
(in thousands)	2020		2019		2018
Income tax based on income from continuing operations, at estimated tax rates of 28%, 28%, and 31%, respectively	$	39,544	$	49,977	$	36,044
Income tax before discrete items	39,544		49,977		36,044
Discrete tax expense/(benefit):
Net impact of mandatory deemed repatriation	—		—		(1,003)
Provision for/resolution of tax audits and contingencies, net	752		(2,874)		1,286
Adjustments to prior period tax liabilities	(2,420)		(1,637)		(1,284)
Provision for/adjustment to beginning of year valuation allowances	168		(525)		(4,882)
Enacted tax legislation	—		(112)		2,067
Tax effect of non-deductible foreign exchange loss on intercompany loan	3,801		—		—
Other	(14)		—		—
Total income tax expense	$	41,831	$	44,829	$	32,228


(in thousands)	2020		2019		2018
Income/(loss) before income taxes:
U.S.	$	63,375	$	76,024	$	41,875
Non-U.S.	75,699		102,188		73,372
	$	139,074	$	178,212	$	115,247
Income tax provision
Current:
Federal	$	1,415	$	780	$	304
State	2,028		6,357		4,996
Non-U.S.	26,916		25,255		21,557
	$	30,359	$	32,392	$	26,857
Deferred:
Federal	$	11,211	$	10,583	$	10,700
State	192		253		(338)
Non-U.S.	69		1,601		(4,991)
	$	11,472	$	12,437	$	5,371
Total income tax expense	$	41,831	$	44,829	$	32,228


(in thousands)	2020		2019		2018
Net effect of temporary differences	$	5,262	$	(18)	$	(4,657)
Foreign tax credits	7,173		12,530		9,437
Retirement benefits	401		(752)		2,360
Net impact to operating loss carryforwards	(1,532)		1,314		1,046
Enacted changes in tax laws and rates			(112)		2,067
Adjustment to beginning-of-the-year valuation allowance balance for changes in circumstances	168		(525)		(4,882)
Total	$	11,472	$	12,437	$	5,371


	2020		2019		2018
U.S. federal statutory tax rate	21.0	%	21.0	%	21.0	%
State taxes, net of federal benefit	1.8		3.0		2.9
Non-U.S. local income taxes	3.2		4.4		3.3
U.S. permanent adjustments	0.1		—		(0.3)
Foreign permanent adjustments	0.2		0.4		(0.4)
Foreign rate differential	0.6		0.5		0.2
Net U.S. tax on non-U.S. earnings and foreign withholdings	1.2		0.3		5.7
Provision for/resolution of tax audits and contingencies, net	0.5		(1.6)		1.1
Research and development and other tax credits	(0.4)		(0.3)		(0.1)
Provision for/adjustment to beginning of year valuation allowances	0.2		(0.3)		(4.2)
Enacted tax legislation and rate change	—		(0.1)		1.8
Tax effect of non-deductible foreign exchange loss on intercompany loan	2.7		—		—
Return to provision and other adjustments	(1.0)		(2.1)		(3.0)
Effective income tax rate	30.1	%	25.2	%	28.0	%

The Company has operations which constitute a taxable presence in 18 countries outside of the United States. The majority of these countries had income tax rates that are above the United States federal tax rate of 21% during 2020. The jurisdictional location of earnings is a significant component of the Company’s effective tax rate each year. The rate impact of this component is influenced by the specific location of non-U.S. earnings and the level of the Company’s total earnings. From period to period, the jurisdictional mix of earnings can vary as a result of operating fluctuations in the normal course of business, as well as the extent and location of other income and expense items, such as pension settlement and restructuring charges. The foreign income tax rate differential that is included above in the reconciliation of the effective tax rate includes the difference between tax expense calculated at the U.S. federal statutory tax rate of 21% and the expense accrued based on the different statutory tax rates that apply in the jurisdictions where the income or loss is earned.

During the periods reported, income outside of the U.S. was heavily concentrated within Brazil (blended 34% tax rate), China (25% tax rate), and Mexico (30% tax rate). The foreign rate differential of these jurisdictions was partially offset by Switzerland (7.8% tax rate). As a result, the foreign income tax rate differential was primarily attributable to these tax rate differences.

