

(amounts in thousands)	2019		2018			2017
Federal	$	5,037	$	(9,760	)	$	11,699
State	935		764			667
Foreign	29,264		34,742			29,228
Current taxes	35,236		25,746			41,594

Federal	11,771		(24,445		)	60,618
State	6,620		(12,760		)	27,241
Foreign	3,447		1,401			8,365
Deferred taxes	21,838		(35,804		)	96,224
Total provision (benefit) for income taxes	$	57,074	$	(10,058	)	$	137,818

On December 22, 2017, the Tax Act was enacted in the U.S. The specific provisions of the Tax Act had both direct and indirect impacts on our 2017 and 2018 results and may continue to materially affect our financial results in the future as regulations continue to be finalized. The direct impacts recorded as provisional estimates in 2017 were due primarily to the change in the U.S. corporate income tax rate from 35% to 21% for tax years beginning after December 31, 2017 and the one-time deemed repatriation tax. As a result of the lowering of the U.S. federal tax rate, we revalued our net deferred tax

assets in the U.S. reflecting the lower expected benefit in the U.S. in the future. This revaluation resulted in an estimated additional tax expense of approximately $21.1 million. Our provisional estimate of the one-time deemed repatriation tax, which effectively subjected the Company’s net aggregate historic foreign earnings to taxation in the U.S., resulted in a further tax charge of $11.3 million. During the fourth quarter of 2017, the Company undertook certain transactions which premised the repatriation of certain earnings from foreign subsidiaries. While these transactions were not undertaken as a direct result of tax reform, the U.S. tax implications were heavily impacted due to the timing of the transactions and the measurement dates as outlined in the Tax Act. We recorded a provisional estimate of the effects of certain steps completed in 2017 as well as further steps premised to be completed in 2018 which would have retroactive effect into 2017 resulting in a net increase to tax expense of $65.8 million related to these transactions and their impacts under the Tax Act.

As of December 31, 2018, we completed our accounting for the income tax effects of the Tax Act as of the enactment date. As further discussed below, we recognized a tax benefit of $40.2 million in 2018 which effectively reduced the net charges recorded at December 31, 2017. These adjustments were accounted for as a component of income tax expense from continuing operations. The specific adjustments recorded were (i) an increase to the tax expense recorded related to the revaluation of our net deferred tax assets from $21.1 million to $55.3 million resulting in an additional charge to 2018 earnings of $34.2 million, (ii) a reduction of the estimate of the one-time deemed repatriation tax from $11.3 million to zero resulting in a tax benefit recorded in 2018 earnings of $11.3 million, (iii) a reduction of the additional tax expense recorded related to the premised repatriation of funds from foreign subsidiaries from $65.8 million to $2.7 million resulting in a tax benefit recorded in 2018 earnings of $63.1 million.

The completion of the Company’s accounting for the enactment of the Tax Act reflects, among other things, (i) the issuance of guidance by the U.S. Treasury regarding provisions of the Tax Act, (ii) certain elections and accounting policy decisions pursuant to the Tax Act, (iii) adjustments to historic foreign earnings and profits or the associated tax credit pools which are significant factors in the calculation of the repatriation tax, and (iv) changes in interpretations and assumptions that we have made. We note that final guidance and regulations surrounding the implementation of all provisions in the Tax Act have not been issued to date. This guidance, once issued, may materially affect our conclusions regarding the net related effects of the Tax Act on our financial statements.

The Tax Act subjects a U.S. shareholder to current U.S. tax on GILTI earned by certain foreign subsidiaries. GILTI had a material effect on our effective tax rate in 2019 and 2018 and will likely continue to have such an effect in future periods. The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, states that we are permitted to make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or provide for the tax expense related to such income in the year the tax is incurred. We have elected to account for the impact of GILTI in the period in which it is incurred.

