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Income Taxes
 12 Months Ended
Dec. 31, 2020
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
In 2020, 2019 and 2018, we recorded tax provisions of $142.1 million, $76.6 million and $307.5 million, respectively. Cash tax payments, net of refunds were $102.0 million, $94.7 million and $155.0 million for 2020, 2019 and 2018, respectively.
Tax Cuts and Jobs Act
On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (“TCJA”). The legislation significantly changed U.S. tax law by, among other things, lowering the corporate income tax rate, implementing a territorial tax system and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries (“Transition Tax”). The TCJA permanently reduced the U.S. corporate income tax rate from a maximum of 35% to 21%, effective January 1, 2018.
While the TCJA provides for a territorial tax system, beginning in 2018, it includes the global intangible low-taxed income (“GILTI”) provision. The Company has elected to account for GILTI tax in the period in which it is incurred. The GILTI provisions require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets.
Provisional Tax Impacts
On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the TCJA. SAB 118 provided that where reasonable estimates can be made, the provisional accounting should be based on such estimates and when no reasonable estimate can be made, the provisional accounting may be based on the tax law in effect before the TCJA.
We applied the guidance in SAB 118 when accounting for the enactment-date effects of TCJA. Accordingly, we remeasured U.S. deferred tax assets and liabilities in 2017 based on the income tax rates at which the deferred tax assets and liabilities were expected to reverse in the future and refined the calculations. For the year ended December 31, 2018, an incremental expense of $1.6 million was recorded related to the remeasurement of the U.S. deferred tax assets.
At December 31, 2017, we were not able to reasonably estimate the impact of Transition Tax and therefore our estimate of Transition Tax expense was recorded in the first quarter of 2018. Accordingly, we recognized a provisional tax expense of $290 million related to the tax on the deemed repatriated earnings in our consolidated financial statements for the quarter ended March 31, 2018. The one-time Transition Tax is based on our total post-1986 earnings and profits (“E&P”), which had been deferred from U.S. taxes under prior law. A final adjustment was made to the provisional amounts allowed under SAB 118 in the fourth quarter of 2018 based on additional guidance from the IRS and state taxing authorities, and the filing of the 2017 tax returns. After the adjustment, total Transition Tax recorded in 2018 was $222 million. The impact of the Transition Tax comprised 48.5% of the 2018 effective tax rate. As of December 31, 2018, we completed our accounting for the tax effects of enactment of the TCJA.
In the fourth quarter of 2019, as part of our Reinvent SEE business transformation and in order to align our structure with our evolving global operations, we transferred certain intangible assets between wholly-owned subsidiaries. The transfer resulted in the establishment of a deferred tax asset and the corresponding recognition of deferred tax benefit of $49 million.
Coronavirus Aid, Relief and Economic Security Act and Issuance of 2020 Tax Regulations
In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law in March 2020. Among other things, the CARES Act raises certain deduction limitations originally imposed by the Tax Cuts and Jobs Act of 2017 (“2017 Tax Act”).

Taxpayers may generally deduct interest expense up to the sum of 50% of adjusted taxable income plus business interest income (30% limit under the 2017 Tax Act) for 2020 and 2019. As a result, we had no Federal disallowed interest expense in 2020 and 2019.

In July 2020, the U.S. Department of Treasury issued final tax regulations with respect to the GILTI proposed tax regulations originally published in 2019. Among other changes, these regulations now permit an election to exclude from the GILTI calculation items of income which are subject to a high effective rate of foreign tax. We have adopted these final regulations and recorded the net benefit in 2020.
The components of earnings before income tax provision were as follows:
 Year Ended December 31,
(In millions)202020192018
Domestic$328.2 $126.7 $255.1 
Foreign298.0 243.6 202.7 
Total$626.2 $370.3 $457.8 
 
