INCOME TAXES

12 Months Ended

Dec. 31, 2019

The components of income before income taxes were as follows:



	Year Ended December 31,
	2019		2018		2017
U.S.	$	237,296	$	255,088	$	213,171
Non-U.S.	131,197		113,572		153,065
Total	$	368,493	$	368,660	$	366,236

The components of income tax expense (benefit) were as follows:



	Year Ended December 31,
	2019		2018			2017
Current:
Federal	$	25,063	$	45,521		$	89,182
Non-U.S.	26,540		28,894			25,746
State and local	9,064		10,515			7,640
	60,667		84,930			122,568
Deferred:
Federal	6,971		(691		)	(4,391		)
Non-U.S.	6,513		(3,121		)	(82		)
State and local	1,259		549			666
	14,743		(3,263		)	(3,807		)
Total	$	75,410	$	81,667		$	118,761

The differences between total income tax expense and the amount computed by applying the statutory federal income tax rate to income before income taxes for the three years ended December 31, 2019 were as follows:



	Year Ended December 31,
	2019			2018			2017
Statutory rate applied to pre-tax income	$	77,384		$	77,419		$	128,182
State and local income taxes, net of federal tax benefit	8,830			8,844			5,671
Excess tax benefits resulting from exercises of stock-based compensation	(3,451		)	(1,094		)	(6,276		)
Net impact of the U.S. Tax Act	—			4,823			21,949
Foreign withholding taxes	—			(4,424		)	6,667
Resolution and settlements to uncertain tax positions	(9,432		)	(457		)	2,216
Foreign Derived Intangible Income Deduction	(4,315		)	(2,647		)	—
Foreign rate variance	7,023			(4,560		)	(13,929		)
Bargain purchase gain	—			—			(17,556		)
Valuation allowances	3,198			5,596			102
Manufacturing deduction	—			—			(5,922		)
Research and development credit	(4,786		)	(3,859		)	(2,688		)
Other	959			2,026			345
Total	$	75,410		$	81,667		$	118,761
Effective tax rate	20.5		%	22.2		%	32.4		%

The 2019 effective tax rate is impacted by the reduced corporate income tax rate associated with the U.S. Tax Act beginning in 2018. The 2019 effective tax rate was lower than 2018 primarily due to income tax benefits for the settlement of tax items as well as tax deductions associated with excess tax benefits resulting from exercises of stock based compensation, offset by the geographic mix of earnings and taxes at higher rates in foreign jurisdictions.

Total income tax payments, net of refunds, were $42,880 in 2019, $85,805 in 2018 and $81,691 in 2017.

Deferred Taxes

Significant components of deferred tax assets and liabilities at December 31, 2019 and 2018, were as follows:



	December 31,
	2019			2018
Deferred tax assets:
Tax loss and credit carry-forwards	$	64,712		$	60,756
Inventory	3,442			3,544
Other accruals	13,048			13,172
Employee benefits	24,532			22,963
Pension obligations	11,561			12,122
Other	3,401			3,739
Deferred tax assets, gross	120,696			116,296
Valuation allowance	(71,546		)	(69,400		)
Deferred tax assets, net	49,150			46,896
Deferred tax liabilities:
Property, plant and equipment	39,583			28,606
Intangible assets	16,695			10,950
Inventory	6,427			4,814
Pension obligations	25,171			19,346
Other	11,285			8,770
Deferred tax liabilities	99,161			72,486
Total deferred taxes	$	(50,011	)	$	(25,590	)

At December 31, 2019, certain subsidiaries had net operating loss carry-forwards of approximately $51,129 that expire in various years from 2020 through 2034, plus $213,724 for which there is no expiration date.

In assessing the realizability of deferred tax assets, the Company assesses whether it is more-likely-than-not that a portion or all of the deferred tax assets will not be realized. The Company considers the scheduled reversal of deferred tax liabilities, tax planning strategies and projected future taxable income in making this assessment. At December 31, 2019, a valuation allowance of $71,546 was recorded against certain deferred tax assets based on this assessment. The Company believes it is more-likely-than-not that the tax benefit of the remaining net deferred tax assets will be realized. The amount of net deferred tax assets considered realizable could be increased or reduced in the future if the Company's assessment of future taxable income or tax planning strategies changes.

The Company determined it will repatriate earnings for certain non-U.S. subsidiaries, which are subject to foreign withholding taxes. The Company has estimated the associated tax to be $1,697. The Company considers remaining earnings and outside basis in all other non-U.S. subsidiaries to be indefinitely reinvested and has not recorded any deferred taxes as such estimate is not practicable.

Unrecognized Tax Benefits

Liabilities for unrecognized tax benefits related to uncertain tax positions are classified as Other liabilities unless expected to be paid in one year. Additionally, to the extent a position would not result in a cash tax liability, those amounts are generally recorded to Deferred income taxes to offset tax attributes. The Company recognizes interest and penalties related to unrecognized tax benefits in Income taxes. Current income tax expense included benefits of $1,957 for the year ended December 31, 2019 and benefits of $1,277 for the year ended December 31, 2018 for interest and penalties. For those same years, the Company's accrual for interest and penalties related to unrecognized tax benefits totaled $4,512 and $6,655, respectively.

The following table summarizes the activity related to unrecognized tax benefits:



	2019			2018
Balance at beginning of year	$	28,804		$	28,449
Increase related to current year tax provisions	1,204			1,431
Increase/(decrease) related to prior years' tax positions	(101		)	4,917
Decrease related to settlements with taxing authorities	(3,567		)	(111		)
Resolution of and other decreases in prior years' tax liabilities	(5,692		)	(1,501		)
Other	(63		)	(4,381		)
Balance at end of year	$	20,585		$	28,804

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $17,552 at December 31, 2019 and $25,069 at December 31, 2018.

The Company files income tax returns in the U.S. and various state, local and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local or non-U.S. income tax examinations by tax authorities for years before 2015. The Company is currently subject to various state audits and non-U.S. income tax audits. The Company is generally not able to precisely estimate the ultimate settlement amounts or timing until after the close of an audit. The Company evaluates its tax positions and establishes liabilities for unrecognized tax benefits related to uncertain tax positions that may be challenged by local authorities and may not be fully sustained.

Unrecognized tax benefits are reviewed on an ongoing basis and are adjusted for changing facts and circumstances, including management’s judgment in the interpretation of applicable tax law, regulation or tax ruling, the progress of tax audits and closing of statutes of limitations. Based on information currently available, management believes that additional audit activity could be completed and/or statutes of limitations may close relating to existing unrecognized tax benefits. It is reasonably possible there could be a further reduction of $2,971 in prior years' unrecognized tax benefits in 2020.