Income taxes are accounted for in accordance with FASB authoritative guidance on accounting for income taxes. Deferred income tax assets and liabilities are recognized for the future income tax consequences attributable to differences between the financial statement carrying amounts for existing assets and liabilities and their respective tax bases. Tax rate changes impacting these assets and liabilities are recognized in the period during which the rate change occurs.

We record an income tax expense or benefit based on the income earned or loss incurred in each tax jurisdiction and the tax rate applicable to that income or loss. In the ordinary course of business, there are transactions for which the ultimate tax outcome is uncertain. These uncertainties are accounted for in accordance with FASB authoritative guidance on accounting for the uncertainty in income taxes. The final tax outcome for these matters may be different than management's original estimates made in determining the income tax provision. A change to these estimates could impact the effective tax rate and net income or loss in subsequent periods. We use the flow-through accounting method for tax credits. Under this method, tax credits reduce income tax expense.


	2020		2019		2018
Current
Federal	$	(301.0)	$	57.8	$	159.4
State	(5.5)		0.7		4.1
Foreign	(8.1)		(12.8)		11.4
Total current	$	(314.6)	$	45.7	$	174.9
Deferred
Federal	$	(16.2)	$	71.8	$	(27.8)
State	106.9		(11.4)		(12.8)
Foreign	3.7		26.7		5.5
Total deferred	94.4		87.1		(35.1)
Total income tax provision	$	(220.2)	$	132.8	$	139.8


	2020				2019				2018
Tax at U.S. Federal statutory rate	$	(228.1)	21.0	%	$	139.3	21.0	%	$	158.8	21.0	%
State income taxes, net of Federal benefit	(28.1)		2.6		14.9		2.3		18.1		2.4
State income tax credits, net of Federal benefit	(17.4)		1.6		(22.6)		(3.4)		(22.7)		(3.0)
Foreign rate differences	(3.3)		0.3		(7.1)		(1.1)		(6.2)		(0.8)
Research and experimentation	(0.1)		—		0.7		0.1		(5.4)		(0.7)
Excess tax benefits	0.1		—		(2.5)		(0.4)		(4.0)		(0.5)
Non-deductible expenses	10.5		(1.0)		4.0		0.6		4.6		0.6
Transition tax	—		—		1.6		0.2		(5.4)		(0.7)
Re-measurement of Deferred Taxes	1.7		(0.2)		(2.0)		(0.3)		—		—
Global Intangible Low-Taxed Income (GILTI) Tax	3.9		(0.4)		7.1		1.1		1.8		0.2
Valuation Allowance	150.2		(13.8)		—		—		—		—
NOL Utilized at 35% vs 21%	(104.8)		9.7		—		—		—		—
Other	(4.8)		0.5		(0.6)		(0.1)		0.2		—
Total income tax provision	$	(220.2)	20.3	%	$	132.8	20.0	%	$	139.8	18.5	%

In 2019, an amended tax return was filed in a foreign jurisdiction for one of the Company’s foreign subsidiaries impacting the amount of undistributed earnings included in the transition tax liability enacted by TCJA. The increase to the transition tax in 2019 is $1.6 which has been included as a component of income tax expense from continuing operations.

The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. The Company has elected to account for GILTI in the year the tax is incurred. As of December 31, 2020, there was $3.9 of GILTI tax expense due a U.K. NOL carryback to 2019 that will result in an increase to US GILTI tax. As of December 31, 2019 there was $7.1 of GILTI tax expense resulting from $0.6 of income tax expense related to activity in 2019 and $6.5 of income tax expense related to the finalization of the 2018 amounts related to GILTI reported in the tax return as agreed upon

The 2020 U.S. Net Operating Loss will be carried back to 2015 and 2016. The tax rate in the carryback years is 35% compared to the current tax rate of 21%. The impact of this rate difference is included in the current year tax provision.

The CARES Act allows net operating losses to be carried back to the previous five years, when the federal tax rate was 35%. As of December 31, 2020 the Company will report a net operating loss when it files its fiscal year 2020 tax return. Management will continue to monitor potential legislation as well as market conditions which may materially alter the anticipated value of this net operating loss. The Company had $315.3 and $74.2 of income tax receivable as of December 31, 2020 and December 31, 2019, respectively, which is reflected within other current assets on the balance sheet as well as $0.0 and $6.3 of income tax payable as of December 31, 2020 and December 31, 2019, respectively, which is reflected within other current liabilities on the balance sheet. The Company had $1.5 and $5.3 of non-current income tax payable as of December 31, 2020 and December 31, 2019, respectively, which is reflected within other liabilities on the balance sheet.

Additionally, as allowed by the CARES Act, the Company has deferred $32.9 of employer payroll taxes, of which 50% is required to be deposited by December 2021 and the remaining 50% by December 2022. The Company has estimated it will be eligible for a pre-tax employee retention credit of approximately $16. The Company will continue to evaluate its eligibility for this credit through June 2021. In addition, as of December 31, 2020, the Company has recorded a deferral of $31.5 of VAT payments with the option to pay in smaller payments through the end of March 31, 2022 interest free under the United Kingdom deferral scheme.

Oklahoma follows the CARES Act and also allows net operating losses to be carried back to the previous five years. The estimated state income tax refund is recorded as an income tax receivable along with the estimated federal income tax receivable as mentioned above.


