Income Taxes

We use the asset and liability method to reflect income taxes on our financial statements, pursuant to ASC 740. We recognize deferred tax assets and liabilities by applying enacted tax rates to the differences between the carrying value of existing assets and liabilities and their respective tax basis and to loss carryforwards. Tax credit carryforwards are recorded as deferred tax assets. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that the change occurs. We assess the validity of deferred tax assets and loss and tax credit carryforwards and provide valuation allowances when we determine it is more likely than not that such assets, losses, or credits will not be realized. We have not recognized deferred taxes relative to foreign subsidiaries’ earnings that are deemed to be permanently reinvested. Any related taxes associated with such earnings are not material.

The Company has adopted the guidance provided by Securities and Exchange Staff Accounting Bulletin No. 118 (“SAB 118”) regarding the public disclosures of certain of the accounting impacts of the The Tax Act. More specifically, the amount of the accumulated deferred net foreign earnings and profits, appropriately reduced to reflect the corresponding reduced federal tax rates and then required to be included in taxable income, has been estimated using the best available information, including the limited official guidance that has been released, as of the practical completion date necessary for inclusion in this timely-filed Form 10-K. That amount in turn affected the computation of the deferred tax relative to the outside GAAP and Tax basis difference in our foreign subsidiaries for which we do not claim permanent reinvestment. Ultimately, then, the total net deferred tax subject to revaluation for the reduction in the federal rate from 35% to 21%, the actual tax effect of the rate reduction and the corresponding change in the overall valuation allowance against net deferred tax assets, as disclosed in this footnote, are all impacted.

The ultimate state tax treatment, which may vary by state, of the inclusion in 2017 U.S.federal taxable income of this deemed repatriation of foreign earnings has not been determined by state tax authorities. The Company has presumed federal/state conformity consistent with current state law and accounted for state income taxes accordingly. That estimated state tax accounting is also subject to change as the state tax authorities publicize their intended treatment of the deemed repatriation.

Consequently, all accounting results affected by the estimated foreign earnings and profits included in 2017 taxable income are “provisional”, as described in SAB 118. The U.S. Treasury Department/IRS and state tax authorities are expected to issue further guidance in 2018. The approximate earnings and profits and all related accounting results will be finalized upon both the completion of the foreign jurisdiction tax returns for 2017 and review and analysis of that additional guidance.

The Tax Act also requires that beginning in 2018, all Global Intangible Low-Taxed Income (“GILTI”) earned by foreign subsidiaries of U.S. corporate taxpayers be included in U.S. taxable income. The computation of GILTI is complex and multiple technical issues remain unresolved. Preliminary guidance from the FASB indicates that companies may choose to account for GILTI either immediately prior to or concurrent with the year in which it is realized. Recognizing a potential deferred tax liability in 2017 for post 2017 GILTI would require projections of relevant foreign earnings and consideration of any allowable structuring that would mitigate or eliminate any GILTI. Given the resulting uncertainty, the Company has made no accounting policy decision nor completed any accounting for GILTI for purposes of this Form 10-K.

The Company has identified multiple other relevant sections of The Tax Act. However, either because of post 2017 effective dates or the Company’s decision to opt out of certain changes, none of those sections resulted in any “provisional” accounting for this 2017 Form 10-K.

Deferred tax liabilities (assets) were comprised of the following at December 31:



(in millions)	2017			2016
Depreciation	$	148.0		$	229.5
Deferred revenue	14.4			15.8
Intangibles	6.4			8.9
Gain on debt redemption	7.9			25.7
State taxes	22.1			30.2
Other	10.6			31.5
Deferred tax liabilities	209.4			341.6
Claims and insurance	(98.2		)	(149.6		)
Net operating loss carryforwards	(228.0		)	(302.9		)
Employee benefit accruals	(88.8		)	(201.8		)
Sale/Leaseback transaction	(64.7		)	(99.9		)
Other	(31.7		)	(46.0		)
Deferred tax assets	(511.4		)	(800.2		)
Valuation allowance	305.1			461.7
Net deferred tax assets	(206.3		)	(338.5		)
Net deferred tax liability	$	3.1		$	3.1

The net deferred tax liability of $3.1 million and $3.1 million as of December 31, 2017 and 2016, respectively, is included as separate line items in the accompanying balance sheets. Current income tax receivable was $1.3 million and $9.1 million as of December 31, 2017 and 2016, respectively, and is included in “Prepaid expenses and other” in the accompanying balance sheets.

As of December 31, 2017, the Company has remaining federal net operating loss carryforwards of approximately $805.4 million. Deemed ownership changes that occurred in July 2011, in July 2013 and in January 2014 imposed annual and cumulative limits under the Code on the utilization of these carryforwards. These limits are not expected to inhibit the Company’s ability to utilize these losses over their carry forward periods. These carryforwards expire between 2028 and 2037 if not used. As of December 31, 2017, the Company has foreign tax credit and other credit carryforwards of approximately $0.9 million. These credit carryforwards will likely not be utilized and will expire in 2018 if not used. As of December 31, 2017, the Company has a capital loss carryforward of approximately $13.8 million, which will expire in 2021 if not used.