The significant components of deferred income tax expense attributed to income from continuing operations for the year ended December 31, 2019, were increases to the valuation allowances for deferred tax assets, primarily in the U.S. The significant components of the deferred income tax benefit attributed to income from continuing operations for the year ended December 31, 2018, were the adjustments related to the provisional amounts of the income tax effects of the Tax Act and the additional release of valuation allowances, primarily in the U.S. The significant components of the deferred income tax expense attributed to income from continuing operations for the year ended December 31, 2017, were the revaluation of our U.S. deferred tax assets under the Tax Act and the increases in valuation allowances for deferred tax assets, primarily in the U.S.



	2019				2018				2017
(amounts in thousands)	Amount			%	Amount			%	Amount			%
Statutory rate	$	25,209		21.0	$	27,515		21.0	$	49,805		35.0
State income tax, net of federal benefit	3,180			2.6	(1,207		)	(0.9)	(4,784		)	(3.4)
Foreign source dividends and deemed inclusions	10,797			9.0	16,295			12.4	86,119			60.5
Valuation allowance	10,144			8.4	(85,876		)	(65.5)	98,156			69.0
Nondeductible expenses	1,276			1.1	1,097			0.8	1,950			1.4
Acquisition of ABS	—			—	(10,189		)	(7.8)	—			—
Equity based compensation	2,526			2.1	54			—	(12,718		)	(8.9)
Deferred benefit on acquisitions	—			—	—			—	(6,201		)	(4.4)
Foreign tax rate differential	1,964			1.6	3,557			2.7	(17,536		)	(12.3)
Tax rate differences and credits	(1,867		)	(1.5)	96,231			73.4	(91,109		)	(64.0)
Uncertain tax positions	1,604			1.3	5,443			4.2	736			0.5
IRS audit adjustments	—			—	—			—	(699		)	(0.5)
Termination of hedge accounting	4,533			3.8	—			—	—			—
U.S. Tax Reform	—			—	(62,836		)	(47.9)	32,414			22.8
Disposition of subsidiary	(2,384		)	(2.0)	—			—	—			—
Other	92			0.1	(142		)	(0.1)	1,685			1.1
Effective rate for continuing operations	$	57,074		47.5%	$	(10,058	)	(7.7)%	$	137,818		96.8%

In 2019, we recorded tax expense of $4.5 million upon the termination of hedge accounting to relieve the disproportionate tax effect previously in Accumulated Other Comprehensive Income. The tax benefit arising from the disposition of our subsidiary, CMD, is $2.4 million and included in the “Disposition of subsidiary” line in the reconciliation of tax expense table above.

In 2018, we recorded a tax benefit of $40.2 million to revise the provisional estimates recorded under the Tax Act. The “U.S. Tax Reform” line in the reconciliation of tax expense above totals $62.8 million and is comprised of tax benefit of $11.3 million for the reduction of the estimated one-time deemed repatriation tax, tax benefit of $85.7 million attributed to the restoration of the Company’s net operating losses, offset by tax expense of $34.2 million for the revaluation of our deferred tax assets. The remaining tax expense is comprised of: additional tax expense of $97.6 million for the reduction of foreign tax credits included in “Tax rate differences and credits”, offset by tax benefit of $75.0 million included above as “Valuation allowance”.

For the year ended December 31, 2017, we recorded provisional estimates of the items directly impacted by the Tax Act within the “U.S. Tax Reform” line in the reconciliation of tax expense above. The tax charge of $32.4 million is comprised of (i) the repricing our U.S. deferred tax balances of $21.1 million from 35% to 21%, and (ii) one-time deemed repatriation tax of $11.3 million. As previously, discussed, certain other transactions undertaken by the Company in the fourth quarter of 2017 were indirectly impacted by the Tax Act and the measurement periods as outlined therein. The provisional estimates of the following amounts are included in the Company’s tax expense for 2018: additional tax expense of $85.5 million included as “Foreign Source Dividends”, a tax benefit of $90.8 million included as “Tax rate differences and credits”, and additional tax expense of $71.1 million included as “Valuation allowance” above.

We recorded a tax benefit of $6.2 million primarily relating to the change in disposition for certain intellectual property in the “Deferred benefit on acquisitions” line and a corresponding tax charge in the same amount in the “Valuation allowance” line, resulting in no impact to the effective rate for continuing operations in 2017. We did not incur or recognize tax expense or benefit associated with these categories in 2019 or 2018.

