INCOME TAXES |
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Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INCOME TAXES | INCOME TAXES The Company files U.S., Brazilian, Canadian and U.K. tax returns at the federal and local taxing jurisdictional levels. The Company’s U.S. federal tax returns for tax years 2012 forward remain open and subject to examination. Generally, the Company’s state, local and foreign tax returns for years as early as 2003 forward remain open and subject to examination, depending on the jurisdiction. The following table summarizes the Company’s income tax provision (benefit) related to earnings for the years ended December 31 (in millions):
The following table summarizes components of earnings before taxes and shows the tax effects of significant adjustments from the expected tax expense computed at the federal statutory rate for the years ended December 31 (in millions):
Under U.S. GAAP, deferred tax assets and liabilities are recognized for the estimated future tax effects, based on enacted tax law, of temporary differences between the values of assets and liabilities recorded for financial reporting and tax purposes, and of net operating losses and other carryforwards. The significant components of the Company’s deferred tax assets and liabilities were as follows at December 31 (in millions):
At December 31, 2015, the Company had approximately $3.6 million of gross foreign federal net operating loss ("NOL") carryforwards that have no expiration date, $1.7 million of gross foreign federal NOL carryforwards which expire in 2033 and $0.2 million of net operating tax-effected state NOL carryforwards which expire in 2033. The Company has recorded a valuation allowance for a portion of its deferred tax asset relating to various tax attributes that it does not believe are, more likely than not to be realized. As of December 31, 2015 and 2014, the Company’s valuation allowance was $0.9 million and $1.0 million, respectively. In the future, if the Company determines, based on existence of sufficient evidence, that it should realize more or less of its deferred tax assets, an adjustment to the valuation allowance will be made in the period such a determination is made. The calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax regulations in multiple jurisdictions. The Company recognizes potential liabilities for unrecognized tax benefits in the U.S. and other tax jurisdictions in accordance with applicable U.S. GAAP, which requires uncertain tax positions to be recognized only if they are more likely than not to be upheld based on their technical merits. The measurement of the uncertain tax position is based on the largest benefit amount that is more likely than not (determined on a cumulative probability basis) to be realized upon settlement of the matter. If payment of these amounts ultimately proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the period when the Company determines the liabilities are no longer necessary. If the Company’s estimate of tax liabilities proves to be less than the ultimate assessment, a further charge to expense may result. The Company’s uncertain tax positions primarily relate to transactions and deductions involving U.S. and Canadian operations. If favorably resolved, $9.3 million of unrecognized tax benefits would decrease the Company’s effective tax rate. Management believes that it is reasonably possible that unrecognized tax benefits will decrease by approximately $0.8 million in the next twelve months largely as a result of tax returns being closed to future audits. In the fourth quarter of 2015, the Company’s income tax expense included a benefit of approximately $2.7 million related to the release of uncertain tax positions due to the expiration of the statutes of limitations. The following table shows a reconciliation of the beginning and ending amount of unrecognized tax benefits (in millions):
The Company accrues interest and penalties related to its uncertain tax positions within its tax provision. During the years ended December 31, 2015, 2014 and 2013, the Company accrued interest and penalties, net of reversals, of $0.2 million, $0.6 million and $0.4 million, respectively. As of December 31, 2015 and 2014, accrued interest and penalties included in the consolidated balance sheets totaled $4.2 million and $4.1 million, respectively. The Company does not provide U.S. federal income taxes on undistributed earnings of foreign companies that are not currently taxable in the U.S. No undistributed earnings of foreign companies were subject to U.S. income tax in the years ended December 31, 2015, 2014 and 2013. Total undistributed earnings on which no U.S. federal income tax has been provided were $401.0 million at December 31, 2015. It is not practicable to estimate the amount of tax that might be payable if some or all of such earnings were to be repatriated, and the amount of foreign tax credits would be available to reduce the resulting U.S. income tax liability. As of December 31, 2015, the Company had $54.4 million of cash and cash equivalents (in the consolidated balance sheets) that were either held directly or indirectly by foreign subsidiaries. Canadian provincial tax authorities have challenged tax positions claimed by one of the Company’s Canadian subsidiaries and have issued tax reassessments for years 2002-2010. The reassessments are a result of ongoing audits and total approximately $77.7 million, including interest through December 31, 2015. The Company disputes these reassessments and plans to continue to work with the appropriate authorities in Canada to resolve the dispute. There is a reasonable possibility that the ultimate resolution of this dispute, and any related disputes for other open tax years, may be materially higher or lower than the amounts the Company has reserved for such disputes. In connection with this dispute, local regulations require the Company to post security with the tax authority until the dispute is resolved. The Company has posted collateral in the form of a $49.2 million performance bond. The Company has paid approximately $27.3 million, most of which is recorded in other assets in the consolidated balance sheets, with the remaining balance to be paid after 2015. In addition, Canadian federal and provincial taxing authorities have reassessed the Company for years 2004-2006, which have been previously settled by agreement among the Company, the Canadian federal taxing authority and the U.S. federal taxing authority. The Company has fully complied with the agreement since entering into it and it believes this action is highly unusual. The Company is seeking to enforce the agreement which provided the basis upon which the returns were previously filed and settled. The total amount of the reassessments, including penalties and interest through December 31, 2015, related to this matter totals approximately $87.1 million. The Company has posted collateral in the form of an approximately $19.3 million performance bond and $34.7 million in the form of a bank letter guarantee, which is necessary to proceed with future appeals or litigation. The Company received Canadian income tax reassessments for years 2007-2008. The total amount of the reassessments, including penalties and interest through December 31, 2015, related to this matter is approximately $30.8 million. The Company does not agree with these adjustments and is receiving assistance from the tax jurisdictions for relief from the impact of double taxation as available in the tax treaty between the U.S. and Canada. The Company has filed protective Notices of Objection and has agreed to post collateral of an approximately $8.6 million performance bond and $9.4 million in the form of a bank letter guarantee which is necessary to proceed with future appeals or litigation. Although the outcome of examinations by taxing authorities is uncertain, the Company believes it has adequately reserved for this matter. The Company will be required by the same local regulations to provide security for additional interest on the above disputed amounts and for any future reassessments issued by these Canadian tax authorities in the form of cash, letters of credit, performance bonds, asset liens or other arrangements agreeable with the tax authorities until the dispute is resolved. The Company expects that the ultimate outcome of these matters will not have a material impact on its results of operations or financial condition. However, the Company can provide no assurance as to the ultimate outcome of these matters and the impact could be material if they are not resolved in the Company’s favor. As of December 31, 2015, the amount reserved related to these reassessments was immaterial to the Company’s consolidated financial statements. Additionally, the Company has other uncertain tax positions as well as assessments and disputed positions with taxing authorities in its various jurisdictions. |