Note 14:

Income Taxes

Loss before income taxes for the years ended December 31, 2017, 2016 and 2015 consisted of the following:

	2017			2016			2015

U.S.	$	(145.8	)	$	(149.4	)	$	(450.0	)
Non-U.S.		33.1			86.2			83.3
Loss before income taxes	$	(112.7	)	$	(63.2	)	$	(366.7	)

The following table details the components of the (benefit) provision for income taxes for the years ended December 31, 2017, 2016 and 2015.

	2017			2016			2015
Current:
U.S. federal	$	64.0		$	(6.6	)	$	-
U.S. state and local		3.0			1.3			1.6
Non-U.S.		49.8			57.8			46.7
Deferred:
U.S. federal		(217.5	)		(61.4	)		(31.5	)
U.S. state and local		-			(3.4	)		(9.3	)
Non-U.S.		(30.5	)		(19.6	)		(22.2	)
Benefit for income taxes	$	(131.2	)	$	(31.9	)	$	(14.7	)

The U.S. federal corporate statutory rate is reconciled to the Company’s effective income tax rate for the years ended December 31, 2017, 2016 and 2015 as follows.

	2017			2016			2015
U.S. federal corporate statutory rate		35.0	%		35.0	%		35.0	%
State and local taxes, less federal tax benefit		3.1			4.0			2.3
U.S. deferred tax rate change from 35% to 21%		79.5			-			-
Net effects of foreign tax rate differential		6.2			19.9			1.5
Sale of subsidiary		(4.6	)		(17.1	)		-
Repatriation cost		3.8			4.4			(0.3	)
U.S. transition tax toll charge net of FTC		(56.2	)		-			-
ASC 740-30		61.2			26.3			(2.0	)
Valuation allowance changes		(1.1	)		(15.9	)		(0.5	)
Impairment of goodwill and intangible assets		-			(0.6	)		(31.7	)
Uncertain tax positions		1.9			(7.0	)		(0.4	)
Nondeductible equity compensation		(9.2	)		-			-
Nondeductible foreign interest expense		(3.0	)		-			-
Other, net		(0.3	)		1.5			0.1
Effective income tax rate		116.3	%		50.5	%		4.0	%

The principal items that gave rise to deferred income tax assets and liabilities as of December 31, 2017 and 2016 are as follows.

	2017			2016
Deferred Tax Assets:
Reserves and accruals	$	62.4		$	38.2
Postretirement benefits other than pensions		0.7			1.1
Postretirement benefits - pensions		15.6			20.9
Tax loss carryforwards		41.8			58.0
Foreign tax credit carryforwards		29.8			11.6
Other		19.4			33.1
Total deferred tax assets		169.7			162.9
Valuation allowance		(47.9	)		(33.6	)
Deferred Tax Liabilities:
LIFO inventory		(9.3	)		(17.0	)
Property, plant, and equipment		(21.0	)		(28.6	)
Intangibles		(322.2	)		(444.3	)
Unremitted foreign earnings		(9.3	)		(77.3	)
Other		3.5			(48.3	)
Total deferred tax liabilities		(358.3	)		(615.5	)
Net deferred income tax liability	$	(236.5	)	$	(486.2	)

The U.S. Tax Law change enacted in December 2017 impacted the comparison of the 2017 to the 2016 deferred tax changes by $158.6 million as a result of the U.S. tax rate reduction and the change in the ASC 740-30 deferred liability balance.

The Company believes that it is more likely than not that it will realize its deferred tax assets through the reduction of future taxable income, other than for the deferred tax assets reflected below. Tax attributes and related valuation allowances as of December 31, 2017 were as follows.

	Tax Benefit		Valuation Allowance			Carryforward Period Ends
Tax Attributes to be Carried Forward
U.S. federal net operating loss	$	15.1	$	(2.0	)		2035-2037
U.S federal capital loss		6.9		(6.9	)		2021
U.S. federal tax credit		33.4		(29.9	)		2023-2037
Alternative minimum tax credit		0.9		-		Unlimited
U.S. state and local net operating losses		5.4		-			2034-2037
U.S. state and local tax credit		0.5		-			2018-2034
Non U.S. net operating losses		2.7		(0.8	)		2018-2037
Non U.S. net operating losses		8.1		(7.7	)	Unlimited
Non U.S. capital losses		0.5		(0.5	)	Unlimited
Other deferred tax assets		5.3		(0.1	)	Unlimited
Total tax carryforwards	$	78.8	$	(47.9	)

When comparing to prior year, the comparison is impacted by the US Tax Law change enacted December 22, 2017.

A reconciliation of the changes in the valuation allowance for deferred tax assets for the years ended December 31, 2017, 2016 and 2015 are as follows.

	2017			2016			2015
Valuation allowance for deferred tax assets at beginning of the period	$	33.6		$	23.8		$	27.5
Revaluation and change due to U.S. Tax Reform		10.7			-			-
Charged to tax expense		3.1			12.5			4.8
Charged to other accounts		1.6			(0.1	)		-
Deductions⁽¹⁾		(1.1	)		(2.6	)		(8.5	)
Valuation allowance for deferred tax assets at end of the period	$	47.9		$	33.6		$	23.8

⁽¹⁾

Deductions relate to the realization of net operating losses or the removal of deferred tax assets.