Deferred income taxes are provided for the temporary differences between the financial reporting basis and tax basis of our assets, liabilities and operating loss carryforwards. Significant deferred tax assets and liabilities are as follows as of December 31:



(amounts in thousands)	2019			2018
Net operating loss and tax credit carryforwards	$	199,889		$	216,563
Operating lease liabilities	54,448			—
Employee benefits and compensation	47,760			50,665
Accrued liabilities and other	38,300			38,764
Inventory	5,842			5,923
Investments and marketable securities	2,768			473
Allowance for doubtful accounts and notes receivable	1,641			1,573
Deferred credits	194			635
Gross deferred tax assets	350,842			314,596
Valuation allowance	(67,664		)	(57,571		)
Deferred tax assets	283,178			257,025
Depreciation and amortization	(55,994		)	(58,441		)
Operating lease assets	(52,635		)	—
Deferred tax liabilities	(108,629		)	(58,441		)
Net deferred tax assets	$	174,549		$	198,584
Balance sheet presentation:
Long-term assets	$	183,837		$	209,062
Long-term liabilities	(9,288		)	(10,478		)
Net deferred tax assets	$	174,549		$	198,584

Valuation Allowance – The realization of deferred tax assets is based on historical tax positions and estimates of future taxable income. We evaluate both the positive and negative evidence that we believe is relevant in assessing whether we will realize the deferred tax assets. A valuation allowance is recorded when it is more likely than not that some portion of the deferred tax assets will not be realized.

The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. We consider the scheduled reversal of deferred tax liabilities (including the effect of available carryback and carryforward periods), and projected taxable income in making this assessment. To fully utilize the NOL and tax credits carryforwards, we will need to generate sufficient future taxable income in each respective jurisdiction before the expiration of the deferred tax assets governed by the applicable tax code.

Our valuation allowance was $67.7 million as of December 31, 2019, which represents an increase of $10.1 million from December 31, 2018 and was allocated to continuing operations. The increase in the valuation allowance primarily relates to the following: (i) an increase of $3.9 million due to expiring foreign tax credits, (ii) an increase of $3.6 million for state net operating losses ("NOL") and credits due to the impact of forecasted taxable income in the carry-forward period, (iii) an increase of $1.8 million for our Chilean subsidiary, and (iv) other changes to existing valuation allowances totaling approximately $0.8 million for changes in current year earnings for certain other subsidiaries and foreign exchange.

Our valuation allowance was $57.6 million as of December 31, 2018, which represents a decrease of $87.1 million from December 31, 2017 and was allocated to continuing operations. The decrease in the valuation allowance primarily related to the following: (i) a decrease of $75.0 million relating to the Company’s finalization of the accounting for the effects of the Tax Act, (ii) a decrease of $2.2 million due to expiring foreign tax credits, (iii) a decrease of $8.3 million for state NOL and credits due to the impact of increases in forecasted taxable income in the carry-forward period, and (iv) and other changes to existing valuation allowances totaling approximately $1.6 million for changes in the current year earnings for certain other subsidiaries and foreign exchange.



(amounts in thousands)	2019			2018			2017
Balance as of January 1,	$	(57,571	)	$	(144,701	)	$	(40,118	)
Valuation allowances established	(2,001		)	(260		)	—
Changes to existing valuation allowances	(8,043		)	85,828			(105,453		)
Release of valuation allowances	—			—			2,006
Currency translation	(49		)	1,562			(1,136		)
Balance as of December 31,	$	(67,664	)	$	(57,571	)	$	(144,701	)

Loss Carryforwards – We reduced our income tax payments by utilizing NOL carryforwards of $208.0 million in 2019, $163.7 million in 2018 and $18.6 million in 2017. At December 31, 2019, our federal, state and foreign NOL carryforwards totaled $1,300.8 million, of which $87.0 million does not expire and the remainder expires as follows:

We utilized approximately $146.2 million of NOL carryforwards in the US in 2018; however, the deferred tax asset related to these NOLs actually increased due to the restoration of certain loss carryforwards upon the finalization of the accounting for effects of the Tax Act. We have previously revised the total amount of NOLs utilized in 2017 to reflect the reduced income recognized under the Tax Act. At December 31, 2019, our capital loss carryforwards totaled $20.4 million, which are all foreign and do not expire.

