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. The TRAF 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 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 and third quarter of 2020, we recognized an additional $51.2 million and $6.5 million tax benefit, respectively, related to TRAF as well as the tax impact of certain restructuring transactions in Switzerland. We received notification from the Swiss authorities in October 2020 regarding our TRAF ruling and recorded a net tax benefit of $36.5 million in the fourth quarter of 2020 based on this notification, for an overall benefit of $358.0 million.

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

	For the Years Ended December 31,
	2020			2019			2018
United States operations	$	(592.9	)	$	(125.9	)	$	(382.8	)
Foreign operations		318.5			1,031.7			111.7
Total	$	(274.4	)	$	905.8		$	(271.1	)

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

Current:
Federal	$	(96.1	)	$	65.5		$	(46.2	)
State		4.6			9.8			24.4
Foreign		(57.5	)		237.7			116.6
		(149.0	)		313.0			94.8
Deferred:
Federal		(24.2	)		(90.2	)		37.9
State		(11.5	)		(4.2	)		(8.8	)
Foreign		47.7			(444.3	)		(15.7	)
		12.0			(538.7	)		13.4
(Benefit) provision for income taxes	$	(137.0	)	$	(225.7	)	$	108.2
Net income taxes paid	$	147.4		$	192.5		$	237.1

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

	For the Years Ended December 31,
	2020				2019				2018
U.S. statutory income tax rate		21.0		%		21.0		%		21.0		%
State taxes, net of federal deduction		2.4				0.8				(2.5	)
Tax impact of foreign operations, including U.S. taxes on international income and foreign tax credits		14.9				(10.2	)			54.3
Change in valuation allowance		1.5				1.5				(4.9	)
Non-deductible expenses		(2.0	)			0.4				1.7
Goodwill impairment		(46.1	)			-				(75.2	)
Tax rate change		3.8				0.6				(12.2	)
Tax benefit relating to foreign derived intangible income and U.S. manufacturer’s deduction		5.8				(4.5	)			(0.2	)
R&D tax credit		2.1				(1.2	)			6.0
Share-based compensation		0.1				(0.4	)			0.1
Net uncertain tax positions, including interest and penalties		31.4				1.9				(25.5	)
U.S. tax reform		-				0.1				(3.1	)
Switzerland tax reform and certain restructuring transactions		15.7				(34.8	)			-
Other		(0.7	)			(0.1	)			0.6
Effective income tax rate		49.9		%		(24.9	)	%		(39.9	)	%

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. We reclassified certain prior period amounts to conform to the current period presentation.

	As of December 31,
	2020			2019
Deferred tax assets:
Inventory	$	297.2		$	295.6
Net operating loss carryover		511.2			514.4
Tax credit carryover		55.1			33.8
Capital loss carryover		9.0			8.3
Product liability and litigation		53.9			40.4
Accrued liabilities		86.1			101.6
Share-based compensation		30.4			28.6
Accounts receivable		19.0			24.6
Foreign currency hedges		69.0			-
Other		19.2			16.8
Total deferred tax assets		1,150.1			1,064.1
Less: Valuation allowances		(542.1	)		(546.1	)
Total deferred tax assets after valuation allowances		608.0			518.0
Deferred tax liabilities:
Fixed assets	$	119.2		$	77.6
Intangible assets		787.6			772.3
Foreign currency hedges		-			13.8
Other		39.8			23.0
Total deferred tax liabilities		946.6			886.7
Total net deferred income taxes	$	(338.6	)	$	(368.7	)

Net operating loss carryovers are available to reduce future federal, state and foreign taxable earnings. At December 31, 2020, $388.2 million of these net operating loss carryovers expire within a period of 1 to 20 years and $123.0 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 $479.2 million and $493.4 million at December 31, 2020 and 2019, respectively.

