The components of the income tax provision are as follows (in millions):


	2021			2020			2019
Current income tax expense (benefit):
Federal	$	1.0		$	(0.5	)	$	0.6
State		1.2			(0.5	)		2.2
Foreign		118.0			85.4			82.1

Total current income tax expense		120.2			84.4			84.9

Deferred income tax expense (benefit):
Federal		(7.8	)		(4.9	)		(2.2	)
State		(2.5	)		(1.0	)		0.3
Foreign		3.1			(14.1	)		(0.6	)

Total deferred income tax benefit		(7.2	)		(20.0	)		(2.5	)

Income tax provision	$	113.0		$	64.4		$	82.4

The income tax provision differs from the tax provision computed at the U.S. federal statutory rate due to the following significant components:


	2021			2020			2019

Statutory tax rate		21.0	%		21.0	%		21.0	%
Foreign tax rate differential		5.2			4.9			5.9
Permanent differences		1.2			2.0			0.7
U.S. tax on foreign earnings		1.6			0.3			1.4
Stock compensation		(2.5	)		(0.7	)		(1.0	)
Mandatory repatriation		—			0.5			(0.6	)
Tax contingencies		2.6			1.4			1.4
Change in tax rates		(0.1	)		0.1			0.3
Withholding taxes		—			(0.1	)		(0.1	)
Repatriation of foreign earnings		(0.4	)		0.6			0.3
State income taxes, net of federal benefits		(0.4	)		(0.6	)		0.7
Research and development credits		(0.9	)		(1.2	)		(0.6	)
Other		1.2			(0.7	)		—
Change in valuation allowance for unbenefited losses		0.2			1.0			—

Effective tax rate		28.7	%		28.5	%		29.4	%

The tax effect of temporary items that give rise to significant portions of the deferred tax assets and liabilities are as follows (in millions):


	2021			2020
Deferred tax assets:
Accrued expenses	$	0.3		$	4.7
Compensation		28.8			32.3
Deferred revenue		—			13.9
Disallowed interest carryforward		9.3			5.0
Net operating loss carryforwards		23.5			31.1
Foreign tax and other tax credit carryforwards		21.4			16.4
Unrealized currency gain/loss		6.8			9.6
Hedge unrealized FX gain/loss		12.5			—
Lease obligations		14.1			15.2
Other		2.4			—

Gross deferred tax assets		119.1			128.2
Less valuation allowance		(7.1	)		(6.6	)

Total deferred tax assets		112.0			121.6


Deferred tax liabilities:
Accounts receivable		—			2.7
Inventory		3.6			10.8
Fixed assets		6.1			10.4
Foreign patent reserves		4.4			2.4
Intangibles		32.6			40.2
Accrued expenses		0.5			2.8
Accrued withholding tax		6.7			6.7
Right-of-use asset		14.0			14.9
Other		0.2			2.2

Total deferred tax liabilities		68.1			93.1

Net deferred tax asset s	$	43.9		$	28.5

The Company uses the liability method to account for income taxes. Under this method, deferred income taxes are recognized for the future tax consequences of differences between the tax and financial accounting bases of assets and liabilities at each reporting period. Deferred income taxes are based on enacted tax laws and statutory tax rates applicable to the period in which these differences are expected to affect taxable income. A valuation allowance is established when necessary to reduce deferred tax assets to the expected realizable amounts.

The Company can only recognize a deferred tax asset to the extent this it is “more likely than not” that these assets will be realized. Judgments around realizability depend on the availability and weight of both positive and negative evidence. Changes in the valuation allowance for deferred tax assets were as follows (in millions):


Balance at December 31, 2018	$	4.3
Decreases recorded as a benefit to income tax provision		(0.1	)
Balance at December 31, 2019	$	4.2
Increases recorded as part of acquisition purchase accounting		2.4

Balance at December 31, 2020	$	6.6
Increases recorded as an expense to income tax provision		0.5

Balance at December 31, 2021	$	7.1

As of December 31, 2021, the Company had approximately $89.4 million net operating loss carryforwards available to reduce state taxable income that are expected to expire at various times beginning in 2022. The Company also has approximately $86.1 million of German Trade Tax and Corporate Income Tax net operating losses that are carried forward indefinitely. Additionally, the Company has $6.4 million of other foreign net operating losses that are expected to expire at various times in the future. We had U.S. federal foreign tax credit carried forwards in the amount of $6.3 million. We also had U.S. federal and state research and development tax credit of $4.6 million and $7.8 million respectively. Utilization of these credits and state net operating losses may be subject to annual limitations due to the ownership percentage change limitations provided by the Code Section 382 and similar state provisions. In the event of a deemed change in control under Code Section 382, an annual limitation on the utilization of net operating losses and credits may result in the expiration of all or a portion of the net operating loss and credit carryforwards. Additionally, the Company has $40.2 million of gross interest expense carryforward as provided by Code Section 163(j) that can be carried forward indefinitely.