Section 382 Net Operating Loss Limitation – On November 20, 2017 and October 3, 2011, we had a change in ownership pursuant to Section 382 of the Internal Revenue Code of 1986 as amended (“Code”). Under this provision of the Code, the utilization of any of our NOL or tax credit carryforwards, incurred prior to the date of ownership change, may be limited. Analyses of the respective limits for each ownership change indicated no reason to believe the annual limitation would impair our ability to utilize our NOL carryforward or net tax credit carryforwards as provided. We have concluded the limitation under Section 382 should not prevent us from fully utilizing these historical NOLs.



(amounts in thousands)	EZ Credit		R & E credit		Foreign Tax Credit		Work Opportunity & Welfare to Work Credit		State Investment Tax Credits		Tip Credit		TOTAL
2020	$	—	$	—	$	12,975	$	—	$	2	$	—	$	12,977
2021	—		—		14,990		—		26		—		15,016
2022	—		—		1,061		—		11		—		1,072
2023	—		—		5,735		—		1,656		—		7,391
2024	—		—		3,514		—		84		—		3,598
Thereafter	68		9,047		8,801		6,696		86		102		24,800
	$	68	$	9,047	$	47,076	$	6,696	$	1,865	$	102	$	64,854

Earnings of Foreign Subsidiaries – Historically, the Company has not provided for US tax impacts of any unremitted earnings of its foreign subsidiaries. The Tax Act made significant changes to the taxation of undistributed foreign earnings, including that all previously untaxed earnings and profits of our controlled foreign corporations be subjected to a one-time deemed repatriation tax in 2017. In its final analysis of the effects of the Tax Act, the Company provided for US income taxes on approximately $121.0 million of earnings of our foreign subsidiaries deemed to be repatriated. Beginning in 2018, the Tax Act provides for a 100% dividends received deduction for untaxed earnings received from most foreign corporations. The repatriation tax substantially eliminated the basis difference that existed previously for purposes of ASC

Topic 740. Although dividend income is now generally exempt from U.S. federal income tax in the hands of U.S. corporate shareholders, the guidance of ASC 740-30 still applies to account for the tax consequences of outside basis differences and other tax impacts of investments in non-U.S. subsidiaries. Although likely not subject to U.S. federal taxation, there are limited other taxes that could continue to apply such as foreign income and withholding as well as certain state taxes.

The Company routinely evaluates its indefinite reversal assertion on the outside basis difference in non-U.S. subsidiaries that allows the nonrecognition of associated deferred taxes. As of December 31, 2019, the Company has not recorded deferred tax liabilities or assets for the outside basis difference in any foreign subsidiary. We have concluded that a majority of the unremitted earnings of our foreign subsidiaries are indefinitely reinvested, with certain minor exceptions that do not have an associated tax cost. We hold a combined book-over-tax outside basis difference of $217.5 million in our investment in foreign subsidiaries and may incur up to $7.6 million of local country income and withholding taxes in case of distribution of unremitted earnings.

Dual-Rate Jurisdiction – Estonia taxes the corporate profits of resident corporations at different rates depending upon whether the profits are distributed. The undistributed profits of resident corporations are exempt from taxation while any distributed profits are subject to a 20% corporate income tax rate. The liability for the tax on distributed profits is recorded as an income tax expense in the period in which a dividend is declared. The amount of retained earnings at December 31, 2019 and 2018 for our Estonia subsidiary, which, if distributed, would be subject to this tax was $69.2 million and $68.1 million, respectively. During 2017, Latvia enacted a similar system in which an entity’s local earnings are not subject to tax until distributed. The amount of retained earnings at December 31, 2019 and 2018 for our Latvian subsidiary which, if distributed, would be subject to a 20% corporate income tax rate is $21.4 million and $19.9 million, respectively.