On July 20, 2020, The Treasury Department and the IRS released final regulations and proposed regulations under Section 951A and Section 954, relating to the treatment of income that is subject to a high rate of foreign tax under the global intangible low-taxed income (GILTI) and subpart F income regimes. The final regulations adopted a high-tax exclusion for GILTI purposes, which can be elected on an annual basis. These final regulations may be applied retroactively to tax years beginning after December 31, 2017. The Company expects to elect the GILTI high-tax exclusion for the 2020 tax year. By making the election, the Company will reduce its taxable income by approximately $15 million. After taking the GILTI foreign tax credits into consideration, the net impact of making the election is a tax reduction of $0.7 million, or 0.5%. The Company will also use $0.7 million less carryover foreign tax credits, which can be utilized in a future year. The Company will review the impact of making the high-tax election retroactively for the 2018 and 2019 tax years to determine the potential benefits of making the election. The primary benefit of making the election retroactively would be the preservation of foreign tax credits that could then be utilized in future years. Making the election retroactively isn't expected to have a significant impact on the Company's financial reporting.

The Proposed Regulations generally conform the high-tax exception under the subpart F regime with the high-tax exclusion under the GILTI regime, and adopt a single election under Section 954(b)(4) applicable for purposes of both subpart F income and tested income. The proposed regulations adopt a unified election for subpart F and tested income that applies the rules of the GILTI high-tax exclusion for both tested income and subpart F income. The proposed regulations generally apply to tax years beginning after the date of publication of the Treasury decision adopting such rules as final regulations in the Federal Register. Once the final regulations are published, the Company will determine annually whether making the election is beneficial. This election isn't expected to have a material impact on the Company's financial reporting.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of certain assets and liabilities for financial reporting purposes and income tax return purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:


	U.S.				Non-U.S.
(in thousands)	2020		2019		2020		2019
Noncurrent deferred tax assets:
Accounts receivable, net	$	672	$	823	$	1,453	$	1,050
Inventories	762		636		1,995		1,231
Accrued liabilities, deferred compensation	4,490		4,730		1,064		1,386
Property, plant, equipment and intangibles, net	—		—		2,382		4,892
Other noncurrent liabilities	12,498		14,885		82		1,048
Tax loss carryforwards	517		2,266		24,509		21,467
Tax credit carryforwards	9,236		15,931		954		936
Derivatives	3,283		1,411		—		—
Other noncurrent liabilities, reserves	2,704		2,953		—		—
Deferred revenue	1,471		2,417		—		—
Other			—		638		—
Noncurrent deferred tax assets before valuation allowance	35,633		46,052		33,077		32,010
Less: valuation allowance	(9)		—		(10,261)		(9,102)
Total noncurrent deferred tax assets	35,624		46,052		22,816		22,908
Total deferred tax assets	$	35,624	$	46,052	$	22,816	$	22,908
Noncurrent deferred tax liabilities:
Unrepatriated foreign earnings	$	3,779	$	2,202	$	—	$	—
Property, plant, equipment and intangibles, net	3,122		4,404		—		—
Deferred gain	2,911		3,391		—		—
Flow-through deferred tax liabilities	6,881		6,205		—		—
Deferred revenue	—		—		11,989		8,492
Other	519		510		—		3,137
Total noncurrent deferred tax liabilities	$	17,212	$	16,712	$	11,989	$	11,629
Net deferred tax liabilities	$	17,212	$	16,712	$	11,989	$	11,629
Net deferred tax asset	$	18,412	$	29,340	$	10,827	$	11,279

Deferred income tax assets, net of valuation allowances, are expected to be realized through the reversal of existing taxable temporary differences and future taxable income. In 2020, the Company recorded the following movements in its valuation allowance: $0.1 million increase due to the net recording of valuation allowances, $0.3 million increase in a valuation allowance due to a net increase in the related deferred tax assets, and $0.7 million increase due to the effect of the changes in currency translation rates.