	2020		2019
Depreciation and amortization	$	(174.3)	$	(117.8)
Long-term contracts	165.7		107.5
State income tax credits	122.8		108.3
Net operating loss carryforward	98.6		0.4
Accruals and reserves	50.3		40.3
Employee compensation accruals	36.2		39.2
Pension and other employee benefit plans	(15.3)		(88.5)
Interest expense limitation	22.7		—
Post retirement benefits other than pensions	11.8		9.8
Other	8.0		8.6
Inventory	1.2		0.4
Interest swap contracts	0.3		0.2
Net deferred tax asset before valuation allowance	328.0		108.4
Valuation allowance	(340.9)		(10.2)
Net deferred tax (liability)	(12.9)		98.2


	2020		2019		2018
Balance at January 1	$	10.2	$	13.2	$	15.0
Bombardier Acquisition opening balance sheet	163.6		—		—
State income tax credits	110.1		(3.2)		(2.2)
Net operating losses	20.7		—		—
Depreciation and amortization	—		0.2		0.1
Other	19.4		—		0.3
Other comprehensive income adjustment	16.9		—		—
Balance at December 31	$	340.9	$	10.2	$	13.2

Deferred tax assets are periodically evaluated to determine their recoverability and whether or not a valuation allowance is necessary. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. When determining the amount of net deferred tax assets that are more likely than not to be realized, the Company assesses all available positive and negative evidence. The weight given to the positive and negative evidence is commensurate with the extent the evidence may be objectively verified. As such, it is generally difficult for positive evidence regarding projected future taxable income exclusive of reversing taxable temporary differences to outweigh objective negative evidence of recent financial reporting losses.

Based on these criteria and the relative weighting of both the positive and negative evidence available, and in particular the activity surrounding the Company’s prior earnings history including the forward losses previously recognized in the U.S., Management determined that it was necessary to establish a valuation allowance against nearly all of its net U.S. deferred tax assets at December 31, 2020. This determination was made as the Company will enter into a U.S. cumulative loss position once anticipated 2021 results are included in the threshold. Once a company anticipates a cumulative three year loss position, there is a presumption that a company should no longer rely solely on projected future income in determining whether the deferred tax asset is more likely than not to be realized. As of December 31, 2020, the total net U.S. deferred tax asset was $149.5. The net U.S. deferred tax liability after recording valuation allowances is $0.6. Valuation allowances recorded against the consolidated net U.S. deferred tax asset in the current year were $140.7 for a total valuation allowance of $150.1 for the US.

The Company has determined a valuation allowance on certain U.K. deferred tax assets is needed based upon cumulative losses generated in the U.K. Additionally, with the recording of the Bombardier Acquisition, a $163.6 valuation allowance was recorded against U.K. deferred tax assets as part of the opening balance sheet. The Company recorded a portion of the increase in the valuation allowance to income tax expense in continuing operations $9.5 and a portion to OCI $16.9. Valuation allowances recorded against UK deferred tax assets in the current year were $26.4 for a total valuation allowance of $190.8 for the U.K.

Included in the deferred tax assets at December 31, 2020 are $105.7 in Kansas High Performance Incentive Program ("HPIP") Credit, $11.4 in Kansas Research & Development ("R&D") Credit and $0.4 in Kansas Qualified Vendor (“QV”) Credit, totaling $117.5 in gross Kansas state income tax credit carryforwards, net of federal benefit. The HPIP Credit provides a 10% investment tax credit for qualified business facilities located in Kansas. This credit can be carried forward 16 years. The Kansas R&D Credit provides a credit for qualified research and development expenditures conducted within Kansas. This credit can be carried forward indefinitely. The QV Credit is equal to 15% of the amount for approved expenditures of goods and services purchased from a qualified vendor, not to exceed $0.5 per qualified vendor per tax year. The QV Credit can be carried forward 4 years.

Certain provisions within the TCJA effectively transition the U.S. to a territorial system and eliminates deferral on U.S. taxation for certain amounts of income which is not taxed at a minimum level. At this time, the Company continues to maintain

that earnings of all foreign operating subsidiaries are indefinitely invested outside the U.S. on the basis of estimates that future domestic cash generation, inclusive of management actions and plans associated with the 737MAX production halt and slowdown, will be sufficient to meet future domestic cash needs and the Company's specific plans for reinvestment of those subsidiary earnings to fund working capital requirements, service existing obligations, execute M&A transactions, and invest in efforts to secure future business. As a result, no additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the transition tax, or any additional outside basis difference inherent in these entities.

To the extent cash in excess of the needs identified above are generated from a key international operating subsidiary and a dividend is declared, the Company has completed analysis regarding potential dividend withholding taxes and anticipate that any associated withholding taxes would be immaterial based upon current law. Determining the amount of unrecognized deferred tax liability related to any remaining undistributed foreign earnings not subject to the transition tax and additional outside basis difference in these entities (i.e., basis difference in excess of that subject to the one-time transition tax) is not practicable at this time.


	2020		2019		2018
Beginning balance at January 1	$	5.4	$	7.2	$	6.7
Bombardier Acquisition opening balance sheet	14.0		—		—
Gross increases related to current period tax positions	0.4		0.4		—
Gross increases related to prior period tax positions	—		—		0.5
Gross decreases related to prior period tax positions	—		(2.2)		—
Statute of limitations' expiration	(3.3)		—		—
Settlements	—		—		—
Ending balance at December 31	$	16.5	$	5.4	$	7.2

The Company reports interest and penalties, if any, related to unrecognized tax benefits in the income tax provision. As of December 31, 2020, 2019, and December 31, 2018, there was no accrued interest on the unrecognized tax benefit liability included in the balance sheets and there was no impact of interest on the Company’s unrecognized tax benefit liability during 2020, 2019 and 2018.