Income Taxes

The components of income before income taxes and provision for income taxes for the years ended December 31 are as follows:



	2016			2015			2014
Income before income taxes
U.S.	$	(1.2	)	$	71.2		$	69.1
Non-U.S.	39.5			33.3			81.0
	$	38.3		$	104.5		$	150.1
Income tax provision (benefit)
Current tax provision:
Federal	$	(1.3	)	$	22.1		$	25.0
State	(0.3		)	3.4			2.6
Non-U.S.	5.0			5.3			10.5
Total current	$	3.4		$	30.8		$	38.1
Deferred tax provision (benefit):
Federal	$	(5.8	)	$	(0.4	)	$	(3.3	)
State	0.8			1.2			0.7
Non-U.S.	(2.4		)	(2.2		)	4.4
Total deferred	$	(7.4	)	$	(1.4	)	$	1.8
	$	(4.0	)	$	29.4		$	39.9

The Company made income tax payments of $19.3 million, $32.7 million and $34.7 million during 2016, 2015 and 2014, respectively. The Company received income tax refunds of $11.1 million, $0.2 million and $1.2 million during 2016, 2015 and 2014, respectively.

A reconciliation of the federal statutory and reported income tax rate for the year ended December 31 is as follows:



	2016			2015			2014
Income before income taxes	$	38.3		$	104.5		$	150.1
Statutory taxes at 35.0%	$	13.4		$	36.6		$	52.5
Non-U.S. rate differences	(9.6		)	(10.5		)	(10.6		)
Unremitted Non-U.S. earnings	(3.9		)	0.1			0.1
Equity interest earnings	(2.2		)	(1.9		)	(1.7		)
Sale of non-U.S. investment	(1.9		)	(3.7		)	—
R&D and other federal credits	(1.8		)	(1.7		)	(0.9		)
State income taxes	(0.6		)	4.1			2.7
Valuation allowance	(0.2		)	5.9			(1.5		)
Tax controversy resolution	2.1			(0.2		)	(0.5		)
Other	0.7			0.7			(0.2		)
Income tax provision (benefit)	$	(4.0	)	$	29.4		$	39.9
Reported income tax rate	n.m.			28.1		%	26.6		%
n.m. - not meaningful

The Company continually evaluates its deferred tax assets to determine if a valuation allowance is required. A valuation allowance is required where realization is determined to no longer meet the "more likely than not" standard. During 2014 and 2015, a significant downturn was experienced in the Company's Brazilian operations. This significant decrease in operations and actions taken by management to reduce its manufacturing activity to more appropriate levels, coupled with the continued low expectations in the near term for the Brazilian lift truck market and the continuing devaluation of the Brazilian real, caused the Company in 2015 to forecast a three-year cumulative loss for its Brazilian operations. Although the Company projects earnings over the longer term for its Brazilian operations, such longer-term forecasts are not sufficient positive evidence to support the future utilization of deferred tax assets when a three-year loss is determined. Accordingly, in 2015, the Company recorded a valuation allowance adjustment of $1.9 million against its deferred tax assets in Brazil as a discrete tax adjustment. The Company also recognized $2.4 million and $5.6 million in 2016 and 2015, respectively, of valuation allowances related to pre-tax losses in Brazil included in its effective tax rate.

During 2016, the Company received a notice from the Italian Tax Authority approving the transfer of certain tax losses as part of an internal restructuring. As a result, the Company believes it is more likely than not that deferred tax assets for such losses of approximately $3.2 million will be realized in the foreseeable future, and has released the valuation allowance previously provided.

During 2015, the Company came to a tentative agreement in negotiating an Advance Pricing Agreement with the Australian Tax Authority. The terms of the agreement were finalized in 2016 and will extend through 2020. As a result of this agreement, in 2015, the Company released a portion of the valuation allowance of $4.4 million, related to the deferred tax asset that it expected would be utilized in the foreseeable future.

As of December 31, 2016, the cumulative unremitted earnings of the Company's non-U.S. subsidiaries are approximately $310 million. The Company repatriated earnings of its European subsidiaries of $25.1 million, $23.6 million and $20.3 million during 2016, 2015 and 2014, respectively. As a result of the Bolzoni acquisition, the Company changed its previous reinvestment assertion; and consequently, all of the earnings of its European operations are now considered permanently reinvested and the previously provided deferred tax liability of $4.0 million is no longer required. It is impracticable to determine the total amount of unrecognized deferred taxes with respect to these permanently reinvested earnings; however, non-U.S. tax credits would be available to partially reduce the U.S. income taxes in the event of a distribution.

The Company has continued to provide a deferred tax liability on unremitted non-U.S. earnings for which no reinvestment plan has been identified and that may be repatriated in the foreseeable future. As such, the Company has provided a deferred tax liability with respect to these earnings of $0.4 million at December 31, 2016.

