On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act of 2017 (the “Tax Reform Act”), which significantly changed U.S. tax law. The Tax Reform Act, among other things, lowered our U.S. statutory federal income tax rate from 35% to 21% effective January 1, 2018, while imposing a deemed repatriation tax on deferred foreign income and implementing a modified territorial tax system. The Tax Reform Act also provides for a one-time transition tax (“Transition Tax”) on certain foreign earnings as well as prospective changes which began in 2018, including repeal of the domestic manufacturing deduction, capitalization of research and development expenditures, additional limitations on executive compensation and limitations on the deductibility of interest.

We recognized provisional income tax effects of the Tax Reform Act in our previously issued financial statements in accordance with Staff Accounting Bulletin ("SAB") No. 118, which provides SEC staff guidance for the application of ASC Topic 740, Income Taxes with respect to recording certain tax impacts of the Tax Reform Act. We finalized our accounting for the income tax effects of the Tax Reform Act in the fourth quarter of 2018 with no material adjustments to previously recorded provisional amounts. The impacts of these changes are reflected in the 2018 tax benefit of $5.7 million and the 2017 provisional tax expense of $115.3 million.



	Year Ended December 31,
	2019			2018			2017
	(Amounts in thousands)
Current:
U.S. federal	$	22,001		$	5,150		$	59,292
Foreign	61,976			36,897			22,442
State and local	4,506			2,647			5,537
Total current	88,483			44,694			87,271
Deferred:
U.S. federal	2,933			11,242			135,294
Foreign	(12,243		)	(4,585		)	34,626
State and local	897			(127		)	1,488
Total deferred	(8,413		)	6,530			171,408
Total provision	$	80,070		$	51,224		$	258,679



	Year Ended December 31,
	2019			2018			2017
	(Amounts in millions)
Statutory federal income tax at 21% (21% for 2018 and 35% for 2017)	$	71.8		$	37.0		$	92.1
Foreign impact, net	4.5			(5.9		)	(36.4		)
Impact of U.S. Tax Reform Act	—			(5.7		)	115.3
Change in valuation allowances	0.3			15.7			73.6
State and local income taxes, net	5.4			3.7			4.9
Other, net	(1.9		)	6.4			9.2
Total	$	80.1		$	51.2		$	258.7
Effective tax rate	23.4		%	29.1		%	98.4		%

The 2017 tax rate differed from the federal statutory rate of 35% primarily due to the impacts pursuant to enactment of the Tax Reform Act, the net impact of foreign operations, the establishment of a valuation allowance against our deferred tax assets in various foreign jurisdictions, primarily Germany and Mexico, and taxes related to the sale of the Gestra and Vogt businesses.

For the year ended December 31, 2017, we did not assert permanent reinvestment on any of our foreign subsidiaries and as a result recorded deferred tax liabilities of approximately $75.4 million on cumulative unrepatriated earnings in connection with the Tax Reform Act. These deferred tax liabilities primarily relate to foreign withholding taxes that would be due upon repatriation of the designated earnings to the U.S. For the years ended December 31, 2019 and December 31, 2018, we have asserted permanent reinvestment on certain earnings of our foreign subsidiaries. As of December 31, 2019, we have recorded $67.9 million of deferred tax liabilities associated with the pre-December 31, 2017 earnings deemed available for repatriation as referenced above.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the consolidated deferred tax assets and liabilities were:



	December 31,
	2019			2018
	(Amounts in thousands)
Deferred tax assets related to:
Retirement benefits	$	25,214		$	26,496
Net operating loss carryforwards	101,193			92,630
Compensation accruals	24,685			25,993
Inventories	33,773			25,553
Credit and capital loss carryforwards	131,744			16,056
Warranty and accrued liabilities	7,042			2,763
Bad debt reserve	30,884			28,194
Other	25,339			32,253
Total deferred tax assets	379,874			249,938
Valuation allowances	(266,414		)	(133,929		)
Net deferred tax assets	113,460			116,009
Deferred tax liabilities related to:
Property, plant and equipment	(26,545		)	(18,773		)
Goodwill and intangibles	(114,567		)	(123,692		)
Foreign undistributed earnings taxes	(67,930		)	(70,331		)
Other	(12,623		)	(17,935		)
Total deferred tax liabilities	(221,665		)	(230,731		)
Deferred tax liabilities, net	$	(108,205	)	$	(114,722	)

We have $417.3 million of U.S. and foreign net operating loss carryforwards at December 31, 2019. Of this total, $38.0 million are state net operating losses. Net operating losses generated in the U.S., if unused, will expire in 2024 through 2026 tax years. The majority of our foreign net operating losses carry forward without expiration. Additionally, we have $29.1 million of foreign tax credit carryforwards at December 31, 2019. The foreign tax credit carryforwards, if unused, will expire in 2026, 2028 and 2029 tax years.

Our valuation allowances primarily relate to the deferred tax assets established for U.S. foreign tax credit carryforwards of $29.1 million, a foreign capital loss carryforward of $102.6 million, and other foreign deferred tax assets of $134.7 million. The foreign capital loss carryforward was the result of a reorganization of certain foreign subsidiaries in the current year. Due to its capital nature, it is uncertain if the loss will be utilized within its ten year carryforward period and, therefore, has a full valuation allowance.



	Year Ended December 31,
	2019		2018		2017
	(Amounts in thousands)
U.S.	$	129,917	$	88,674	$	102,372
Foreign	211,933		87,600		160,635
Total	$	341,850	$	176,274	$	263,007



	2019			2018			2017
Balance — January 1	$	41.2		$	51.5		$	59.3
Gross amount of increase (decrease) in unrecognized tax benefits resulting from tax positions taken:
During a prior year	8.8			(6.6		)	(3.5		)
During the current period	6.3			4.0			5.5
Decreases in unrecognized tax benefits relating to:
Settlements with taxing authorities	(11.4		)	(2.7		)	(10.8		)
Lapse of the applicable statute of limitations	(3.2		)	(3.7		)	(3.1		)
(Decrease) increase in unrecognized tax benefits relating to foreign currency translation adjustments	(1.1		)	(1.3		)	4.1
Balance — December 31	$	40.6		$	41.2		$	51.5

The amount of gross unrecognized tax benefits at December 31, 2019, was $54.2 million, which includes $13.6 million of accrued interest and penalties. Of this amount $53.6 million, if recognized, would favorably impact our effective tax rate.

With limited exception, we are no longer subject to U.S. federal income tax audits for years through 2016, state and local income tax audits for years through 2013 or foreign income tax audits for years through 2012. We are currently under examination for various years in Austria, Canada, China, France, Germany, India, Indonesia, Italy, Mexico, the Netherlands, Philippines, Saudi Arabia, Singapore, the U.S., Venezuela and Vietnam.

It is reasonably possible that within the next 12 months the effective tax rate will be impacted by the resolution of some or all of the matters audited by various taxing authorities. It is also reasonably possible that we will have the statute of limitations close in various taxing jurisdictions within the next 12 months. As such, we estimate we could record a reduction in our tax expense up to approximately $5 million within the next 12 months.