At December 31, 2021 the Company recorded state income and foreign withholding taxes on the cash and liquid assets portion of the unremitted earnings and profits (E&P) of foreign subsidiaries expected to be repatriated from its foreign subsidiaries to the United States, except for amounts from certain subsidiaries, which the Company has asserted to be indefinitely reinvested. Specifically, the Company asserts that a total of $1.9 billion of unremitted foreign earnings is indefinitely reinvested. This figure is comprised of $1.4 billion in unremitted earnings as well as $546

million of non-cash E&P in all jurisdictions not indefinitely reinvested. If this E&P is ultimately distributed to the United States in the form of dividends the Company would likely be subject to additional withholding tax. The Company estimates the amount of unrecognized deferred withholding taxes on the undistributed E&P to be approximately $

million at December 31, 2021.

The Company had gross unrecognized tax benefits, excluding interest, of approximately $51.4

million as of December 31, 2021, that if recognized, would reduce the Company’s effective tax rate. In the next twelve months it is reasonably possible that the Company will reduce its unrecognized tax benefits by an immaterial amount due to the expiration of statutes of limitations. A tabular reconciliation of the Company’s gross unrecognized tax benefits is as follows (in millions):


Gross unrecognized tax benefits at December 31, 2018	$	6.6
Gross increases—tax positions in prior periods		4.7
Gross increases—current period tax positions		4.7
Lapse of statutes		(0.1	)

Gross unrecognized tax benefits at December 31, 2019	$	15.9
Gross increases—tax positions in prior periods		1.2
Gross increases—current period tax positions		5.6
Gross unrecognized tax benefits at December 31, 2020	$	22.7
Gross increases—tax positions in prior periods		17.8
Gross increases—current period tax positions		10.9

Gross unrecognized tax benefits at December 31, 2021	$	51.4

The Company’s policy is to include accrued interest and penalties related to unrecognized tax benefits and income tax liabilities, when applicable, in income tax expense. At December 31, 2021 and 2020, the Company had approximately $3.1 million and $1.8

million, respectively, of accrued interest and penalties related to uncertain tax positions included in other long-term liabilities in the consolidated balance sheets. The Company recorded expense of $

1.5

million for penalties and interest related to unrecognized tax benefits in the provision for income taxes during the year ended
December 31, 2021. There was no benefit recognized during the year ended December 31, 2020.

The Company has been subject to a tax examination in Germany for the years 2009 through 2012 whereby the German tax authorities had imposed additional tax assessments for those years. Due to the nature of the

additional tax assessments, the Company filed for competent authority relief from those assessments under the Mutual Agreement Procedures (“MAP”) of the United States-Germany income tax treaty. The Company expects the competent authorities to present a resolution for the 2009 through 2012 tax years during 2022. The Company does not expect a material impact to the results of operations for the year ending December 31, 2022 as a result of the resolution of this matter.

The Company files tax returns in the United States, which includes federal, state and local jurisdictions, and many foreign jurisdictions with varying statutes of limitations. The Company considers Germany, the United States and Switzerland to be its significant tax jurisdictions. The majority of the Company’s earnings are derived in Germany and Switzerland. Accounting for the various federal and local taxing authorities, the statutory rates for 2021 were approximately

30.0% and 20.0% for Germany and Switzerland, respectively. The mix of earnings in those two jurisdictions resulted in an increase of 5.7% from the U.S. statutory rate of 21% in 202

In 2020, the Company was granted an income tax holiday for our manufacturing facility in Malaysia. The tax holiday allows for

tax-free

operations through February 28, 2023, with the option to apply for a 5 year extension if certain conditions are met. This tax holiday had an immaterial impact to earnings per share for the year ended December 31, 2021.

In connection with the Tax Cuts and Jobs Act (“TCJA”) of 2017, the Company recorded a toll charge liability of $35.4 million. Of that amount, approximately $11.3 million has already been paid as of December 31, 2021.

In 2020, the U.S. Treasury Department issued final regulations regarding Foreign Derived Intangible Income (“FDII”) and Global Intangible

Low-Taxed

Income (“GILTI”). We have determined we will elect the GILTI high tax exception as allowed by the final regulations for the period ended December 31, 2021.