At December 31, 2020, the Company had available approximately $90.6 million of net operating loss carryforwards, for which the Company has a deferred tax asset of $24.6 million, with expiration dates ranging from one year to indefinite that may be applied against future taxable income. The Company believes that it is more likely than not that certain benefits from these net operating loss carryforwards will not be realized and, accordingly, the Company has recorded a valuation allowance of $10.3 million as of December 31, 2020. Additionally, management has evaluated its ability to utilize its other non-U.S. tax attributes during the various carryforward periods and has concluded that the Company will more likely than not be able to utilize the remaining non-U.S. tax attributes. Included in the net operating loss carryforward is approximately $8.5 million of state net operating loss carryforwards that are subject to various business apportionment factors and multiple jurisdictional requirements when utilized. In addition, the Company had available a foreign tax credit carryforward of $0.2 million that will begin to expire in 2025, U.S. and non-U.S. research and development credit carryforwards of $9.0 million and $0.9 million, respectively, that will begin to expire in 2025.

The Company reported a U.S. net deferred tax asset of $18.4 million at December 31, 2020, which contained $9.8 million of tax attributes with limited lives. Although the Company is in a cumulative book income position for the three-year period ending December 31, 2020, management has evaluated its ability to utilize these tax attributes during the carryforward period. The Company’s future profits from operations, available tax elections and tax planning opportunities more likely than not will generate income of sufficient character to utilize the remaining tax attributes except for a small amount of state net operating losses for which we recorded a valuation allowance of less than $0.1 million.

The Company records the residual U.S. and foreign taxes on certain amounts of foreign earnings that have been targeted for repatriation to the U.S. These amounts are not considered to be indefinitely reinvested, and the Company accrued for the tax cost on these earnings to the extent they cannot be repatriated in a tax-free manner. The Company has targeted for repatriation $131.7 million of current year and prior year earnings of the Company’s foreign operations. If these earnings were distributed, the Company would be subject to foreign withholding taxes of $1.3 million and U.S. income taxes of $2.0 million which have already been recorded.

No additional income taxes have been provided on the indefinitely invested foreign earnings at December 31, 2020. If these earnings were distributed, the Company could be subject to income taxes and additional foreign withholding taxes. Determining the amount of unrecognized deferred tax liability related to any additional outside basis difference in these entities is not practical.


(in thousands)	2020		2019		2018
Unrecognized tax benefits balance at January 1st	$	5,834	$	3,790	$	4,509
Increase in gross amounts of tax positions related to prior years	540		4,874		2,008
Decrease in gross amounts of tax positions related to prior years	(637)		(2,239)		(358)
Increase in gross amounts of tax positions related to current years	—		—		—
Decrease due to settlements with tax authorities	—		—		(1,626)
Decrease due to lapse in statute of limitations	(300)		(626)		(479)
Currency translation	54		35		(264)
Unrecognized tax benefits balance at December 31,	$	5,491	$	5,834	$	3,790

The Company recognizes interest and penalties related to unrecognized tax benefits within its global operations as a component of income tax expense. The Company recognized interest and penalties related to the unrecognized tax benefits noted above of $0.2 million or less in each of 2020, 2019 and 2018. As of December 31, 2020, 2019 and 2018, the Company had approximately $0.1 million, $0.1 million, and $0.4 million respectively, of accrued interest and penalties related to unrecognized tax benefits.

The Company conducts business globally and, as a result, files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world, including major jurisdictions such as the United States, Brazil, Canada, France, Germany, Italy, Mexico and Switzerland. The open tax years in these jurisdictions range from 2008 to 2020. The Company is currently under audit in non-U.S. tax jurisdictions, including but not limited to Canada, Italy and Switzerland. In the first quarter of 2020, the Company recorded a $1.8 million out-of-period immaterial charge related to developments in an ongoing U.S. state tax audit, which resulted in a corresponding decrease in deferred tax assets. In the second quarter of 2020, the U.S. state tax audit was settled. As a result of the audit settlement, the Company recorded a net tax benefit of $1.5 million.