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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
A summary of consolidated income before provision for income taxes and equity in net income of affiliates and the components of provision for income taxes is shown below (in millions):
For the year ended December 31,202120202019
Consolidated income before provision for income taxes and equity in net income of affiliates:
Domestic$(110.9)$(145.0)$317.4 
Foreign694.4 444.3 636.2 
$583.5 $299.3 $953.6 
Domestic benefit for income taxes:
Current provision $38.4 $29.0 $24.2 
Deferred benefit(76.6)(106.2)(52.6)
Total domestic benefit$(38.2)$(77.2)$(28.4)
Foreign provision for income taxes:
Current provision$154.8 $149.6 $160.1 
Deferred provision21.1 21.5 14.4 
Total foreign provision$175.9 $171.1 $174.5 
Provision for income taxes$137.7 $93.9 $146.1 
The domestic current provision includes withholding taxes related to dividends and royalties paid by the Company's foreign subsidiaries, as well as state and local taxes. In 2021, 2020 and 2019, the provision for income taxes includes the benefit of prior unrecognized net operating loss carryforwards of $2.9 million, $5.3 million and $1.8 million, respectively.
A summary of the differences between the provision for income taxes calculated at the United States federal statutory income tax rate of 21% and the consolidated provision for income taxes is shown below (in millions):
For the year ended December 31,202120202019
Consolidated income before provision for income taxes and equity in net income of affiliates multiplied by the United States federal statutory income tax rate$122.5 $62.9 $200.2 
Differences in income taxes on foreign earnings, losses and remittances30.4 20.7 14.1 
Valuation allowance adjustments29.0 47.7 1.2 
Research and development and other tax credits(19.0)(11.8)(40.8)
FDII deduction(6.0)(14.6)(29.3)
U.S. tax impact of foreign earnings (1)
(9.8)(21.1)9.7 
Tax audits and assessments3.2 8.9 0.4 
Change in the tax status of certain affiliates— — (18.1)
Other(12.6)1.2 8.7 
Provision for income taxes$137.7 $93.9 $146.1 
(1)     Reflects the impact on the domestic provision for income taxes related to foreign source income, including foreign branch earnings net of the applicable foreign tax credits in the general, foreign branch, GILTI and passive separate limitation categories. This amount includes the U.S. tax impact of apportioning U.S. expenses against the GILTI and foreign branch baskets in calculating the foreign tax credit limitation resulting in no tax benefit for these expenses due to the Company's excess foreign tax credit position in the GILTI basket for 2020 and 2019. In 2020, as a result of the change in the foreign branch basket limitation, the Company recognized tax benefits of $15.5 million related to the U.S. deferred tax effect of the foreign branches.
In 2019, the Company completed a U.S. research and development ("R&D") tax credit study for the years 2013 to 2018, the results of which were accepted by the Internal Revenue Service and pursuant to which the Company recognized a tax benefit of $28.6 million. The tax benefit is reflected in the table above in research and development and other tax credits.
For the years ended December 31, 2021, 2020 and 2019, income in foreign jurisdictions with tax holidays was $55.6 million, $29.4 million and $89.4 million, respectively. Such tax holidays generally expire from 2021 through 2036.
Deferred income taxes represent temporary differences in the recognition of certain items for financial reporting and income tax purposes. A summary of the components of the net deferred income tax asset is shown below (in millions):
December 31,20212020
Deferred income tax assets (liabilities):
Tax loss carryforwards$396.9 $423.9 
Tax credit carryforwards266.4 280.6 
Retirement benefit plans55.8 82.9 
Accrued liabilities193.9 177.9 
Self-insurance reserves6.7 7.1 
Current asset basis differences41.4 43.3 
Long-term asset basis differences(24.2)(36.5)
Deferred compensation25.4 22.6 
Capitalized engineering, research and development138.3 67.1 
Undistributed earnings of foreign subsidiaries(74.0)(71.7)
Derivative instruments and hedging activities2.0 (5.2)
Other(12.3)(8.9)
Net deferred income tax asset before valuation allowance1,016.3 983.1 
Valuation allowance(406.9)(397.7)
Net deferred income tax asset$609.4 $585.4 
As of December 31, 2021 and 2020, the valuation allowance with respect to the Company's deferred tax assets was $406.9 million and $397.7 million, respectively, a net increase of $9.2 million.
