A public referendum held in Switzerland passed the Federal Act on Tax Reform and AHV Financing (“TRAF”), effective January 1, 2020 and includes the abolishment of various favorable federal and cantonal tax regimes. Swiss Tax Reform provides transitional relief measures for companies that are losing the tax benefit of a ruling, including a "step-up" for amortizable goodwill, equal to the amount of future tax benefit they would have received under their

existing ruling, subject to certain limitations. Certain provisions of the TRAF were enacted in the third quarter of 2019, resulting in us recognizing a provisional net tax benefit of $263.8 million. In the fourth quarter of 2019, we recognized an additional $51.2 million related to TRAF as well as the tax impact of certain restructuring transactions in Switzerland.

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,
	2019			2018			2017
United States operations	$	(125.9	)	$	(382.8	)	$	(114.0	)
Foreign operations		1,031.7			111.7			578.6
Total	$	905.8		$	(271.1	)	$	464.6

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

Current:
Federal	$	65.5		$	(46.2	)	$	438.5
State		9.8			24.4			2.4
Foreign		237.7			116.6			(13.7	)
		313.0			94.8			427.2
Deferred:
Federal		(90.2	)		37.9			(1,728.5	)
State		(4.2	)		(8.8	)		(95.5	)
Foreign		(444.3	)		(15.7	)		48.0
		(538.7	)		13.4			(1,776.0	)
(Benefit) provision for income taxes	$	(225.7	)	$	108.2		$	(1,348.8	)
Net income taxes paid	$	192.5		$	237.1		$	266.9

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

	For the Years Ended December 31,
	2019				2018				2017
U.S. statutory income tax rate		21.0		%		21.0		%		35.0		%
State taxes, net of federal deduction		0.8				(2.5	)			1.8
Tax impact of foreign operations, including U.S. taxes on international income and foreign tax credits		(10.2	)			54.3				(32.0	)
Change in valuation allowance		1.5				(4.9	)			0.8
Non-deductible expenses		0.4				1.7				2.7
Goodwill impairment		-				(75.2	)			22.5
Tax rate change		0.6				(12.2	)			(24.0	)
Tax benefit relating to foreign derived intangible income and U.S. manufacturer’s deduction		(4.5	)			(0.2	)			(1.7	)
R&D tax credit		(1.2	)			6.0				(1.2	)
Share-based compensation		(0.4	)			0.1				(2.6	)
Net uncertain tax positions, including interest and penalties		1.9				(25.5	)			(17.0	)
U.S. tax reform		0.1				(3.1	)			(273.8	)
Switzerland tax reform and certain restructuring transactions		(34.8	)			-				-
Other		(0.1	)			0.6				(0.8	)
Effective income tax rate		(24.9	)	%		(39.9	)	%		(290.3	)	%

Our operations in Puerto Rico benefit from various tax incentive grants. These grants expire between fiscal years 2026 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,
	2019			2018
Deferred tax assets:
Inventory	$	295.6		$	271.5
Net operating loss carryover		514.4			374.3
Tax credit carryover		33.8			29.2
Capital loss carryover		8.3			7.9
Product liability and litigation		40.4			92.6
Accrued liabilities		45.5			35.3
Share-based compensation		28.6			27.3
Accounts receivable		24.6			15.2
Other		79.0			48.8
Total deferred tax assets		1,070.2			902.1
Less: Valuation allowances		(546.1	)		(390.9	)
Total deferred tax assets after valuation allowances		524.1			511.2
Deferred tax liabilities:
Fixed assets	$	77.6		$	94.4
Intangible assets		772.3			1,301.3
Other		42.9			14.1
Total deferred tax liabilities		892.8			1,409.8
Total net deferred income taxes	$	(368.7	)	$	(898.6	)

Net operating loss carryovers are available to reduce future federal, state and foreign taxable earnings. At December 31, 2019, $391.6 million of these net operating loss carryovers expire within a period of 1 to 20 years and $122.8 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 $493.4 million and $348.9 million at December 31, 2019 and 2018, respectively.

Deferred tax assets related to tax credit carryovers are available to offset future federal and state tax liabilities. At December 31, 2019, $33.8 million of these tax credit carryovers generally expire within a period of 1 to 16 years. Valuation allowances for certain tax credit carryovers have been established in the amount of $32.3 million and $25.2 million at December 31, 2019 and 2018, respectively.

Deferred tax assets related to capital loss carryovers are also available to reduce future federal and foreign capital gains. At December 31, 2019, $1.8 million of these capital loss carryovers expire within a period of 1 year to 3 years and $6.5 million of these capital loss carryovers have an indefinite life. Valuation allowances for certain capital loss carryovers have been established in the amount of $8.3 million and $7.9 million at December 31, 2019 and 2018, respectively. The remaining valuation allowances booked against deferred tax assets of $12.1 million and $8.9 million at December 31, 2019 and 2018, respectively, relate primarily to accrued liabilities and intangible assets that management believes, more likely than not, will not be realized.

We intend to repatriate at least $5.0 billion of unremitted earnings, of which the additional tax related to remitting earnings is deemed immaterial as a portion of these earnings has already been taxed as toll tax or GILTI and is not subject to further U.S. federal tax. Portions of the additional tax would also be offset by allowable foreign tax credits. Of the $5.0 billion amount, we have an estimated $2.2 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. If the Company decides at a later date to repatriate these earnings to the U.S., the Company would be required to provide for the net tax effects on these amounts. The Company estimates that the total tax effect of this repatriation would not be significant under current enacted tax laws and regulations and at current currency exchange rates.

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

	For the Years Ended December 31,
	2019			2018			2017
Balance at January 1	$	685.5		$	626.8		$	649.3
Increases related to business combinations		-			4.5			70.2
Increases related to prior periods		24.7			34.6			172.8
Decreases related to prior periods		(35.6	)		(14.4	)		(262.2	)
Increases related to current period		133.2			41.9			24.8
Decreases related to settlements with taxing authorities		(60.2	)		(3.8	)		(21.7	)
Decreases related to lapse of statute of limitations		(5.8	)		(4.1	)		(6.4	)
Balance at December 31	$	741.8		$	685.5		$	626.8
Amounts impacting effective tax rate, if recognized balance at December 31	$	599.2		$	549.1		$	499.6

We recognize accrued interest and penalties related to unrecognized tax benefits as income tax expense. During 2019, we accrued interest and penalties of $15.0 million, and as of December 31, 2019, had a recognized liability for interest and penalties of $109.2 million, which does not include any increase related to business combinations.

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, which does not include any increases related to business combinations. 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.

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 $290 million decrease to a $30 million increase.

Our U.S. Federal income tax returns have been audited by the IRS through 2012 and are currently under audit by the IRS 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 as we pursue resolution through petitions with the U.S. Tax Court for years 2005-2009 and the administrative process with the IRS Independent Office of Appeals for years 2010-2012.

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.