Deferred tax assets related to tax credit carryovers are available to offset future federal and state tax liabilities. At December 31, 2020, $55.1 million of these tax credit carryovers expire within a period of 1 to 15 years. Valuation allowances for certain tax credit carryovers have been established in the amount of $42.6 million and $32.3 million at December 31, 2020 and 2019, respectively.

Deferred tax assets related to capital loss carryovers are also available to reduce future federal and foreign capital gains. At December 31, 2020, $2.2 million of these capital loss carryovers expire within a period of 1 year to 4 years and $6.8 million of these capital loss carryovers have an indefinite life. Valuation allowances for certain capital loss carryovers have been established in the amount of $9.0 million and $8.3 million at December 31, 2020 and 2019, respectively. The remaining valuation allowances booked against deferred tax assets of $11.3 million and $12.1 million at December 31, 2020 and 2019, 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 $5.5 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 $5.5 billion amount, we have an estimated $4.5 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,
	2020			2019			2018
Balance at January 1	$	741.8		$	685.5		$	626.8
Increases related to business combinations		-			-			4.5
Increases related to prior periods		75.3			24.7			34.6
Decreases related to prior periods		(158.3	)		(35.6	)		(14.4	)
Increases related to current period		3.4			133.2			41.9
Decreases related to settlements with taxing authorities		(14.6	)		(60.2	)		(3.8	)
Decreases related to lapse of statute of limitations		(28.2	)		(5.8	)		(4.1	)
Balance at December 31	$	619.4		$	741.8		$	685.5
Amounts impacting effective tax rate, if recognized balance at December 31	$	473.9		$	599.2		$	549.1

We recognize accrued interest and penalties related to unrecognized tax benefits as income tax expense. During 2020, we released interest and penalties of $1.7 million, and as of December 31, 2020, had a recognized liability for interest and penalties of $107.5 million, which does not include any increase related to business combinations.

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 increase related to business combinations.

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 $260 million decrease to a $20 million increase.

We are under continuous audit by the Internal Revenue Service (“IRS”) and other taxing authorities. During the course of these audits, we receive proposed adjustments from taxing authorities that may be material. Therefore, there is a possibility that an adverse outcome in these audits could have a material effect on our results of operations and financial condition. Our U.S. Federal income tax returns have been audited through 2012 and are currently under audit for years 2013-2015 and 2016-2019. The IRS started a routine examination of our 2016-2019 U.S. Federal income tax returns in November 2020.

In October 2020, we reached agreement with the IRS for tax years 2006-2012 related to the reallocation of profits between the U.S. and Puerto Rico as well as other miscellaneous adjustments.

The IRS has proposed adjustments for tax years 2010-2012, primarily related to reallocating profits between certain of our U.S. and foreign subsidiaries, which remain unsettled. We have disputed these adjustments and intend to continue to vigorously defend our positions as we pursue resolution through the administrative process with the IRS Independent Office of Appeals.

In December 2020, we received a revised Notice of Proposed Adjustment (“NOPA”) from the IRS for 2013-2015 relating to transfer pricing involving our cost sharing agreement between the U.S. and Switzerland affiliated companies and reallocating profits between certain of our U.S. and foreign subsidiaries. The revised NOPA related to the cost sharing agreement proposes an increase to our U.S. Federal taxable income, which would result in additional tax expense related to 2013 of approximately $370 million, subject to interest and penalties. We strongly believe that the position of the IRS, with regard to this matter, is inconsistent with the applicable U.S. Treasury regulations governing our cost sharing agreement. We do not expect changes to our reserves relative to these matters within the next twelve months. We intend to vigorously contest the revised NOPA, and we will pursue all available administrative and, if necessary, judicial remedies. If we pursue judicial remedies in the U.S. Tax Court for years 2013-2015, a number of years will likely elapse before such matters are finally resolved. No payment of any amount related to the revised NOPA is required to be made, if at all, until all applicable proceedings have been completed. We believe the tax liability we have accrued is correct given the revised NOPA received.

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.