Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Provision for income taxes consisted of the following:

For the year ended December 31
(in thousands)	2021		2020		2019
Income before income taxes:
U.S.	$	63,708	$	63,375	$	76,024
Non-U.S.	102,223		75,699		102,188
	$	165,931	$	139,074	$	178,212
Income tax expense/(benefit)
Current:
Federal	$	3,348	$	1,415	$	780
State	2,663		2,028		6,357
Non-U.S.	29,319		26,916		25,255
	$	35,330	$	30,359	$	32,392
Deferred:
Federal	$	9,911	$	11,211	$	10,583
State	(24)		192		253
Non-U.S.	1,946		69		1,601
	$	11,833	$	11,472	$	12,437
Total income tax expense	$	47,163	$	41,831	$	44,829

A reconciliation of the U.S. federal statutory tax rate to the Company’s effective income tax rate is as follows:

For the year ended December 31	2021		2020		2019
U.S. federal statutory tax rate	21.0	%	21.0	%	21.0	%
State taxes, net of federal benefit	1.8		1.8		3.0
Non-U.S. local income taxes	2.5		3.2		4.4
U.S. permanent adjustments	1.1		0.1		—
Foreign rate differential	1.2		0.6		0.5
Net U.S. tax on non-U.S. earnings and foreign withholdings	2.1		1.2		0.3
Provision for/(resolution) of tax audits and contingencies, net	0.1		0.5		(1.6)
Tax effect of non-deductible foreign exchange loss on intercompany loan	—		2.7		—
Impact of amended tax returns	(1.3)		—		—
Return to provision and other adjustments	(0.1)		(1.0)		(2.4)
Effective income tax rate	28.4	%	30.1	%	25.2	%

The Company's subsidiary in Mexico has an intercompany loan payable in U.S. dollars. As a result of the weaker Mexican peso, the Company recorded a revaluation loss in 2020 which is not deductible under Mexican tax law, leading to a $3.8 million discrete tax charge.

The Company has operations which constitute a taxable presence in 18 countries outside of the United States. The Company is subject to audit in the U.S. and various foreign jurisdictions. Our open tax years for major jurisdictions generally range from 2012-2021.

During the periods reported, income outside of the U.S. was heavily concentrated within Brazil (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.

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 purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:

For the year ended December 31	U.S.				Non-U.S.
(in thousands)	2021		2020		2021		2020
Deferred tax assets:
Accounts receivable, net	$	428	$	672	$	1,378	$	1,453
Inventories	1,450		762		1,752		1,995
Incentive compensation	4,580		4,490		1,084		1,064
Property, plant, equipment and intangibles, net	—		—		4,339		2,382
Pension, post retirement benefits - non-current	12,912		12,498		—		82
Tax loss carryforwards	217		517		19,821		24,509
Tax credit carryforwards	4,643		9,236		—		954
Derivatives	468		3,283		—		—
Reserves	991		2,704		—		—
Deferred revenue	239		1,471		—		—
Other	—		—		1,791		638
Deferred tax assets before valuation allowance	25,928		35,633		30,165		33,077
Less: valuation allowance	(9)		(9)		(10,650)		(10,261)
Total deferred tax assets	$	25,919	$	35,624	$	19,515	$	22,816
Deferred tax liabilities:
Unrepatriated foreign earnings	$	6,308	$	3,779	$	—	$	—
Property, plant, equipment and intangibles, net	5,356		3,122		—		—
Basis difference in partner capital	2,466		2,911		—		—
Basis difference in investment	3,985		6,881		—		—
Deferred revenue	—		—		10,829		11,989
Other	963		519		602		—
Total deferred tax liabilities	$	19,078	$	17,212	$	11,431	$	11,989
Net deferred tax asset	$	6,841	$	18,412	$	8,084	$	10,827

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 2021, the Company recorded immaterial movements in its valuation allowance, which are included in Schedule II in Item 15.

As of December 31, 2021, the Company's net operating loss, capital loss and tax credit carryforwards were as follows:

(in thousands)	Expiration Period	Net Operating and Capital Loss Carryforwards		Tax Credit Carryforwards
Jurisdiction
U.S. Federal	2025 - 2040	$	—	$	4,802
U.S. State	2027 - 2035	3,471		400
U.S. State	Indefinite	52		—
Non-U.S.	2025 - 2030	22,383		—
Non-U.S.	Indefinite	43,154		—
Balance at end of year		$	69,060	$	5,202

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 $187.6 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 $3.4 million and U.S. income taxes of $2.9 million which have already been recorded.

The accumulated undistributed earnings of the Company’s foreign operations not targeted for repatriation to the U.S. were approximately $190.2 million, and are intended to remain indefinitely invested in foreign operations.

No additional income taxes have been provided on the indefinitely invested foreign earnings at December 31, 2021. 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 due to the complexities of the hypothetical calculation.

The following table provides a reconciliation of the beginning and ending amount of unrecognized tax benefits. If recognized, $1.5 million would impact the effective tax rate at December 31, 2021:

(in thousands)	2021		2020		2019
Unrecognized tax benefits balance at January 1,	$	5,491	$	5,834	$	3,790
Increase in gross amounts of tax positions related to prior years	278		540		4,874
Decrease in gross amounts of tax positions related to prior years	(4,236)		(637)		(2,239)
Increase in gross amounts of tax positions related to current years	—		—		—
Decrease due to settlements with tax authorities	—		—		—
Decrease due to lapse in statute of limitations	(39)		(300)		(626)
Currency translation	(35)		54		35
Unrecognized tax benefits balance at December 31,	$	1,459	$	5,491	$	5,834

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 immaterial interest and penalties related to the unrecognized tax benefits noted above, for the years 2021, 2020 and 2019.