Taxation

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

TAXATION

TAXATION

The components of the company's income tax expense (benefit) for the years ended December 31, 2020, 2019 and 2018 are as follows:

$ in millions	2020	2019	2018
Current:
Federal	125.1	102.0	38.8
State	19.7	17.0	20.5
Foreign	35.5	94.0	158.2
	180.3	213.0	217.5
Deferred:
Federal	57.6	16.6	35.5
State	5.2	4.3	10.0
Foreign	18.5	1.2	(8.0)
	81.3	22.1	37.5
Total income tax expense (benefit)	261.6	235.1	255.0

A reconciliation between the statutory U.S. federal income tax rate and the effective tax rate per the Consolidated Statements of Income for the years ended December 31, 2020, 2019 and 2018 is as follows:

	2020		2019		2018
Statutory rate	21.0	%	21.0	%	21.0	%
Effect of foreign statutory income tax rates	(0.5)	%	(0.8)	%	0.9	%
State taxes, net of federal tax effect	1.9	%	1.8	%	2.1	%
U.S. Tax Reform Impact	—	%	—	%	(1.3)	%
Change in valuation allowance	0.3	%	0.5	%	0.4	%
Share-based compensation	1.3	%	0.9	%	(0.2)	%
Other	1.4	%	1.9	%	(0.5)	%
Effect of (income)/loss attributable to noncontrolling interests	(0.9)	%	(1.1)	%	—	%
Effective tax rate per Consolidated Statements of Income	24.5	%	24.2	%	22.4	%

The company’s effective tax rate is affected by the tax rates in foreign jurisdictions, which are different than the U.S. federal statutory tax rate of 21%, and the relative amount of income earned in those jurisdictions. As a result, the effective tax rate will vary from year to year depending on the mix of the profits and losses from each jurisdiction.

The division of income before taxes between U.S. and foreign for the years ended December 31, 2020, 2019 and 2018 is as follows:

$ in millions	2020	2019	2018
U.S.	845.8	511.1	491.8
Foreign	223.3	461.8	646.3
Income before income taxes	1,069.1	972.9	1,138.1

The components of the deferred tax assets and liabilities reflected in the Consolidated Balance Sheets at December 31, 2020 and 2019 include the following:

$ in millions	2020	2019
Deferred tax assets:
Compensation and benefits	125.9	179.6
Lease obligations	44.5	65.9
Tax loss carryforwards	99.8	124.9
Investments	39.0	32.7
Accrued liabilities	97.7	4.1
Other	16.4	25.5
Total deferred tax assets	423.3	432.7
Valuation allowance	(104.5)	(126.4)
Deferred tax assets, net of valuation allowance	318.8	306.3
Deferred tax liabilities:
Goodwill and intangibles	(1,745.4)	(1,710.4)
Leased assets	(40.3)	(62.5)
Fixed assets	(27.8)	(40.0)
Other	(22.9)	(20.6)
Total deferred tax liabilities	(1,836.4)	(1,833.5)
Net deferred tax liability	(1,517.6)	(1,527.2)

Deferred income tax assets and liabilities are recorded net when related to the same tax jurisdiction. The net deferred tax assets of $5.9 million are included in other assets, and the net deferred tax liabilities of $1,523.5 million are separately presented on the Consolidated Balance Sheets.

At December 31, 2020 and 2019, the company had tax-effected state net operating loss carryforwards of $37.2 million and $38.0 million, respectively, which will expire, if not utilized, between 2021 and 2040 except for approximately $2.7 million which have an indefinite life. At December 31, 2020 and 2019, the company also had tax-effected federal and foreign net operating loss carryforwards of $62.6 million and $86.9 million, respectively, of which approximately $8.6 million will expire over several years starting in 2023, with the remaining $54.0 million having an indefinite life. A valuation allowance has been recorded against certain carryforwards and certain deferred tax assets related to tax jurisdictions in which it is unlikely that the deferred tax asset will be realized.

Deferred tax liabilities are recognized for taxes that would be payable on the unremitted earnings of the company's foreign subsidiaries and corporate joint ventures, except where it is our intention to indefinitely reinvest the undistributed earnings. A deferred tax liability has not been recognized for our Canadian unremitted earnings, which are indefinitely reinvested, of approximately $1,060.0 million and $1,017.0 million at December 31, 2020 and 2019, respectively. If these earnings were distributed as a dividend, Canadian withholding tax of 5.0% would be due on the dividend. There are no other significant jurisdictions for which a deferred tax liability has not been recognized on unremitted earnings.

A reconciliation of the gross unrecognized tax benefits (UTBs) balance from January 1, 2018, to December 31, 2020, is as follows:

$ in millions	Gross Unrecognized Income Tax Benefits
Balance at January 1, 2018	19.6
Additions for tax positions related to the current year	1.0
Additions for tax positions related to prior years	0.1
Reductions for tax positions related to prior years	(0.2)
Reductions related to lapse of statute of limitations	(0.5)
Balance at December 31, 2018	20.0
Additions for tax positions related to the current year	1.4
Additions for tax positions related to prior years	1.2
Additions for tax positions related to prior years of acquired entities	54.1
Reductions for tax positions related to prior years	(4.0)
Reductions related to lapse of statute of limitations	(2.8)
Balance at December 31, 2019	69.9
Additions for tax positions related to the current year	6.6
Additions for tax positions related to prior years	2.2
Reductions related to settlements	(9.9)
Reductions related to lapse of statute of limitations	(6.9)
Balance at December 31, 2020	61.9

The amount of UTBs that, if recognized, would favorably affect the company's effective tax rate was $50.5 million at December 31, 2020. The company recognizes accrued interest and penalties related to UTBs as a component of the income tax provision. The Consolidated Balance Sheets include accrued interest and penalties related to UTBs of $13.2 million, $11.7 million and $3.2 million at December 31, 2020, 2019 and 2018, respectively. The company recognized expense for interest and penalties related to UTBs of $1.7 million, $8.5 million and $0.3 million in 2020, 2019 and 2018, respectively.

The company files U.S. federal, U.S. state and local, and numerous foreign income tax returns. The company is periodically examined by various taxing authorities. With few exceptions, the company is no longer subject to income tax examinations for years prior to 2013. As a result of the completion of taxing authorities' examinations and the expiration of statutes of limitations, it is reasonably possible that the company's gross UTBs may decrease by as much as $16.0 million within the next twelve months.