted share) in 2019, $52.3 million ($0.41 per diluted share) in 2018 and $43.4 million ($0.33 per diluted share) in 2017.



	2019			2018
Deferred income tax assets:
Compensation and benefits	$	6.0		$	6.5
Inventory	11.1			11.5
Returns, rebates and incentives	29.8			34.0
Retirement benefits	298.5			141.5
Environmental remediation and other site-related costs	26.2			20.7
Share-based compensation	21.6			19.6
Other accruals and reserves	46.9			49.7
Investments	69.6			—
Net operating loss carryforwards	18.5			19.6
Tax credit carryforwards	16.5			17.9
Capital loss carryforwards	9.5			10.0
Other	10.7			4.6
Subtotal	564.9			335.6
Valuation allowance	(93.8		)	(27.0		)
Net deferred income tax assets	471.1			308.6
Deferred income tax liabilities:
Property	(55.8		)	(54.7		)
Intangible assets	(24.4		)	(25.3		)
Investments	—			(21.7		)
Unremitted earnings of foreign subsidiaries	(25.5		)	(22.7		)
Other	(1.3		)	(4.6		)
Deferred income tax liabilities	(107.0		)	(129.0		)
Total net deferred income tax assets	$	364.1		$	179.6

We believe it is more likely than not that we will realize our deferred tax assets through the reduction of future taxable income, other than for the deferred tax assets reflected below.



Tax attributes and related valuation allowances	Tax Benefit Amount		Valuation Allowance		Carryforward Period Ends
Non-United States net operating loss carryforward	$	7.2	$	7.2	2020	-	2028
Non-United States net operating loss carryforward	3.3		3.1		Indefinite
Non-United States capital loss carryforward	9.5		9.5		Indefinite
United States net operating loss carryforward	0.4		—		2020	-	2036
State and local net operating loss carryforward	7.6		1.4		2020	-	2037
State tax credit carryforward	16.5		0.7		2020	-	2034
Subtotal	44.5		21.9
Other deferred tax assets	71.9		71.9		Indefinite
Total	$	116.4	$	93.8



	2019			2018			2017
Gross unrecognized tax benefits balance at beginning of year	$	20.1		$	31.1		$	32.4
Additions based on tax positions related to the current year	—			—			1.9
Additions based on tax positions related to prior years	—			3.0			10.8
Reductions based on tax positions related to prior years	—			(1.1		)	(0.1		)
Reductions related to settlements with taxing authorities	—			(11.3		)	(7.7		)
Reductions related to lapses of statute of limitations	(0.2		)	(1.6		)	(6.3		)
Effect of foreign currency translation	—			—			0.1
Gross unrecognized tax benefits balance at end of year	$	19.9		$	20.1		$	31.1

The amount of gross unrecognized tax benefits that would reduce our effective tax rate if recognized was $19.9 million, $20.1 million and $31.1 million at September 30, 2019, 2018 and 2017, respectively.

Accrued interest and penalties related to unrecognized tax benefits were $3.3 million and $2.5 million at September 30, 2019 and 2018, respectively. We recognize interest and penalties related to unrecognized tax benefits in the income tax provision. Benefits (expense) recognized were $(0.8) million, $1.5 million and $1.2 million in 2019, 2018 and 2017, respectively.

We believe it is reasonably possible that the amount of gross unrecognized tax benefits could be reduced by up to $18.5 million in the next 12 months as a result of the resolution of tax matters in various global jurisdictions and the lapses of statutes of limitations. If all of the unrecognized tax benefits were recognized, the net reduction to our income tax provision, including the recognition of interest and penalties and offsetting tax assets, could be up to $19.8 million.

We conduct business globally and are routinely audited by the various tax jurisdictions in which we operate. We are no longer subject to U.S. federal income tax examinations for years before 2016 and are no longer subject to state, local and non-U.S. income tax examinations for years before 2009.