Income Taxes

Income before income taxes for the Company’s domestic and foreign operations was as follows:



	Years Ended June 30,
($ in millions)	2019		2018		2017
Domestic	$	204.2	$	140.3	$	56.0
Foreign	11.8		19.9		14.2
Income before income taxes	$	216.0	$	160.2	$	70.2

The provision (benefit) for income taxes from continuing operations consisted of the following:



	Years Ended June 30,
($ in millions)	2019			2018			2017
Current:
Federal	$	23.2		$	22.6		$	(24.5	)
State	4.4			3.5			(1.1		)
Foreign	4.9			6.7			7.2
Total current	32.5			32.8			(18.4		)
Deferred:
Federal	13.1			(66.0		)	38.7
State	3.6			4.8			3.5
Foreign	(0.2		)	0.1			(0.6		)
Total deferred	16.5			(61.1		)	41.6
Total income tax expense (benefit)	$	49.0		$	(28.3	)	$	23.2

The following is a reconciliation of income taxes computed at the U.S. Federal income tax rate to the Company’s effective income tax rates:



	Years Ended June 30,
(% of pre-tax income)	2019		2018		2017
Statutory federal income tax rate	21.0	%	28.1	%	35.0	%
State income taxes, net of federal tax benefit	3.0		2.6		2.0
Domestic manufacturing deduction	—		(1.5	)	(3.0	)
Research and development tax credit	(1.1	)	(1.4	)	(3.9	)
Adjustments of prior years' income taxes	(0.9	)	0.2		3.3
Remeasurement of U.S. deferred taxes	0.1		(49.3	)	—
Transition tax on foreign earnings	(0.1	)	3.1		—
Other, net	0.7		0.5		(0.4	)
Effective income tax rate	22.7	%	(17.7	)%	33.0	%

Deferred taxes are recorded for temporary differences between the carrying amounts of assets and liabilities and their tax bases. The significant components of deferred tax assets and liabilities that are recorded in the consolidated balance sheets are summarized in the table below. A valuation allowance is required when it is more likely than not that all or a portion of a deferred tax asset will not be realized. As of June 30, 2019, the Company had state net operating loss carryforwards of $337.6 million expiring between 2020 and 2039. A significant portion of the state net operating loss carryforwards are subject to an annual limitation that, under current law, is likely to limit future tax benefits to approximately $3.3 million. Valuation allowances increased by $0.7 million during fiscal year 2019 primarily due to increases in net operating losses incurred in certain tax jurisdictions for which no tax benefit was recognized.



	June 30,
($ in millions)	2019			2018
Deferred tax assets:
Pensions	$	86.9		$	66.8
Postretirement provisions	35.7			33.7
Net operating loss carryforwards	28.8			26.5
Derivatives and hedging activities	4.1			—
Other	32.1			29.4
Gross deferred tax assets	187.6			156.4
Valuation allowances	(24.6		)	(23.9		)
Total deferred tax assets	163.0			132.5
Deferred tax liabilities:
Depreciation	(249.5		)	(235.2		)
Intangible assets	(11.3		)	(11.9		)
Inventories	(36.1		)	(30.5		)
Derivatives and hedging activities	(0.3		)	(8.7		)
Other	(4.3		)	(3.5		)
Total deferred tax liabilities	(301.5		)	(289.8		)
Deferred tax liabilities, net	$	(138.5	)	$	(157.3	)

The Company does not have unrecognized tax benefits as of June 30, 2019, 2018 and 2017. The Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.

All years prior to fiscal year 2013 have been settled with the Internal Revenue Service and with most significant state, local and foreign tax jurisdictions.

In December 2017, an Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018 (the “Act”) was enacted. The Act included provisions that reduced the federal statutory income tax rate from 35 percent to 21 percent, created a territorial tax system with a one-time mandatory tax on previously deferred foreign earnings (i.e. transition tax), and changed certain business deductions including allowing for immediate expensing of certain qualified capital expenditures and limitations on deductions of interest expense. The SEC staff issued guidance on income tax accounting for the Act which allowed companies to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. In accordance with this guidance, during fiscal year 2018, we recorded a provisional tax charge of $5.0 million for the transition tax and a provisional tax benefit of $74.6 million for the remeasurement of deferred tax assets and liabilities. During fiscal year 2019, we recorded a discrete tax benefit of $0.2 million in measurement period adjustments for the transition tax offset by a discrete tax charge of $0.2 million for the remeasurement of deferred tax assets and liabilities. Our accounting for the impact of the Act was completed as of the period ending December 31, 2018. Under the Act, the transition tax is being paid over an eight year period beginning in fiscal year 2019.

The Act also established new tax provisions that became effective in fiscal year 2019, including but not limited to eliminating the corporate alternative minimum tax, creating the base erosion anti-abuse tax (“BEAT”), establishing new limitations on deductible interest expense and certain executive compensation, creating a new provision designed to tax global intangible low-tax income (“GILTI”) and generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries. The Company has made an accounting policy election to treat the tax effect of GILTI as a current period expense when incurred.

Undistributed earnings of our foreign subsidiaries, totaling $77.8 million were considered permanently reinvested. Following enactment of the Act, the repatriation of cash to the U.S. is generally no longer taxable for federal income tax purposes. If these earnings were to be repatriated, approximately $0.3 million of tax expense would be incurred.