Concluding that a valuation allowance is not required is difficult when there is significant negative evidence, such as cumulative losses in recent years, which is objective and verifiable. When measuring cumulative losses in recent years, the
Company uses a rolling three-year period of pretax book income, adjusted for permanent differences between book and taxable income and certain other items. As of December 31, 2021, the Company continues to maintain a U.S. valuation allowance of $24.5 million, primarily related to U.S. state and local deferred tax assets that, due to their nature, are not likely to be realized. In addition, the Company continues to maintain a valuation allowance of $382.4 million with respect to its deferred tax assets in several international jurisdictions.
The classification of the net deferred income tax asset is shown below (in millions):
December 31,20212020
Long-term deferred income tax assets$701.4 $670.2 
Long-term deferred income tax liabilities(92.0)(84.8)
Net deferred income tax asset$609.4 $585.4 
As of December 31, 2021, deferred income taxes have not been provided on the undistributed earnings of the Company's foreign subsidiaries since these earnings will not be taxable upon repatriation to the United States. These earnings will be primarily treated as previously taxed income from either the one-time transition tax or GILTI, or they will be offset with a 100% dividend received deduction. However, the Company continues to provide a deferred tax liability for foreign withholding tax that will be incurred with respect to the undistributed foreign earnings that are not permanently reinvested.
As of December 31, 2021, the Company had tax loss carryforwards of $1.7 billion. Of the total tax loss carryforwards, $1.4 billion have no expiration date, and $253.0 million expire between 2022 and 2038. In addition, the Company had tax credit carryforwards of $266.4 million, comprised principally of U.S. foreign tax credits of $103.7 million that expire between 2027 and 2031, U.S. research and development credits of $119.3 million that expire between 2025 and 2041 and other tax credits primarily in international jurisdictions of $43.4 million that generally expire between 2022 and 2041.
As of December 31, 2021 and 2020, the Company's gross unrecognized tax benefits were $34.9 million and $36.4 million (excluding interest and penalties), respectively, which is recorded in other long-term liabilities in the accompanying consolidated balance sheets. If recognized, all of the Company's gross unrecognized tax benefits would affect the Company's effective tax rate.
A summary of the changes in gross unrecognized tax benefits is shown below (in millions):
For the year ended December 31,202120202019
Balance at beginning of period$36.4 $31.6 $36.7 
Additions (reductions) based on tax positions related to current year7.7 4.9 (0.3)
Additions (reductions) based on tax positions related to prior years(4.0)3.6 2.0 
Settlements(0.3)(1.2)(3.7)
Statute expirations(5.2)(4.7)(2.8)
Foreign currency translation0.3 2.2 (0.3)
Balance at end of period$34.9 $36.4 $31.6 
The Company recognizes interest and penalties with respect to unrecognized tax benefits as income tax expense. As of December 31, 2021 and 2020, the Company had recorded gross reserves of $12.7 million and $12.2 million, respectively, related to interest and penalties, all of which, if recognized, would affect the Company's effective tax rate.
The Company operates in multiple jurisdictions throughout the world, and its tax returns are periodically audited or subject to review by both domestic and foreign tax authorities. During the next twelve months, it is reasonably possible that, as a result of audit settlements, the conclusion of current examinations and the expiration of the statute of limitations in multiple jurisdictions, the Company may decrease the amount of its gross unrecognized tax benefits by $3.9 million, all of which, if recognized, would affect the Company's effective tax rate. The gross unrecognized tax benefits subject to potential decrease involve issues related to transfer pricing and various other tax items in multiple jurisdictions. However, as a result of ongoing examinations, tax proceedings in certain countries, additions to the gross unrecognized tax benefits for positions taken and interest and penalties, if any, arising in 2022, it is not possible to estimate the potential net increase or decrease to the Company's gross unrecognized tax benefits during the next twelve months.
The Company considers its significant tax jurisdictions to include China, Germany, Italy, Mexico, Morocco, Spain, the United Kingdom and the United States. The Company or its subsidiaries generally remain subject to income tax examination in certain U.S. state and local jurisdictions for years after 2016. Further, the Company or its subsidiaries remain subject to income tax examination in Spain for years after 2007, in Mexico for years after 2013, in Germany and Italy for years after 2015, in China
and Morocco for years after 2017, in the United Kingdom for years after 2018 and in the United States generally for years after 2019.
Other
In 2021, the Brazilian Supreme Court ruled on certain matters, including the method of determining the amount of indirect tax credits that taxpayers are entitled to monetize in future periods. As a result of the ruling, other expense, net includes a gain of $45.0 million for the year ended December 31, 2021, for which $8.0 million of tax expense was recognized.