The 2017 Tax Act was enacted on December 22, 2017 and contained several key provisions including, among other things:

In March 2018, the FASB issued ASU 2018-05, "Income Taxes - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118." The guidance provided for a provisional one-year measurement period for entities to finalize their accounting for certain tax effects related to the 2017 Tax Act. In 2017, we recorded a $1,272.4 million income tax benefit related to provisional amounts for which the accounting had not been finalized. In 2018, we completed our calculation of the post-1986 E&P and related foreign taxes of our foreign subsidiaries, as well as the classification of the E&P as cash or non-cash and the finalization of all provisional items. Based on the completed calculations related to the effects of the 2017 Tax Act, and consideration of proposed regulations and other guidance issued during 2018, we recorded additional income tax expense of $8.3 million. The additional $8.3 million of tax expense consists of an adjustment to the toll charge or transition tax provision of $11.3 million and a benefit of $3.0 million related to the remeasurement of our deferred tax assets and liabilities.

The 2017 Tax Act created a provision known as GILTI that imposes a U.S. tax on certain earnings of foreign subsidiaries that are subject to foreign tax below a certain threshold. The Company has made an accounting policy election to reflect GILTI taxes, if any, as a current income tax expense in the period incurred.

The components of earnings (loss) before income taxes consisted of the following (in millions):

	For the Years Ended December 31,
	2018			2017			2016
United States operations	$	(382.8	)	$	(114.0	)	$	(251.8	)
Foreign operations		111.7			578.6			651.4
Total	$	(271.1	)	$	464.6		$	399.6

The provision/(benefit) for income taxes and the income taxes paid consisted of the following (in millions):

Current:
Federal	$	(46.2	)	$	438.5		$	134.2
State		24.4			2.4			12.4
Foreign		116.6			(13.7	)		101.6
		94.8			427.2			248.2
Deferred:
Federal		37.9			(1,728.5	)		(108.5	)
State		(8.8	)		(95.5	)		2.3
Foreign		(15.7	)		48.0			(47.0	)
		13.4			(1,776.0	)		(153.2	)
Provision (benefit) for income taxes	$	108.2		$	(1,348.8	)	$	95.0
Net income taxes paid	$	237.1		$	266.9		$	269.6

A reconciliation of the U.S. statutory income tax rate to our effective tax rate is as follows:

	For the Years Ended December 31,
	2018				2017				2016
U.S. statutory income tax rate		21.0		%		35.0		%		35.0		%
State taxes, net of federal deduction		(2.5	)			1.8				2.0
Tax impact of foreign operations, including U.S. taxes on international income and foreign tax credits		54.3				(32.0	)			(11.0	)
Change in valuation allowance		(4.9	)			0.8				-
Non-deductible expenses		1.7				2.7				0.9
Goodwill impairment		(75.2	)			22.5				-
Tax rate change		(12.2	)			(24.0	)			-
Tax impact of certain significant transactions		-				-				1.6
Tax benefit relating to foreign derived intangible income and U.S. manufacturer’s deduction		(0.2	)			(1.7	)			(4.7	)
R&D tax credit		6.0				(1.2	)			(1.9	)
Share-based compensation		0.1				(2.6	)			(2.9	)
Net uncertain tax positions, including interest and penalties		(25.5	)			(17.0	)			4.2
U.S. tax reform		(3.1	)			(273.8	)			-
Other		0.6				(0.8	)			0.6
Effective income tax rate		(39.9	)	%		(290.3	)	%		23.8		%

Our operations in Puerto Rico and Switzerland benefit from various tax incentive grants. These grants expire between fiscal years 2019 and 2029.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Valuation allowances are recorded to reduce deferred income tax assets when it is more likely than not that an income tax benefit will not be realized.

	As of December 31,
	2018			2017
Deferred tax assets:
Inventory	$	271.5		$	246.8
Net operating loss carryover		374.3			165.1
Tax credit carryover		29.2			163.8
Capital loss carryover		7.9			6.9
Product liability and litigation		92.6			55.9
Accrued liabilities		35.3			46.6
Share-based compensation		27.3			26.8
Accounts receivable		15.2			17.3
Other		48.8			84.9
Total deferred tax assets		902.1			814.1
Less: Valuation allowances		(390.9	)		(140.6	)
Total deferred tax assets after valuation allowances		511.2			673.5
Deferred tax liabilities:
Fixed assets	$	94.4		$	85.6
Intangible assets		1,301.3			1,423.0
Other		14.1			18.2
Total deferred tax liabilities		1,409.8			1,526.8
Total net deferred income taxes	$	(898.6	)	$	(853.3	)

Net operating loss carryovers are available to reduce future federal, state and foreign taxable earnings. At December 31, 2018, $240.3 million of these net operating loss carryovers expire within a period of 1 to 20 years and $134.0 million of these net operating loss carryovers have an indefinite life. Valuation allowances for net operating loss carryovers have been established in the amount of $348.9 million and $105.0 million at December 31, 2018 and 2017, respectively.

