Income Tax (Tables)

12 Months Ended

Dec. 31, 2017

Pretax income for computation of income tax provision

Our income (loss) from continuing operations before income taxes on which the provision for income taxes was computed is as follows:



	For the years ended
	December 31, 2017			December 31, 2016			December 31, 2015
	(In millions)
Domestic	$	1,488.3		$	3,396.9		$	746.1
Foreign	(106.6		)	(340.0		)	(290.0		)
Total	$	1,381.7		$	3,056.9		$	456.1

Current and deferred provisions of income tax expense (benefits)

Income tax expense (benefit) includes the following current and deferred provisions:



	For the years ended
	December 31, 2017			December 31, 2016		December 31, 2015
	(In millions)
Current:
Federal	$	(177.1	)	$	83.4	$	116.1
State	4.7			12.0		11.8
Foreign	36.5			31.9		25.2
Total current tax expense (benefit)	$	(135.9	)	$	127.3	$	153.1
Deferred:
Federal	$	69.5		$	684.8	$	(26.1	)
State	35.9			99.9		(5.8		)
Foreign	(22.7		)	143.2		(59.7		)
Total deferred tax expense (benefit)	$	82.7		$	927.9	$	(91.6	)
Total income tax expense (benefit) from continuing operations	$	(53.2	)	$	1,055.2	$	61.5

The decrease in income tax expense for 2017 versus 2016 was largely driven by the net $433.9 million deferred tax benefit resulting from the impacts of the 2017 Tax Act, as well as the 2016 income tax effects of the pretax gain recognized on the fair value remeasurement of our previously held equity interest in MillerCoors and the reclassification of the accumulated other comprehensive loss related to our historical 42% interest in MillerCoors in the prior year (see Note 4, "Acquisition and Investments"). Specifically, this resulted in the recognition of net deferred income tax expense of approximately $850 million upon completion of the Acquisition in 2016. In addition, we recognized incremental deferred income tax expense in 2016 as a result of the remeasurement of our deferred tax liability associated with our Molson core brand intangible asset to the Canadian ordinary income tax rate upon reclassification from indefinite-lived to definite-lived subject to amortization (see Note 11, "Goodwill and Intangible Assets"). This incremental deferred tax expense more than offset the deferred tax benefit associated with the pretax impairment charge. The above-mentioned impacts, which resulted in a substantial decrease in our income tax provision in 2017, were partially offset by the full-year inclusion of 100% of MillerCoors' pretax income in 2017, which is subject to the U.S. federal and state income tax rates.

Computation of effective income tax rate

Our effective tax rate varies from the U.S. federal statutory income tax rate as follows:



	For the years ended
	December 31, 2017		December 31, 2016		December 31, 2015
Statutory Federal income tax rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal benefits	1.9	%	2.4	%	1.4	%
Effect of foreign tax rates and tax planning	(16.5	)%	(1.9	)%	(27.7	)%
Effect of Molson brand useful life change	—	%	6.4	%	—	%
Effect of U.S. tax reform	(31.4	)%	—	%	—	%
Effect of unrecognized tax benefits	(0.3	)%	—	%	(3.2	)%
Change in valuation allowance	3.6	%	(0.5	)%	7.3	%
Acquisition-related permanent items	1.5	%	(7.7	)%	—	%
Other, net	2.3	%	0.8	%	0.7	%
Effective tax rate	(3.9	)%	34.5	%	13.5	%

The decrease in the effective income tax rate for 2017 versus 2016 is primarily driven by the impacts of the 2017 Tax Act, most notably the remeasurement of our deferred taxes from the reduction in the U.S. statutory federal corporate income tax rate, as well as higher pretax income in 2016 resulting from the Acquisition-related revaluation gain discussed above. Additionally, our 2016 effective tax rate was also negatively impacted by the remeasurement of the deferred tax liability on our Molson core brand intangible asset to the Canadian ordinary income tax rate as discussed above. The decrease was partially offset by the full-year inclusion of 100% of MillerCoors' pretax income in 2017, which is subject to the U.S. federal and state income tax rates, and the impact of certain Acquisition-related permanent items during the comparable periods.