The components of our income tax provision were as follows:
 Year Ended December 31,
(In millions)202020192018
Current tax expense:   
Federal$(14.2)$62.3 $228.2 
State and local5.6 4.6 9.8 
Foreign69.9 64.1 59.8 
Total current expense$61.3 $131.0 $297.8 
Deferred tax expense (benefit):   
Federal$59.4 $(19.0)$56.8 
State and local11.8 4.0 (21.2)
Foreign9.6 (39.4)(25.9)
Total deferred tax expense (benefit)80.8 (54.4)9.7 
Total income tax provision$142.1 $76.6 $307.5 
Deferred tax assets (liabilities) consist of the following:
 December 31,
(In millions)20202019
Accruals not yet deductible for tax purposes$16.0 $17.4 
Net operating loss carryforwards252.1 245.9 
Foreign, federal and state credits6.5 8.4 
Employee benefit items78.7 79.5 
Capitalized expenses6.2 32.2 
Intangibles 24.9 21.8 
Derivatives and other59.8 47.7 
Sub-total deferred tax assets444.2 452.9 
Valuation allowance(207.1)(197.6)
Total deferred tax assets$237.1 $255.3 
Depreciation and amortization$(66.0)$(37.0)
Unremitted foreign earnings(11.0)(10.0)
Intangible assets— — 
Other(4.0)(0.4)
Total deferred tax liabilities(81.0)(47.4)
Net deferred tax assets$156.1 $207.9 
A valuation allowance has been provided based on the uncertainty of utilizing the tax benefits, primarily related to the following deferred tax assets:
•$195.1 million of foreign items, primarily net operating losses; and
•$6.0 million of state tax credits.
For the year ended December 31, 2020, the valuation allowance increased by $9.5 million. The change is primarily driven by an increase related to currency revaluation, offset by a net decrease attributable to increased profitability in EMEA.
As of December 31, 2020, we have foreign net operating loss carryforwards of $930.6 million expiring in years beginning in 2021 with the large majority of losses having an unlimited carryover. The state net operating loss carryforwards totaling $506.3 million expire in various amounts over 1 to 19 years.
As of December 31, 2020, we have $0.4 million of foreign and federal tax credit carryforwards and $7.8 million of state credit carryovers expiring in 2021 – 2028. Most of the credit carryovers have a valuation allowance.
Although a deferred tax liability of $11.0 million was recorded as of December 31, 2020 for planned repatriation of foreign earnings, the Company has indefinitely reinvested most of its foreign earnings, which are the principal component of U.S. and foreign outside basis differences. The total amount of unremitted foreign earnings is $5.2 billion upon which the U.S. federal income tax effect has largely been recorded as a result of Transition Tax. Remitting these foreign earnings would result in additional foreign and U.S. income tax consequences, the net tax costs of which are not practicable to determine. 
We have no outstanding liability with respect to Transition Tax.
A reconciliation of the provision for income taxes, with the amount computed by applying the statutory federal income tax rate, 21%, to income before provision for income taxes, is as follows:
 Year Ended December 31,
 202020192018
Computed expected tax$131.5 21.0 %$77.8 21.0 %$96.1 21.0 %
State income taxes, net of federal tax benefit
13.4 2.1 %6.7 1.8 %8.4 1.8 %
Foreign earnings taxed at different rates
10.5 1.7 %10.5 2.8 %8.3 1.8 %
U.S. tax on foreign earnings24.0 3.8 %29.0 7.8 %13.5 2.9 %
Tax credits(27.8)(4.4)%(50.1)(13.5)%(20.7)(4.5)%
Unremitted foreign earnings2.5 0.4 %10.0 2.7 %— — %
Reorganization and divestitures0.4 0.1 %(47.2)(12.7)%— — %
Withholding tax4.2 0.7 %4.8 1.3 %21.7 4.7 %
Net change in valuation allowance(5.2)(0.8)%(7.6)(2.1)%(39.8)(8.7)%
Net change in unrecognized tax benefits(1.1)(0.2)%36.0 9.7 %95.0 20.8 %
Tax Cuts and Jobs Act and associated Tax Regulations(22.4)(3.6)%— — %117.6 25.7 %
Other 12.1 1.9 %6.7 1.9 %7.4 1.7 %
Income tax expense and rate$142.1 22.7 %$76.6 20.7 %$307.5 67.2 %
 