A detailed summary of the total deferred tax assets and liabilities in the Consolidated Balance Sheets resulting from differences in the book and tax basis of assets and liabilities follows:



	December 31
	2016		2015
Deferred tax assets
Tax attribute carryforwards	$	31.6	$	27.1
Accrued expenses and reserves	23.2		17.4
Product warranties	13.7		15.8
Accrued product liability	9.3		8.7
Accrued pension benefits	8.2		6.4
Other employee benefits	5.2		5.7
Other	2.2		2.5
Total deferred tax assets	93.4		83.6
Less: Valuation allowance	29.3		28.6
	64.1		55.0
Deferred tax liabilities
Depreciation and amortization	25.4		8.9
Inventories	5.8		8.7
Unremitted earnings	0.4		4.7
Total deferred tax liabilities	31.6		22.3
Net deferred tax asset	$	32.5	$	32.7

The following table summarizes the tax carryforwards and associated carryforward periods and related valuation allowances where the Company has determined that realization is uncertain:



	December 31, 2016
	Net deferred tax asset			Valuation allowance		Carryforwards expire during:
Non-U.S. net operating loss	$	25.2		$	15.7	2017 - Indefinite
Non-U.S. capital losses	5.9			5.9		2017 - Indefinite
State net operating losses and credits	2.8			2.0		2017 - 2031
U.S. foreign tax credit	2.5			—		2017 - 2026
U.S. net operating loss	0.8			—		2017 - 2036
Less: Unrecognized tax benefits	(5.6		)	—
Total	$	31.6		$	23.6



	December 31, 2015
	Net deferred tax asset		Valuation allowance		Carryforwards expire during:
Non-U.S. net operating loss	$	19.1	$	14.7	2016-Indefinite
Non-U.S. capital losses	6.1		6.1		2016-Indefinite
State net operating losses and credits	1.9		0.9		2016-2030
Total	$	27.1	$	21.7

The establishment of a valuation allowance does not have an impact on cash, nor does such an allowance preclude the Company from using its loss carryforwards or other deferred tax assets in future periods. The tax net operating losses attributable to Brazil and Australia comprise a substantial portion of the deferred tax assets and do not expire under local law.

During 2016 and 2015, the net valuation allowance provided against certain deferred tax assets increased by $0.7 million and $1.7 million, respectively. The change in the total valuation allowance in 2016 and 2015 included a net decrease in tax expense of $0.2 million and a net increase of $5.9 million, respectively, a net change in the overall U.S. dollar value of valuation allowances previously recorded in non-U.S. currencies and amounts recorded directly in equity of a net increase of $0.9 million and net decrease of $4.2 million in 2016 and 2015, respectively.

Based upon a review of historical earnings and trends, forecasted earnings and the relevant expiration of carryforwards, the Company believes the valuation allowances provided are appropriate. At December 31, 2016, the Company had gross net operating loss carryforwards in U.S. jurisdictions of $2.4 million, U.S. state jurisdictions of $32.6 million and non-U.S. jurisdictions of $85.9 million

The following is a reconciliation of total gross unrecognized tax benefits, defined as the aggregate tax effect of differences between tax return positions and the benefits recognized in the consolidated financial statements for the years ended December 31, 2016, 2015 and 2014. Approximately $11.1 million, $3.8 million and $4.2 million of these amounts as of December 31, 2016, 2015 and 2014, respectively, relate to permanent items that, if recognized, would impact the reported income tax rate. This amount differs from gross unrecognized tax benefits presented in the table below for December 31, 2016 and 2014 due to the increase in U.S. federal income taxes which would occur upon the recognition of the state tax benefits included herein.



	2016			2015			2014
Balance at January 1	$	3.8		$	4.3		$	5.3
Additions for business acquisitions	6.3			—			—
Additions based on tax positions related to the current year	2.8			0.7			0.9
Additions for tax positions of prior years	0.1			0.1			—
Reductions due to settlements with taxing authorities and the lapse of the applicable statute of limitations	(0.9		)	(1.1		)	(1.6		)
Other changes in unrecognized tax benefits including foreign currency translation adjustments	(0.9		)	(0.2		)	(0.3		)
Balance at December 31	$	11.2		$	3.8		$	4.3

The Company records interest and penalties on uncertain tax positions as a component of the income tax provision. The Company recorded a net increase of $0.1 million during 2016 and 2015 and a net decrease of $0.1 million during 2014 in interest and penalties. In addition, during 2016, the balance of accrued interest and penalty was increased for uncertain tax positions related to business acquisitions by $0.5 million. The total amount of interest and penalties accrued was $0.9 million, $0.3 million and $0.2 million as of December 31, 2016, 2015 and 2014, respectively.

The Company expects the amount of unrecognized tax benefits will change within the next twelve months; however, the change in unrecognized tax benefits which is reasonably possible within the next twelve months, is not expected to have a significant effect on the Company's financial position or results of operations. It is reasonably possible the Company will record unrecognized tax benefits within the next twelve months in the range of zero to $1.0 million resulting from the possible expiration of certain statutes of limitation and settlement of audits. If recognized, the previously unrecognized tax benefits will be recorded as discrete tax benefits in the quarter in which the items are effectively settled.

The tax returns of the Company and its non-U.S. subsidiaries are routinely examined by various taxing authorities. The Company has not been informed of any material assessment for which an accrual has not been previously provided and the Company would vigorously contest any material assessment. Management believes any potential adjustment would not materially affect the Company's financial condition or results of operations.

In general, the Company operates in taxing jurisdictions that provide a statute of limitations period ranging from three to five years for the taxing authorities to review the applicable tax filings. The examination of U.S. federal tax returns for all years prior to 2013 have been settled with the Internal Revenue Service or otherwise have essentially closed under the applicable statute of limitations. The Company is currently under examination in various state and non-U.S. jurisdictions and in most cases the statute of limitations has not been extended. The Company believes these examinations are routine in nature and are not expected to result in any material tax assessments.