The increase in the effective income tax rate for 2016 versus 2015 was primarily driven by higher pretax income in 2016 resulting from the Acquisition-related revaluation gain, the inclusion of 100% of MillerCoors' pretax income following the completion of the Acquisition, and the remeasurement of the Molson core brand intangible deferred tax liability, all as discussed above. Additionally, deferred tax expense was not required to be recorded on the difference between our historical tax basis in goodwill and the new book basis in goodwill resulting from the remeasurement of our previously held equity interest in MillerCoors. This resulted in a partially offsetting decrease to the effective tax rate in 2016, which is presented in the Acquisition-related permanent items line in the table above, as a portion of the revaluation gain was not tax effected.

Additionally, our effective income tax rates also deviate from the U.S. federal statutory rate of 35% primarily due to lower effective income tax rates applicable to our foreign businesses, driven by lower statutory income tax rates and tax planning impacts on statutory taxable income. The statutory income tax rates in the countries in Europe in which we operate range from 9% to 25%. Canada has a statutory income tax rate of approximately 26%.

Composition of deferred tax assets and liabilities



	As of
	December 31, 2017			December 31, 2016
	(In millions)
Non-current deferred tax assets:
Compensation-related obligations	$	10.3		$	22.2
Pension and postretirement benefits	—			35.6
Foreign exchange gain/loss	21.0			—
Hedging	45.8			—
Tax credit carryforwards	23.6			13.0
Tax loss carryforwards	1,214.2			1,004.8
Accrued liabilities and other	28.3			46.1
Other	8.3			7.5
Valuation allowance	(1,077.7		)	(901.7		)
Total non-current deferred tax assets	$	273.8		$	227.5
Non-current deferred tax liabilities:
Fixed assets	69.4			72.5
Partnership investments	898.7			922.0
Foreign exchange gain/loss	—			43.0
Pension and postretirement benefits	2.7			—
Intangible assets	881.2			800.5
Hedging	—			13.8
Total non-current deferred tax liabilities	$	1,852.0		$	1,851.8
Net non-current deferred tax assets	—			—
Net non-current deferred tax liabilities	$	1,578.2		$	1,624.3

The overall decrease to net deferred tax liabilities of $46.1 million in 2017 is primarily attributable to the decrease in net deferred tax liabilities of $433.9 million due to the above mentioned impacts of the 2017 Tax Act. This decrease was partially offset by an increase in deferred tax liabilities in 2017 as a result of our 100% ownership of MillerCoors, which includes the amortization of goodwill and intangible assets resulting from the acquisition of the remaining 58% of MillerCoors for U.S. tax purposes. These impacts are reflected within the partnership investments line item above. Additionally, our deferred tax balances are also impacted by foreign exchange rates, as a significant amount of our deferred tax assets and liabilities are in foreign jurisdictions.

Separately, during 2017, we recorded additional tax loss carryforwards of $59.6 million in certain European jurisdictions. As the carryforwards were generated in jurisdictions where we do not have operations, we concluded that it was more likely than not that the net operating losses would not be realized, and thus recorded a full valuation allowance on the associated deferred tax assets. The recognition of these deferred tax assets and fully offsetting valuation allowance resulted in a zero net impact to the consolidated statement of operations, balance sheet and statement of cash flows. In addition, the increase in our total valuation allowance position in the current year was further driven significantly by the impacts of foreign exchange rates, as a significant portion of our valuation allowances relate to jurisdictions outside of the U.S.

