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Income Tax (Tables)

12 Months Ended

Dec. 31, 2019

Pretax income for computation of income tax provision

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



	For the years ended
	December 31, 2019			December 31, 2018		December 31, 2017
	(In millions)
Domestic	$	1,136.1		$	1,320.4	$	1,488.3
Foreign	(656.2		)	39.4		(105.1		)
Total	$	479.9		$	1,359.8	$	1,383.2

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, 2019			December 31, 2018			December 31, 2017
	(In millions)
Current:
Federal	$	69.1		$	(22.9	)	$	(177.1	)
State	9.4			(4.7		)	4.7
Foreign	46.7			38.7			36.5
Total current tax expense (benefit)	$	125.2		$	11.1		$	(135.9	)
Deferred:
Federal	$	128.3		$	232.2		$	(79.5	)
State	22.2			31.2			33.5
Foreign	(42.0		)	(49.3		)	(22.7		)
Total deferred tax expense (benefit)	$	108.5		$	214.1		$	(68.7	)
Total income tax expense (benefit)	$	233.7		$	225.2		$	(204.6	)

The increase in income tax expense for 2018 versus 2017 was primarily driven by net deferred tax benefit of approximately $567 million recognized in 2017 resulting from the impacts of the 2017 Tax Act, partially offset by the impact of the reduction of the U.S. federal corporate income tax rate from 35% to 21% in 2018.

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, 2019		December 31, 2018		December 31, 2017
Statutory Federal income tax rate	21.0	%	21.0	%	35.0	%
State income taxes, net of federal benefits	3.4	%	1.4	%	2.2	%
Effect of foreign tax rates and tax planning	(21.2	)%	(8.1	)%	(16.5	)%
Effect of U.S. tax reform	—	%	0.2	%	(41.0	)%
Effect of unrecognized tax benefits	3.7	%	0.8	%	(0.3	)%
Change in valuation allowance	6.0	%	0.7	%	3.6	%
Goodwill impairment	36.5	%	—	%	—	%
Other, net	(0.7	)%	0.6	%	2.2	%
Effective tax rate	48.7	%	16.6	%	(14.8	)%

The increase in the effective income tax rate for 2019 versus 2018 is primarily driven by the $668.3 million impairment loss attributable to nondeductible goodwill of our Canada reporting unit, increased valuation allowances, the recognition of other one-time tax expenses in 2019, as well as cycling one-time tax benefits in 2018.

The increase in the effective income tax rate for 2018 versus 2017 was primarily driven by the one-time impacts of the 2017 Tax Act recognized when enacted in 2017, most notably the remeasurement of our deferred taxes from the reduction in the U.S. statutory federal corporate income tax rate.

Additionally, our foreign businesses operate in jurisdictions with statutory income tax rates that differ from the U.S. Federal statutory rate. Specifically, the statutory income tax rates in the countries in Europe in which we operate range from 9% to 25%, and Canada has a statutory income tax rate of approximately 26%.

Separately, since 2018, the U.S. Department of Treasury has continued to issue proposed, temporary and final regulations to implement provisions of the 2017 Tax Act. We have continued to monitor these and while temporary and final regulations have not yet resulted in material adverse impacts to us, there are certain proposed regulations, which are not yet considered law, that if finalized as proposed, could result in a material adverse impact on our consolidated financial statements. Specifically, if certain of the proposed regulations are finalized as proposed with full retroactive application to January 1, 2018, then we would be required to recognize estimated income tax expense of approximately $100 million to $200 million upon enactment related to the proposed retroactive period through December 31, 2019, for fiscal years 2018 and 2019. This estimated range contains significant uncertainty and could be impacted by various factors, including any differences between the proposed and ultimately finalized regulations.