As of December 31, 2017 and 2016, a valuation allowance of $305.1 million and $461.7 million has been established for deferred tax assets because, based on available sources of future taxable income, it is more likely than not that those assets will not be realized.

A reconciliation between income taxes at the federal statutory rate and the consolidated effective tax rate follows:



	2017		2016		2015
Federal statutory rate	35.0	%	35.0	%	35.0	%
State income taxes, net	(2.8	)%	2.9	%	(50.0	)%
Foreign tax rate differential	(10.0	)%	(3.3	)%	43.2	%
Permanent differences	(8.9	)%	6.9	%	(88.6	)%
Valuation allowance	(48.6	)%	(13.0	)%	(243.2	)%
Benefit from intraperiod tax allocation under ASC 740	73.5	%	—	%	265.9	%
Net change in unrecognized tax benefits	0.5	%	(10.2	)%	(11.4	)%
Benefit from settlement of litigation & audits	—	%	—	%	54.5	%
Other, net (primarily prior year return to provision)	1.6	%	(5.7	)%	110.5	%
Effective tax rate	40.3	%	12.6	%	115.9	%

The income tax provision (benefit) consisted of the following:



(in millions)	2017			2016			2015
Current:
Federal	$	(0.9	)	$	(1.7	)	$	(0.8	)
State	0.8			(0.7		)	(1.6		)
Foreign	6.0			5.9			7.1
Current income tax expense	$	5.9		$	3.5		$	4.7

Deferred:
Federal	$	(13.3	)	$	—		$	(8.7	)
State	—			—			(3.0		)
Foreign	0.1			(0.4		)	1.9
Deferred income tax benefit	$	(13.2	)	$	(0.4	)	$	(9.8	)

Income tax expense (benefit)	$	(7.3	)	$	3.1		$	(5.1	)

Based on the income (loss) before income taxes:
Domestic	$	(30.5	)	$	3.9		$	(33.2	)
Foreign	12.4			20.7			28.8
Income (Loss) before income taxes	$	(18.1	)	$	24.6		$	(4.4	)

The Company applies the intraperiod tax allocation rules of ASC 740 to allocate income taxes among continuing operations, discontinued operations, extraordinary items, other comprehensive income (loss), and additional paid-in capital when our situation meets the criteria as prescribed in the rule. During 2017 and 2015, the Company recognized $13.3 million and $11.7 million, respectively, of deferred benefit in the statement of consolidated operations and an equal and offsetting deferred tax expense in other comprehensive income included in the statement of consolidated comprehensive loss due to the application of the exception within the intraperiod tax allocation rules. There was no deferred benefit recognized in 2016, as the exception did not apply. This allocation has no effect on total tax provision or total valuation allowance.

Uncertain Tax Positions

A rollforward of the total amount of unrecognized tax benefits for the years ended December 31 is as follows:



(in millions)		2017			2016
Unrecognized tax benefits at January 1		$	45.3		$	30.6

Increases related to:
	Tax positions taken during a prior period	11.8			17.3
	Tax positions taken during the current period	0.4			0.4

Decreases related to:
	Tax positions taken during a prior period	—			—
	Lapse of applicable statute of limitations	(0.7		)	(3.0		)
	Settlements with taxing authorities	—			—

Unrecognized tax benefits at December 31		$	56.8		$	45.3

At December 31, 2017 and 2016, there are $10.8 million and $10.9 million of benefits that, if recognized, would affect the effective tax rate. We accrued interest of $0.8 million and $0.6 million for the years ended December 31, 2017 and 2016 and reversed $0.7 million and $1.5 million of previously accrued interest on uncertain tax positions during the years ended December 31, 2017 and 2016 for a net increase of $0.1 million for 2017 and a net reduction of $0.9 million for 2016. The reversal related primarily to settlements and other favorable resolution of prior uncertain positions. The total amount of interest accrued for uncertain tax positions is $2.3 million and $2.2 million as of December 31, 2017 and 2016. During the year ended December 31, 2017, we paid no amounts to settle audits. During the year ended December 31, 2016, we paid inconsequential amounts of tax and interest to settle foreign audits of tax years 2006 through 2011 for certain of our subsidiaries, and we reduced our previously recorded liability for unrecognized tax benefits accordingly. We have not accrued any penalties relative to uncertain tax positions. We have elected to treat interest and penalties on uncertain tax positions as interest expense and other operating expenses, respectively.

It is reasonably possible that the existing unrecognized tax benefits may decrease over the next twelve months by as much as $0.6 million as a result of developments in examinations and/or litigation, or from the expiration of statutes of limitation.

Tax years that remain subject to examination for our major tax jurisdictions as of December 31, 2017:



Statute remains open		2005-2016
Tax years currently under examination/exam completed		2005-2013
Tax years not examined		2014-2017