Tax Payments and Balances – We made tax payments of $32.1 million in 2019, $49.7 million in 2018 and $29.0 million in 2017 primarily for foreign liabilities. We received tax refunds of $5.6 million in 2019, $3.3 million in 2018, and $6.5 million in 2017 and the primary jurisdictions for which refunds were received in the current year are Australia, Austria and the U.S. We recorded global receivables for refunds of $9.0 million at December 31, 2019 and $10.5 million at December 31, 2018, which is included in other current assets on the accompanying consolidated balance sheets. We recorded foreign payables for taxes of $2.0 million at December 31, 2019 and $1.7 million at December 31, 2018, which is included in accrued income taxes payable in the accompanying consolidated balance sheets. We recorded a non-current U.S. receivable of $0.8 million at December 31, 2018, which is included in other assets in the accompanying consolidated balance sheets. We do not have any non-current taxes receivable or payable as of December 31, 2019.



(amounts in thousands)	2019			2018			2017
Balance as of January 1,	$	18,951		$	14,519		$	12,054
Increase for tax positions taken during the prior period	197			2,620			252
Decrease for settlements with taxing authorities	(126		)	(157		)	(788		)
(Decrease) increase for tax positions taken during the current period	(96		)	300			107
Currency translation	(318		)	(707		)	1,626
Balance at period end - unrecognized tax benefit	18,607			16,575			13,251
Accrued interest and penalties	1,627			2,376			1,268
	$	20,234		$	18,951		$	14,519

Unrecognized tax benefits were $18.6 million, $16.6 million and $13.3 million at December 31, 2019, 2018 and 2017, respectively. The changes during the current period relate to the establishment of an uncertain tax positions for certain tax examinations offset by currency translation during the period. Interest and penalties related to uncertain tax positions are reported as a component of tax expense and included in the total uncertain tax position balance within deferred credits and other liabilities in the accompanying consolidated balance sheets.

A significant portion of our uncertain tax positions relates to the implementation of the Capacity Management Agreements within the European business (“CMA”) which took place in January 1, 2015. The CMA changed the manner in which we manage our manufacturing capacity and the distribution and sale of our products in Europe. The reorganization of our Europe segment was part of our review of our operations structure and management that began in 2014 and resulted in changes in taxable income for certain of our subsidiaries within that reportable segment. Effective January 1, 2015, our subsidiary JELD-WEN U.K. Limited (the “Managing Subsidiary”) entered into an agreement (the “Managing Agreement”) with several of our other subsidiaries in Europe (collectively, the “Operating Subsidiaries”). The Managing Agreement provides that the Managing Subsidiary will receive a fee from the Operating Subsidiaries in exchange for performing

various management and decision-making services for the Operating Subsidiaries. As a result, the Managing Agreement shifts certain risks (and correlated benefits) from the Operating Subsidiaries to the Managing Subsidiary. In exchange, the Managing Subsidiary guarantees a specific return to each Operating Subsidiary on a before interest and taxes basis, commensurate with such Operating Subsidiary’s functions and risk profile. While there is no impact on the consolidated reporting of the Europe segment due to the Managing Agreement, there may be changes in taxable income of the Operating Subsidiaries. Therefore, we have reserved for a potential loss resulting from such uncertainty.

Included in the balance of unrecognized tax benefits as of December 31, 2019, 2018, and 2017, are $18.6 million, $16.6 million, and $13.3 million respectively, of tax benefits that, if recognized, would affect the effective tax rate. We cannot reasonably estimate the conclusion of certain non-US income tax examinations and its outcome at this time.

We operate in multiple foreign tax jurisdictions and are generally open to examination for tax years 2015 and forward. In the U.S., we are open to examination at the federal level for tax years 2013 and forward and at state and local jurisdictions for tax years 2014 and forward. We are under examination in Austria, the Czech Republic, Denmark, Germany, Indonesia, Latvia, Switzerland, and the United Kingdom for tax years 2011 through 2017, and generally remain open to examination for other non-US jurisdictions for tax years 2013 forward.