Composition of deferred tax assets and liabilities



	As of
	December 31, 2019			December 31, 2018
	(In millions)
Non-current deferred tax assets:
Compensation-related obligations	$	54.8		$	55.8
Pension and postretirement benefits	115.9			121.4
Foreign exchange gain/loss	1.8			—
Derivative instruments	41.8			8.9
Tax credit carryforwards	41.1			54.5
Tax loss carryforwards	267.1			1,201.8
Accrued liabilities and other	48.3			76.2
Valuation allowance	(73.8		)	(1,040.0		)
Total non-current deferred tax assets	$	497.0		$	478.6
Non-current deferred tax liabilities:
Fixed assets	353.7			345.8
Partnerships and investments	18.8			17.0
Foreign exchange gain/loss	—			3.0
Intangible assets	2,279.9			2,167.1
Total non-current deferred tax liabilities	$	2,652.4		$	2,532.9
Net non-current deferred tax assets	—			—
Net non-current deferred tax liabilities	$	2,155.4		$	2,054.3

The overall increase in net deferred tax liabilities of $101.1 million in 2019 is primarily attributable to the amortization of goodwill and indefinite-lived intangible assets resulting from the Acquisition for U.S. tax purposes. 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.

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 2020 and 2039 of $63.2 million and $76.7 million as of December 31, 2019 and December 31, 2018, respectively. We have foreign tax loss carryforwards that expire between 2020 and 2039 of $233.8 million and $195.0 million as of December 31, 2019 and December 31, 2018, respectively. We have foreign tax loss carryforwards that do not expire of $11.2 million and $984.6 million as of December 31, 2019 and December 31, 2018, respectively.

The significant year over year decrease in our deferred tax valuation allowances as well as our tax loss carryforwards that do not expire is attributable to the liquidation of certain European entities, resulting in the write-off of their loss carryforwards and associated full valuation allowances. As a result, these write-offs did not have an impact to the consolidated statement of operations, balance sheet and statement of cash flows.



	As of
	December 31, 2019		December 31, 2018
	(In millions)
Domestic net non-current deferred tax liabilities	$	1,488.5	$	1,353.2
Foreign net non-current deferred tax assets	34.8		26.8
Foreign net non-current deferred tax liabilities	701.7		727.9
Net non-current deferred tax liabilities	$	2,155.4	$	2,054.3

The 2019 and 2018 amounts above exclude $68.4 million and $47.8 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 amounts of unrecognized tax benefits, excluding interest and penalties, is as follows:



	For the years ended
	December 31, 2019			December 31, 2018			December 31, 2017
	(In millions)
Balance at beginning of year	$	51.6		$	41.9		$	39.7
Additions for tax positions related to the current year	18.1			22.3			13.5
Additions for tax positions of prior years	—			0.7			13.6
Reductions for tax positions of prior years	—			(8.4		)	—
Settlements	—			—			(12.8		)
Release due to statute expirations	(0.8		)	(1.6		)	(14.6		)
Foreign currency adjustment	3.5			(3.3		)	2.5
Balance at end of year	$	72.4		$	51.6		$	41.9

Our remaining unrecognized tax benefits as of December 31, 2019, relate to tax years that are currently open to examination. 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 2020, we anticipate that an immaterial amount of unrecognized tax benefits will be released due to closings of statutes of limitations.

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



	For the years ended
	December 31, 2019		December 31, 2018		December 31, 2017
	(In millions)
Reconciliation of unrecognized tax benefits balance
Estimated interest and penalties	$	2.9	$	2.3	$	2.1
Unrecognized tax positions	72.4		51.6		41.9
Total unrecognized tax benefits	$	75.3	$	53.9	$	44.0

Presented net against non-current deferred tax assets	$	68.4	$	47.8	$	37.9
Current (included in accounts payable and other current liabilities)	—		—		—
Non-current (included within other liabilities)	6.9		6.1		6.1
Total unrecognized tax benefits	$	75.3	$	53.9	$	44.0

Amount of unrecognized tax benefits that would impact the effective tax rate, if recognized⁽¹⁾	$	72.4	$	51.6	$	41.9

(1)

Amounts exclude the potential effects of valuation allowances, which may fully or partially offset the impact to the effective tax rate.