Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

Schedule of earnings before income taxes

Earnings before income taxes for the years ended December 31 were as follows ($ in millions):



	2019		2018		2017
United States	$	572.4	$	687.7	$	679.6
International	302.1		390.7		394.0
Total	$	874.5	$	1,078.4	$	1,073.6

Schedule of provision for income taxes

The provision for income taxes for the years ended December 31 were as follows ($ in millions):



	2019			2018			2017
Current:
Federal U.S.	$	38.9		$	48.3		$	170.0
Non-U.S.	84.6			96.3			69.8
State and local	11.7			7.8			10.5
Deferred:
Federal U.S.	43.0			27.3			(62.0		)
Non-U.S.	(21.1		)	(19.6		)	(1.7		)
State and local	(8.0		)	—			2.7
Income tax provision	$	149.1		$	160.1		$	189.3

Schedule of deferred tax assets and liabilities

Deferred income tax assets and liabilities as of December 31 were as follows ($ in millions):



	2019			2018
Deferred Tax Assets:
Allowance for doubtful accounts	$	16.7		$	17.4
Operating lease liabilities	44.4			—
Inventories	16.6			17.9
Pension benefits	30.3			27.3
Environmental and regulatory compliance	10.4			10.1
Other accruals and prepayments	35.2			50.5
Deferred service income	15.1			7.1
Warranty services	16.0			19.7
Stock-based compensation expense	27.8			14.2
Tax credit and loss carryforwards	171.4			131.4
Valuation allowances	(58.4		)	(40.3		)
Total deferred tax assets	$	325.5		$	255.3
Deferred Tax Liabilities:
Property, plant and equipment	$	(47.3	)	$	(11.7	)
Operating lease right-of-use assets	(43.7		)	—
Insurance, including self-insurance	(200.5		)	(155.2		)
Goodwill and other intangibles	(722.0		)	(597.1		)
Other	(26.7		)	(14.7		)
Total deferred tax liabilities	(1,040.2		)	(778.7		)
Net deferred tax liability	$	(714.7	)	$	(523.4	)

Schedule of effective income tax rate reconciliation

The effective income tax rate for the years ended December 31 varies from the U.S. statutory federal income tax rate as follows:



	Percentage of Pretax Earnings
	2019		2018		2017
Statutory federal income tax rate	21.0	%	21.0	%	35.0	%
Increase (decrease) in tax rate resulting from:
State income taxes (net of federal income tax benefit)	(0.3	)%	1.0	%	0.7	%
Foreign income taxed at different rates than U.S. statutory rate	(0.7	)%	0.8	%	(5.3	)%
U.S. federal permanent differences related to the TCJA	(6.2	)%	(4.8	)%	(2.9	)%
Compensation related	(1.0	)%	(1.5	)%	(1.7	)%
Other	0.5	%	(0.5	)%	(1.6	)%
Effective income tax rate before adjustments related to the 2017 TCJA provisional estimates	13.3	%	16.0	%	24.2	%

Deferred tax revaluation	—	%	(1.3	)%	(19.2	)%
Transition tax	—	%	0.1	%	12.6	%
Vontier transaction tax costs	3.7	%	—	%	—	%
Total Vontier transaction tax costs and adjustments to 2017 TCJA provisional estimates	3.7	%	(1.2	)%	(6.6	)%
Effective income tax rate after adjustments related to the Vontier transaction tax costs and 2017 TCJA provisional estimates	17.0	%	14.8	%	17.6	%

Schedule of unrecognized tax benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding amounts accrued for potential interest and penalties, is as follows ($ in millions):



	2019			2018			2017
Unrecognized tax benefits, beginning of year	$	133.4		$	59.0		$	28.6
Additions based on tax positions related to the current year	17.8			40.8			25.3
Additions for tax positions of prior years	79.7			39.0			7.8
Reductions for tax positions of prior years	(13.0		)	(3.8		)	(1.9		)
Lapse of statute of limitations	(2.3		)	(3.5		)	(3.3		)
Settlements	(0.3		)	(6.4		)	(0.6		)
Effect of foreign currency translation	(0.4		)	(0.9		)	1.9
Separation related adjustments ^(a)	—			9.2			1.2
Unrecognized tax benefits, end of year	$	214.9		$	133.4		$	59.0

^(a) Unrecognized tax benefit reserves increased by $9 million and $1 million during the year ended December 31, 2018 and December 31, 2017, respectively, due primarily to unrecognized tax benefits from pre-Separation periods.