Our deferred tax valuation allowances are primarily the result of uncertainties regarding the future realization of recorded tax benefits on tax loss carryforwards from operations in various jurisdictions. The measurement of deferred tax assets is reduced by a valuation allowance if, based upon available evidence, it is more likely than not that the deferred tax assets will not be realized. We have evaluated the realizability of our deferred tax assets in each jurisdiction by assessing the adequacy of expected taxable income, including the reversal of existing temporary differences, historical and projected operating results and the availability of prudent and feasible tax planning strategies. Based on this analysis, we have determined that the valuation allowances recorded in each period presented are appropriate.

We have deferred tax assets for U.S. tax carryforwards that expire between 2019 and 2037 of $35.8 million and $17.8 million at December 31, 2017, and December 31, 2016, respectively. We have foreign tax loss carryforwards that expire between 2018 and 2037 of $238.6 million and $151.0 million as of December 31, 2017, and December 31, 2016, respectively. We have foreign tax loss carryforwards that do not expire of $963.4 million and $849.0 million as of December 31, 2017, and December 31, 2016, respectively. The significant increase in foreign tax loss carryforwards is primarily driven by the tax loss carryforwards related to certain European jurisdictions specifically mentioned above, and for which a full valuation allowance exists, as well as the impact of foreign exchange rates.



	As of
	December 31, 2017		December 31, 2016
	(In millions)
Domestic net non-current deferred tax liabilities	$	797.9	$	925.5
Foreign net non-current deferred tax assets	32.5		42.0
Foreign net non-current deferred tax liabilities	812.8		740.8
Net non-current deferred tax liabilities	$	1,578.2	$	1,624.3

The 2017 and 2016 amounts above exclude $37.9 million and $32.7 million respectively, of unrecognized tax benefits that have been recorded as a reduction of non-current deferred tax assets, which is presented within non-current deferred tax liabilities due to jurisdictional netting on the consolidated balance sheets.

Schedule of Unrecognized Tax Benefits Roll Forward

A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties, is as follows:



	For the years ended
	December 31, 2017			December 31, 2016			December 31, 2015
	(In millions)
Balance at beginning of year	$	39.7		$	39.5		$	59.8
Additions for tax positions related to the current year	13.5			1.7			1.8
Additions for tax positions of prior years	13.6			—			2.2
Reductions for tax positions of prior years	—			—			(5.5		)
Settlements	(12.8		)	—			(0.9		)
Release due to statute expiration and legislative changes	(14.6		)	(2.3		)	(9.6		)
Foreign currency adjustment	2.5			0.8			(8.3		)
Balance at end of year	$	41.9		$	39.7		$	39.5

Our remaining unrecognized tax benefits as of December 31, 2017, relate to tax years that are currently open, and amounts may differ from those to be determined upon closing of the positions. Annual tax provisions include amounts considered sufficient to pay assessments that may result from examination of prior year tax returns; however, the amount ultimately paid upon resolution of issues may differ materially from the amount accrued.

During 2018, we anticipate that approximately $1 million to $5 million of unrecognized tax benefits will be released due to settlements and closings of statutes of limitations in the U.S., Canada and Europe.

Summary of Positions for which Significant Change in Unrecognized Tax Benefits is Reasonably Possible [Table Text Block]



	For the years ended
	December 31, 2017		December 31, 2016		December 31, 2015
Reconciliation of unrecognized tax benefits balance	(In millions)
Estimated interest and penalties	$	2.1	$	5.7	$	5.3
Offsetting positions	—		—		(3.7		)
Unrecognized tax positions	41.9		39.7		39.5
Total unrecognized tax benefits	$	44.0	$	45.4	$	41.1

Presented net against non-current deferred tax assets	$	37.9	$	32.7	$	30.9
Current (included in accounts payable and other current liabilities)	—		3.0		1.8
Non-current (included within other liabilities)	6.1		9.7		8.4
Total unrecognized tax benefits	$	44.0	$	45.4	$	41.1

Amount of unrecognized tax benefits that would impact the effective tax rate, if recognized⁽¹⁾	$	41.9	$	39.7	$	39.5