Total unrecognized tax benefits were $12.6 million, $6.8 million and $4.8 million for the years ended December 31, 2017, 2016 and 2015, respectively. The net increase in this balance primarily relates to recording $11.2 million for tax positions in prior years, which were partially offset by the benefits associated with the lapse of applicable statutes of limitations of $0.3 million and settlements of $6.2 million. Included in total unrecognized benefits as of December 31, 2017 is $12.6 million of unrecognized tax benefits that would affect the Company's effective tax rate if recognized, of which $1.2 million would be offset by a reduction of a corresponding deferred tax asset. The balance of total unrecognized tax benefits is not expected to significantly increase or decrease within the next twelve months. Below is a tabular reconciliation of the changes in total unrecognized tax benefits during the years ended December 31, 2017, 2016 and 2015.

	2017			2016			2015
Beginning balance	$	6.8		$	4.8		$	4.0
Gross increases for tax positions of prior years		11.2			3.1			-
Gross decreases for tax positions of prior years		-			-			(0.4	)
Gross increases for tax positions of current year		0.6			-			1.8
Settlements		(6.2	)		(0.4	)		-
Lapse of statute of limitations		(0.3	)		(0.7	)		(0.6	)
Changes due to currency fluctuations		0.5			-			-
Ending balance	$	12.6		$	6.8		$	4.8

The Company includes interest expense and penalties related to unrecognized tax benefits as part of the provision for income taxes. The Company's income tax liabilities as of December 31, 2017 and 2016 include accrued interest and penalties of $0.8 million and $3.0 million, respectively.

The statutes of limitations for U.S. Federal tax returns are open beginning with the 2014 tax year, and state returns are open beginning with the 2013 tax year. The Company closed the IRS audit of the short tax year ending December 31, 2013. On January 3, 2018 the Company received notification from the IRS stating that the Company is now under IRS audit for the tax years ending December 31, 2014, 2015 and 2016. The audit will begin in 2018.

The Company is subject to income tax in approximately 33 jurisdictions outside the U.S. The statute of limitations varies by jurisdiction with 2005 being the oldest year still open. The Company's significant operations outside the U.S. are located in the United Kingdom and Germany. In the United Kingdom, tax years prior to 2012 are closed. However, the Company is currently under audit in the United Kingdom, which has been expanded to include years 2012 to 2014. The audit has not been completed as of the date of these financial statements. In Germany, generally, the tax years 2010 and beyond remain open to examination. The general field tax audit of fiscal years 2008 to 2010 was settled during the tax year ended December 31, 2017. The Company also commenced a general tax audit for the tax years 2011 to 2014 for Germany during 2017. Additionally, in Italy, the withholding tax audit for the tax years 2012 to 2014 was settled during 2017.

The Company recorded a deferred tax liability of approximately $114.0 million as of the acquisition date by KKR for the anticipated repatriation of a limited amount of unremitted foreign earnings generated prior to date of acquisition, July 30, 2013. These accumulated earnings of non-U.S. subsidiaries amounting to approximately $287.0 million are expected to supplement the Company’s projected U.S. operating cash flow in meeting the Company’s debt service requirements along with other U.S. cash flow needs during the term of its credit agreement. This deferred tax liability was adjusted to $94.1 million as of December 31, 2014, 94.6 million as of December 31, 2015, $77.3 million as of December 31, 2016, and $9.3 million as of December 31, 2017 based upon the estimated need to repatriate accumulated earnings of approximately $200.0 million. As a result of the transition tax, the recorded deferred tax liability of $9.3 million as of December 31, 2017 relates to withholding tax.

Our accounting for the following elements of the Tax Act is incomplete, and we were not yet able to make reasonable estimates of the effects. Therefore, no provisional adjustments, other than the adjustment related to the effect of the transitional tax, were recorded related to ASC 740-30.

The Tax Act creates a new requirement that certain income (i.e., GILTI) earned by controlled foreign corporations (“CFC”) must be included currently in the gross income of the CFCs’ U.S. shareholder. GILTI is the excess of the shareholder’s “net CFC tested income” over the net deemed tangible income return, which is currently defined as the excess of (1) 10% of the aggregate of the U.S. shareholder’s pro rata share of the qualified business asset investment of each CFC with respect to which it is a U.S. shareholder over (2) the amount of certain interest expense taken into account in the determination of net CFC-tested income.

Because of the complexity of the new GILTI tax rules, we are continuing to evaluate this provision of the Tax Act and the application of ASC 740. Under U.S. GAAP, we are allowed to make an accounting policy choice of either (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”) or (2) factoring such amounts into a company’s measurement of its deferred taxes (the “deferred method”). Because whether we expect to have future U.S. inclusions in taxable income related to GILTI depends on not only our current structure and estimated future results of global operations but also our intent and ability to modify our structure and/or our business, we are not yet able to reasonably estimate the effect of this provision of the Tax Act.

Due to these complexities, we have not been able to determine if our company policy concerning permanent reinvestment will change as a result of the new Tax Act. With the exception of the $9.3 million withholding tax impact on the $200 million of accumulated earnings to be repatriated as discussed previously, no additional adjustments relating to ASC 740-30 have been recorded in accordance with SAB 118 as we are not currently able to reasonably estimate the impact as of the filing of the December 31, 2017 financial statements.

Except as noted above, we consider the excess of the amount for financial reporting over the tax basis (including undistributed and previously taxed earnings) of investments in our foreign subsidiaries as of December 31, 2017 to be indefinitely reinvested outside the United States on the basis of our plan for reinvestment and estimates that future domestic cash generation will be sufficient to meet future domestic cash needs. Therefore, we have not provided for deferred taxes related to such and it is not practicable to determine this amount.