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 adopted the guidance provided by Securities and Exchange Staff Accounting Bulletin No. 118 (“SAB 118”) regarding the public disclosures of certain accounting impacts of the Tax Act. In 2017 and the first nine months of 2018, the Company recorded provisional amounts for certain enactment date effects of the Tax Act by applying the guidance in SAB 118 because we had not yet completed our enactment date accounting for these effects. All provisional amounts have been finalized for the 2018 Form 10-K as required by SAB 118. This includes the federal and state income tax effects of newly enacted law, which imposed a one-time transition tax liability related to undistributed earnings of certain foreign subsidiaries that were not previously taxed. Such finalization had no net impact on the tax provision for 2018, as it merely adjusted net operating loss carry-forward amounts and was fully offset by a valuation allowance.

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



(in millions)	2018			2017
Depreciation	$	109.0		$	148.0
Deferred revenue	9.3			14.4
Intangibles	6.0			6.4
Gain on debt redemption	—			7.9
State taxes	19.9			22.1
Other	15.2			10.6
Deferred tax liabilities	159.4			209.4
Claims and insurance	(84.8		)	(98.2		)
Net operating loss carryforwards	(199.9		)	(228.0		)
Employee benefit accruals	(88.9		)	(88.8		)
Sale/leaseback transactions	(54.5		)	(64.7		)
Other	(20.6		)	(31.7		)
Deferred tax assets	(448.7		)	(511.4		)
Valuation allowance	291.1			305.1
Net deferred tax assets	(157.6		)	(206.3		)
Net deferred tax liability	$	1.8		$	3.1

The net deferred tax liability of $1.8 million and $3.1 million as of December 31, 2018 and 2017, respectively, is included as a separate line item in each of the accompanying balance sheets. Current income tax payable was $5.8 million as of December 31, 2018 and is included in “Other current and accrued liabilities” in the accompanying balance sheets. Current income tax receivable was $1.3 million as of December 31, 2017, and is included in “Prepaid expenses and other” in the accompanying balance sheets.

As of December 31, 2018, the Company has remaining federal net operating loss carryforwards of approximately $677.3 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 2030 and 2037 if not used. As of December 31, 2018, the Company has general business and other credit carryforwards of approximately $0.1 million. These credit carryforwards will likely not be utilized and will expire between 2027 and 2031 if not used.

As of December 31, 2018 and 2017, a valuation allowance of $291.1 million and $305.1 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:



	2018		2017		2016
Federal statutory rate	21.0	%	35.0	%	35.0	%
State income taxes, net	14.1	%	(2.8	)%	2.9	%
Foreign tax rate differential	12.1	%	(10.0	)%	(3.3	)%
Permanent differences	8.3	%	(8.9	)%	6.9	%
Valuation allowance	(17.5	)%	(48.6	)%	(13.0	)%
Benefit from intraperiod tax allocation under ASC 740	—	%	73.5	%	—	%
Net change in unrecognized tax benefits	(0.9	)%	0.5	%	(10.2	)%
Other, net (primarily prior year return to provision)	(1.6	)%	1.6	%	(5.7	)%
Effective tax rate	35.5	%	40.3	%	12.6	%

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



(in millions)	2018			2017			2016
Current:
Federal	$	—		$	(0.9	)	$	(1.7	)
State	5.4			0.8			(0.7		)
Foreign	6.8			6.0			5.9
Current income tax expense	12.2			5.9			3.5

Deferred:
Federal	—			(13.3		)	—
State	—			—			—
Foreign	(1.1		)	0.1			(0.4		)
Deferred income tax benefit	(1.1		)	(13.2		)	(0.4		)

Income tax expense (benefit)	11.1			(7.3		)	3.1

Based on the income (loss) before income taxes:
Domestic	13.6			(30.5		)	3.9
Foreign	17.7			12.4			20.7
Income (Loss) before income taxes	$	31.3		$	(18.1	)	$	24.6

The Company applies the intraperiod tax allocation rules of ASC 740 to allocate income taxes among continuing operations, other comprehensive income (loss), and additional paid-in capital when our situation meets the criteria as prescribed in the rule. During 2017, the Company recognized $13.3 million of deferred benefit in the statement of consolidated operations and an equal and offsetting deferred tax expense in other comprehensive income (loss) included in the statement of consolidated comprehensive income (loss) due to the application of the exception within the intraperiod tax allocation rules. There was no domestic deferred benefit recognized in 2018 or 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)		2018			2017
Unrecognized tax benefits at January 1		$	56.8		$	45.3

Increases related to:
	Tax positions taken during a prior period	7.1			11.8
	Tax positions taken during the current period	0.4			0.4

Decreases related to:
	Tax positions taken during a prior period	(0.1		)	—
	Lapse of applicable statute of limitations	(4.8		)	(0.7		)
	Settlements with taxing authorities	(0.2		)	—

Unrecognized tax benefits at December 31		$	59.2		$	56.8

At December 31, 2018 and 2017, there are $10.5 million and $10.8 million of benefits that, if recognized, would affect the effective tax rate. We accrued interest of $0.8 million for each of the years ended December 31, 2018 and 2017 and reversed $0.3 million and $0.7 million of previously accrued interest on uncertain tax positions during the years ended December 31, 2018 and 2017 for a net increase of $0.5 million and $0.1 million for 2018 and 2017, respectively. The reversals related primarily to statute expirations and other favorable resolution of prior uncertain positions. The total amount of interest accrued for uncertain tax positions is $2.8 million and $2.3 million as of December 31, 2018 and 2017. During the year ended December 31, 2018, we paid inconsequential amounts of tax and interest to settle state audits of tax years 2010 through 2014 for certain of our subsidiaries, and we reduced our previously recorded liability for unrecognized tax benefits accordingly. During the year ended December 31, 2017, we paid no amounts to settle audits. 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 $7.7 million as a result of developments in examinations, or from the expiration of statutes of limitation.

Tax years that remain subject to examination for our major tax jurisdictions as of December 31, 2018:



Statute remains open		2005-2017
Tax years currently under examination/exam completed		2005-2013
Tax years not examined		2014-2018