Income Taxes |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes On December 22, 2017, comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (TCJA) was enacted in the United States. The TCJA included a number of changes to the U.S. tax code including, but not limited to, (1) the reduction of the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018; (2) a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries; (3) the addition of new taxes on certain foreign sourced earnings; (4) a deduction for foreign-derived intangible income; and (5) the repeal of corporate alternative minimum tax and the domestic production activity deduction. SAB 118 Measurement Period The SEC staff issued Staff Accounting Bulletin No. 118 (SAB 118) to address the application of U.S. GAAP in situations where a registrant did not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of the TCJA. The Company applied the guidance in SAB 118 when accounting for the enactment-date effects of the TCJA in 2017 and throughout 2018. As of December 31, 2017, the Company had not completed its accounting for the enactment-date income tax effects of the TCJA under ASC 740 for the following items: remeasurement of deferred tax assets and liabilities, the one-time transition tax on earnings of foreign subsidiaries, and the policy election to account for global intangible low-taxed income (GILTI) in deferred taxes. In the year ended December 31, 2017, the Company recorded a total provisional amount of $17.1 million, which was recognized and included as a component of income tax expense. The $17.1 million provisional amount included $5.0 million of tax expense for the re-measurement of deferred tax assets, $6.1 million of tax expense for the transition tax on the mandatory deemed repatriation of foreign earnings, a $9.5 million valuation allowance recorded on foreign tax credits that were deemed unrealizable as a result of the TCJA, and a $3.5 million tax benefit for the generation of foreign tax credits. At December 31, 2018, the Company had completed its accounting for all of the enactment-date income tax effects of the TCJA. During 2018, the Company recognized adjustments to the provisional amounts recorded as of December 31, 2017 and included the adjustments as a component of income tax expense. In 2018, the Company recorded a $11.1 million net tax benefit related to the enactment-date effects of the TCJA for the re-measurement of deferred tax assets and liabilities, the one-time transition tax on the mandatory deemed repatriation of foreign earnings, the generation of foreign tax credits, and the reversal of the valuation allowance related to foreign tax credits. Deferred Remeasurement As of December 31, 2017, the Company re-measured certain deferred tax assets and liabilities based on the rates at which they were expected to reverse in the future, which is generally 21%, and recorded a provisional tax expense of $5.0 million. Upon further analysis of certain aspects of the TCJA and refinement of our calculations during the twelve-month period ended December 31, 2018, we reduced our provisional tax expense by $2.8 million, which is included as a component of income tax expense from continuing operations. Transition Tax The transition tax is a one-time tax based on the Company's total post-1986 earnings and profits (E&P) that were previously deferred from U.S. income taxes. As of December 31, 2017, the Company recorded a provisional tax expense of $6.1 million for the one-time transition tax. Upon further analysis of the TCJA, as well as Notices and Regulations issued and proposed by the U.S. Department of Treasury and the Internal Revenue Service, the Company finalized the calculations of the transition tax liability in 2018. The Company reduced its provisional tax expense by $1.2 million, which is included as a component of income tax expense. As of December 31, 2017, the Company recorded a valuation allowance of $9.5 million on foreign tax credits that were determined not to be realizable as a result of the TCJA. In 2018, the Company finalized its calculations and reduced the valuation allowance by $2.4 million due to the generation of less foreign tax credits. The Company released the remaining valuation allowance due to an updated foreign expense methodology and further assessment of Notices and Regulations issued. As of December 31, 2018, the Company has determined that the foreign tax credits can be realized in full and no valuation allowance is recorded, which resulted in a $7.1 million tax benefit during the year. Consistent with December 31, 2017, no additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the transition tax, or any additional outside basis difference inherent in these entities, as these amounts continue to be indefinitely reinvested in foreign operations as of December 31, 2018. GILTI While the TCJA provides for a territorial tax system, beginning in 2018, it includes a new U.S. tax, GILTI. 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. Under U.S. GAAP, the Company is allowed to make an accounting policy choice of either (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current period expense when incurred (the period cost method), or (2) factoring such amounts into the Company’s measurement of its deferred taxes (the deferred method). After further analysis, the Company has determined that it has no incremental U.S. tax on GILTI for the year ended December 31, 2018. The Company has elected to use the current period method, and therefore has not provided any deferred tax impacts of GILTI in its consolidated financial statements for the year ended December 31, 2018. Income (loss) before income taxes and income tax expense (benefit) are comprised of the following:
A reconciliation of the U.S. federal statutory income tax rate to the Company's effective income tax rate is as follows:
Deferred tax assets and (liabilities) are determined based on temporary differences between the financial reporting and tax basis of assets and liabilities. Deferred tax assets and (liabilities) recorded in the Consolidated Balance Sheets consist of the following:
The Company had deferred income tax assets offset with a valuation allowance for certain foreign and state net operating losses, state investment and research and development tax credit carryforwards, and deferred tax assets that are not likely to be realized for several of the Company's controlled foreign corporations. The Company intends to maintain a valuation allowance on these deferred tax assets until a realization event occurs to support reversal of all or a portion of the allowance. At December 31, 2018, for income tax purposes, the Company had foreign net operating loss carryforwards of $22.7 million that do not expire, and $8.0 million that expire in calendar years 2019 through 2027, of which $0.1 million expires within the next twelve months. The Company also had state net operating loss carryforwards of $21.9 million that expire in calendar years 2019 through 2037 and state tax credits of $3.6 million that expire in calendar years 2019 through 2033. A valuation allowance of $9.5 million has been provided against certain foreign and state net operating loss carryforwards and state tax credits due to uncertainty of their realization. The Company has research and development tax credits of $0.7 million that expire in calendar year 2038 and foreign tax credits of $2.4 million which all expire in calendar year 2026. The Company files income tax returns in the U.S. federal jurisdiction, and in various state, local, and foreign jurisdictions. With limited exceptions, the Company is no longer subject to U.S. federal examinations for years before 2015, state and local examinations for years before 2014, and foreign examinations for tax years before 2010. A reconciliation of the Company’s unrecognized tax benefits for the year-to-date periods ended December 31, 2018 and 2017 is as follows:
At December 31, 2018, the Company had $2.9 million of unrecognized tax benefits, of which $2.2 million would affect the Company’s effective tax rate if recognized. It is reasonably possible that the amount of unrecognized tax benefits will change in the next twelve months; however, we do not expect the change to have a material impact on the Consolidated Statements of Income or the Consolidated Balance Sheets. The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying Consolidated Statements of Income. Accrued interest and penalties are included on the related tax liability line in the Consolidated Balance Sheets. The amount of interest and penalties, net of the related tax benefit, recognized in earnings was immaterial during 2018, 2017, and 2016. As of December 31, 2018 and 2017, accrued interest and penalties, net of the related tax benefit, were immaterial. Income taxes paid during 2018, 2017 and 2016, were approximately $0.0 million, $8.1 million and $3.0 million, respectively. |