Deferred tax assets related to tax credit carryovers are available to offset future federal and state tax liabilities. At December 31, 2018, $29.2 million of these tax credit carryovers generally expire within a period of 2 to 16 years. Valuation allowances for certain tax credit carryovers have been established in the amount of $25.2 million and $18.5 million at December 31, 2018 and 2017, respectively.

Deferred tax assets related to capital loss carryovers are also available to reduce future federal and foreign capital gains. At December 31, 2018, $1.5 million of these capital loss carryovers expire within 1 year and $6.4 million of these capital loss carryovers have an indefinite life. Valuation allowances for certain capital loss carryovers have been established in the amount of $7.9 million and $5.5 million at December 31, 2018 and 2017, respectively. The remaining valuation allowances booked against deferred tax assets of $8.9 million and $11.6 million at December 31, 2018 and 2017, respectively, relate primarily to accrued liabilities and intangible assets that management believes, more likely than not, will not be realized.

Many of our operations are conducted outside the United States. Under the 2017 Tax Act, a company’s post-1986 previously untaxed foreign E&P are mandatorily deemed to be repatriated and taxed, which is also referred to as the toll charge. We intend to repatriate at least $5.1 billion of unremitted earnings and any tax cost related to the remittance of these earnings has been accounted for in the financial statements as of December 31, 2018. We have an estimated $2.6 billion of cash and intercompany notes available to repatriate and the remainder is invested in the operations of our foreign entities. The remaining amounts earned overseas are expected to be permanently reinvested outside of the United States, and therefore, no accrual for U.S. taxes has been recorded. It is not practical for us to determine the additional tax related to remitting the earnings in excess of $5.1 billion. A portion of these earnings has already been taxed as toll tax or GILTI and is not subject to further U.S. federal tax. Some of the additional tax would be offset by the allowable foreign tax credits.

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits (in millions):

	For the Years Ended December 31,
	2018			2017			2016
Balance at January 1	$	626.8		$	649.3		$	591.9
Increases related to business combinations		4.5			70.2			70.2
Increases related to prior periods		34.6			172.8			36.7
Decreases related to prior periods		(14.4	)		(262.2	)		(94.7	)
Increases related to current period		41.9			24.8			53.0
Decreases related to settlements with taxing authorities		(3.8	)		(21.7	)		(3.2	)
Decreases related to lapse of statute of limitations		(4.1	)		(6.4	)		(4.6	)
Balance at December 31	$	685.5		$	626.8		$	649.3
Amounts impacting effective tax rate, if recognized balance at December 31	$	549.1		$	499.6		$	511.5

We recognize accrued interest and penalties related to unrecognized tax benefits as income tax expense. During 2018, we accrued interest and penalties of $18.5 million, and as of December 31, 2018, had a recognized liability for interest and penalties of $94.2 million.

During 2017, we released interest and penalties of $38.3 million, and as of December 31, 2017, had a recognized liability for interest and penalties of $75.7 million, which included $3.0 million of increase related to the Biomet merger. During 2016, we accrued interest and penalties of $19.3 million, and as of December 31, 2016, had a recognized liability for interest and penalties of $110.8 million, which included an $8.6 million increase from December 31, 2015 related to the Biomet merger.

We operate on a global basis and are subject to numerous and complex tax laws and regulations. Additionally, tax laws have and continue to undergo rapid changes in both application and interpretation by various countries, including state aid interpretations and the Organization for Economic Cooperation and Development led initiatives. Our income tax filings are subject to examinations by taxing authorities throughout the world. Income tax audits may require an extended period of time to reach resolution and may result in significant income tax adjustments when interpretation of tax laws or allocation of company profits is disputed. Although ultimate timing is uncertain, the net amount of tax liability for unrecognized tax benefits may change within the next twelve months due to changes in audit status, expiration of statutes of limitations, settlements of tax assessments and other events. Management’s best estimate of such change is within the range of a $125 million decrease to a $25 million increase.

Our U.S. Federal income tax returns have been audited through 2012 and are currently under audit for years 2013-2015. The IRS has proposed adjustments for years 2005-2012, primarily related to reallocating profits between certain of our U.S. and foreign subsidiaries. We have disputed these adjustments and intend to continue to vigorously defend our positions. For years 2005-2007, we have filed a petition with the U.S. Tax Court. For years 2008-2009, we will be filing a petition with the U.S. Tax Court. For years 2010-2012, we are pursuing resolution through the IRS Administrative Appeals Process.

State income tax returns are generally subject to examination for a period of 3 to 5 years after filing of the respective return. The state impact of any federal changes generally remains subject to examination by various states for a period of up to one year after formal notification to the states. We have various state income tax return positions in the process of examination, administrative appeals or litigation.