Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

Income Tax Disclosure [Abstract]

Components of Income Tax Expense Benefit

Income from continuing operations before income taxes and equity in net income of unconsolidated investments, and current and deferred income tax expense (benefit) are composed of the following (in thousands):

	Year Ended December 31,
	2018			2017			2016
Income from continuing operations before income taxes and equity in net income of unconsolidated investments:
Domestic	$	223,702		$	(8,293	)	$	49,630
Foreign	570,999			455,091			465,634
Total	$	794,701		$	446,798		$	515,264
Current income tax expense (benefit):
Federal	$	(2,712	)	$	394,747		$	7,717
State	6,793			323			1,407
Foreign	91,581			78,688			63,957
Total	$	95,662		$	473,758		$	73,081
Deferred income tax (benefit) expense:
Federal	$	15,573		$	(58,640	)	$	12,230
State	1,614			(2,288		)	(1,715		)
Foreign	31,977			18,987			12,667
Total	$	49,164		$	(41,941	)	$	23,182
Total income tax expense	$	144,826		$	431,817		$	96,263

Significant Differences Between United States Federal Statutory Rate and Effective Income Tax Rate

The reconciliation of the U.S. federal statutory rate to the effective income tax rate is as follows:

	% of Income Before Income Taxes
	2018		2017		2016
Federal statutory rate	21.0	%	35.0	%	35.0	%
State taxes, net of federal tax benefit	0.9		(0.5	)	(0.1	)
Change in valuation allowance(a)	0.7		(1.4	)	3.7
Impact of foreign earnings, net(b)	(0.3	)	(13.5	)	(19.3	)
Global intangible low tax inclusion	0.8		—		—
Change in U.S. federal statutory rate(c)	0.1		(14.0	)	—
Transition tax on deferred foreign earnings(d)	(5.3	)	96.1		—
Subpart F income	0.9		2.0		0.2
Undistributed earnings of foreign subsidiaries	—		(2.2	)	0.1
Stock-based compensation	(0.7	)	(1.9	)	—
Depletion	(0.6	)	(1.4	)	(1.0	)
Revaluation of unrecognized tax benefits/reserve requirements	—		(0.7	)	(0.4	)
Domestic manufacturing tax deduction	—		—		(0.9	)
Other items, net	0.7		(0.9	)	1.4
Effective income tax rate	18.2	%	96.6	%	18.7	%

(a) The year ended December 31, 2018 includes an $8.2 million expense due to the establishment of a valuation allowance due to a foreign restructuring plan and a $1.5 million benefit due to the release of a foreign valuation allowance due to changes in expected profitability. 2017 includes a $10.9 million benefit from the release of valuation allowances due to a foreign restructuring plan.

(b) Our statutory rate is decreased by of our share of the income of JBC, a Free Zones company under the laws of the Hashemite Kingdom of Jordan. The applicable provisions of the Jordanian law, and applicable regulations thereunder, do not have a termination provision and the exemption is indefinite. As a Free Zones company, JBC is not subject to income taxes on the profits of products exported from Jordan, and currently, substantially all of the profits are from exports. This resulted in a rate benefit of 3.3%, 8.9%, and 7.3% for 2018, 2017, and 2016, respectively.

(c) At December 31, 2017 we have made a reasonable estimate of the tax impact of the U.S. enacted tax law on our business and our consolidated financial statements and have recorded a provisional tax benefit of $62.3 million related to the remeasurement of our deferred tax assets and liabilities for the reduction in the Federal statutory tax rate from 35% to 21%. In 2018, the updates to our calculation of the remeasurement of deferred tax assets and liabilities resulted in income tax expense of $0.4 million.

(d) At December 31, 2017 we made a reasonable estimate of the tax impact of the U.S. enacted tax law on our business and our consolidated financial statements and recognized a provisional tax expense of $429.2 million for the one-time transition tax. During 2018, the impact of the refined one-time transition tax calculation was an income tax benefit of $42.3 million.

Deferred Income Tax Assets and Liabilities Recorded on Consolidated Balance Sheets

Deferred income tax assets and liabilities recorded on the consolidated balance sheets as of December 31, 2018 and 2017 consist of the following (in thousands):

	December 31,
	2018			2017
Deferred tax assets:
Accrued employee benefits	$	18,462		$	21,463
Operating loss carryovers(a)	1,210,377			459,644
Pensions	61,308			64,799
Tax credit carryovers	1,270			11,634
Other	35,895			44,714
Gross deferred tax assets	1,327,312			602,254
Valuation allowance(a)	(1,213,750		)	(458,288		)
Deferred tax assets	113,562			143,966
Deferred tax liabilities:
Depreciation	(337,503		)	(334,162		)
Intangibles	(88,871		)	(113,792		)
Hedge of net investment of foreign subsidiary	(21,854		)	(17,028		)
Other	(31,287		)	(24,265		)
Deferred tax liabilities	(479,515		)	(489,247		)
Net deferred tax liabilities	$	(365,953	)	$	(345,281	)
Classification in the consolidated balance sheets:
Noncurrent deferred tax assets	$	17,029		$	25,108
Noncurrent deferred tax liabilities	(382,982		)	(370,389		)
Net deferred tax liabilities	$	(365,953	)	$	(345,281	)

(a) During 2018, the Company recognized intercompany losses at a foreign entity related to international restructuring resulting in an increase to the deferred tax asset for net operating losses and an associated and equal valuation allowance of $749.8 million.

Changes in Balance of Deferred Tax Asset Valuation Allowance

Changes in the balance of our deferred tax asset valuation allowance are as follows (in thousands):

	Year Ended December 31,
	2018			2017			2016
Balance at January 1	$	(458,288	)	$	(69,900	)	$	(84,137	)
Additions	(766,012		)	(408,252		)	(20,568		)
Deductions	10,550			19,864			34,805
Balance at December 31	$	(1,213,750	)	$	(458,288	)	$	(69,900	)

Reconciliation of Total Gross Liability Related to Uncertain Tax Positions

The following is a reconciliation of our total gross liability related to uncertain tax positions for 2018, 2017 and 2016 (in thousands):

	Year Ended December 31,
	2018			2017			2016
Balance at January 1	$	21,438		$	25,384		$	95,715
Divestitures(a)	—			—			(55,881		)
Additions for tax positions related to prior years	874			—			548
Reductions for tax positions related to prior years	—			(1,933		)	(1,253		)
Additions for tax positions related to current year	1,091			1,132			1,271
Lapses in statutes of limitations/settlements	(3,578		)	(4,198		)	(12,591		)
Foreign currency translation adjustment	(83		)	1,053			(2,425		)
Balance at December 31	$	19,742		$	21,438		$	25,384

(a) Reclassified to Other noncurrent liabilities as a result of the indemnification of certain income tax liabilities associated with the Chemetall Surface Treatment entities sold. See Note 16, “Other Noncurrent Liabilities.”