Unrecognized Tax Benefits
We are providing the following disclosures related to our unrecognized tax benefits and the effect on our effective income tax rate if recognized:
 
Year Ended December 31,
(in millions)202020192018
Beginning balance of unrecognized tax benefits$390.3 $356.4 $214.3 
Additions for tax positions of current year2.7 3.4 106.0 
Additions for tax positions of prior years8.3 47.9 59.5 
Reductions for tax positions of prior years(18.2)(16.0)(7.0)
Reductions for lapses of statutes of limitation and settlements(3.5)(1.4)(16.4)
Ending balance of unrecognized tax benefits$379.6 $390.3 $356.4 
In 2020, our unrecognized tax benefit decreased by $10.7 million, primarily related to decreases in North America for resolution of audit matters. In 2019, we increased our unrecognized tax benefit by $33.9 million, also primarily related to North America.
If the unrecognized tax benefits at December 31, 2020 were recognized, our income tax provision would decrease by $333.0 million, resulting in a substantially lower effective tax rate. Based on the potential outcome of the Company’s global tax examinations and the expiration of the statute of limitations for specific jurisdictions, it is possible that the unrecognized tax benefits could change significantly within the next 12 months. Absent resolution of significant tax controversy, the associated impact on the reserve balance is estimated to be a decrease in the range of $0.9 to $2.3 million during 2021.
We recognize interest and penalties associated with unrecognized tax benefits in our income tax provision in the Consolidated Statements of Operations. Interest and penalties recorded were $5.6 million, $13.1 million and negligible, respectively in 2020, 2019 and 2018. We had gross liabilities, for interest and penalties, of $65.3 million at December 31, 2020, $56.2 million at December 31, 2019 and $18.2 million at December 31, 2018. The increase in the gross liability related to interest and penalties from 2018 to 2019 was primarily due to a reclass within other non-current liabilities from unrecognized tax benefits to interest and penalties which had no impact on the overall Consolidated Balance Sheets or Consolidated Statements of Operations.
Most of the unrecognized tax benefit amount of $379.6 million relates to North America.
Income Tax Returns
The IRS completed its field examination of the U.S federal income tax returns for the years 2011-2014 in the third quarter of 2020. As previously disclosed, the IRS has proposed to disallow, for the 2014 taxable year, the entirety of the deduction of the approximately $1.49 billion settlement payment made pursuant to the Settlement agreement (as defined in Note 20, “Commitments and Contingencies”) and the resulting reduction of our U.S. federal tax liability by approximately $525 million. We continue to believe that we have meritorious defenses to the proposed disallowance and have filed a protest with the IRS. Although we expected to enter the IRS administrative appeals process in late 2020, or early 2021, upon receipt of our protest, the IRS determined that it needed additional information before transferring the matter to the IRS administrative appeals process. We are currently responding to requests for further information from the IRS and at this time, cannot predict when we will enter the IRS administrative appeals process, when such process will conclude, or the outcome of such process. It is possible that future developments in this matter could have a material impact to the uncertain tax position balances and results of operations, including cash flow, within the next twelve months.
State income tax returns are generally subject to examination for a period of 3 to 5 years after their filing date. We have various state income tax returns in the process of examination and are generally open to examination for periods after 2015.
Our foreign income tax returns are under examination in various jurisdictions in which we conduct business. Income tax returns in foreign jurisdictions have statutes of limitations generally ranging from 3 to 5 years after their filing date. We have various foreign returns in the process of examination but have largely concluded all other income tax matters for the years prior to 2015.
Management believes that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any of the issues addressed in the Company’s tax audits are resolved in a manner that is inconsistent with management’s expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs and could be required to make significant payments as a result.