

	Year Ended
	December 31, 2018			December 31, 2017			December 31, 2016
Pre-tax income (loss):
Ireland	$	(109.0	)	$	(454.0	)	$	(3,624.1	)
United States	(428.6		)	(144.9		)	(90.0		)
Other foreign	828.2			879.0			(1,134.2		)
Total pre-tax income (loss)	290.6			280.1			(4,848.3		)
(Benefit) provision for income taxes:
Current:
Ireland	22.7			(8.1		)	0.3
United States	66.4			100.4			93.7
Other foreign	75.1			46.1			26.7
Subtotal	164.2			138.4			120.7
Deferred (credit):
Ireland	(13.9		)	13.1			(549.4		)
United States	7.3			7.8			(12.7		)
Other foreign	2.0			1.2			(394.1		)
Subtotal	(4.6		)	22.1			(956.2		)
Total (benefit) provision for income taxes	$	159.6		$	160.5		$	(835.5	)



	Year Ended
	December 31, 2018		December 31, 2017		December 31, 2016
Provision at statutory rate	12.5	%	12.5	%	12.5	%
Foreign rate differential	(7.1	)	(93.3	)	2.6
State income taxes, net of federal benefit	3.0		(1.4	)	0.1
Provision to return	(1.0	)	9.3		0.3
Tax law changes	(6.2	)	10.3		—
Valuation allowance changes	51.0		17.0		0.8
Change in unrecognized taxes	13.8		22.2		(0.8	)
Permanent differences	(13.0	)	61.8		1.3
Withholding taxes	4.2		17.3		—
Other	(2.3	)	1.6		0.4
Effective income tax rate	54.9	%	57.3	%	17.2	%

Pursuant to changes made by the U.S. Tax Cuts and Jobs Act ("U.S. Tax Act"), remittances from subsidiaries held by Perrigo Company U.S. made in 2018 and future years are generally not subject to U.S. federal income tax. These remittances are either excluded from U.S. taxable income as earnings that are already subject to taxation or are subject to a 100% dividends received deduction. We are indefinitely reinvested in historic earnings beyond those taxed in the U.S. Tax Act and other outside basis differences of our foreign subsidiaries. Due to the complexity of the legal entity structure and the complexity of the tax laws in various jurisdictions, we believe it is not practicable to estimate the additional income taxes that may be payable on the remittance of such undistributed earnings.



	Year Ended
	December 31, 2018			December 31, 2017
Deferred income tax asset (liability):
Depreciation and amortization	$	(371.2	)	$	(457.8	)
Inventory basis differences	27.8			21.3
Accrued liabilities	87.1			87.9
Allowance for doubtful accounts	3.0			1.5
R&D	58.8			58.9
Loss and credit carryforwards	359.2			292.5
Share-based compensation	19.6			16.2
Federal benefit of unrecognized tax positions	18.2			17.0
Interest carryforwards	76.1			30.5
Unremitted earnings	(8.3		)	(9.3		)
Other, net	6.5			37.5
Subtotal	$	276.8		$	96.2
Valuation allowance ⁽¹⁾	(557.9		)	(407.7		)
Net deferred income tax liability:	$	(281.1	)	$	(311.5	)

We have loss and credit carryforwards of $1,556.6 million ($359.2 million tax effected) and $1,755.1 million ($292.5 million tax effected), R&D credit carryforwards of $58.8 million and $58.9 million, as well as interest carryforwards of $331.9 million ($76.1 million tax effected) and $131.0 million ($30.5 million tax effected) for the years ended December 31, 2018 and December 31, 2017, respectively. A valuation allowance of $343.7 million and $285.2 million has been recorded against the carryforwards referenced above for the years ended December 31, 2018 and December 31, 2017, respectively. $469.0 million ($129.2 million tax effected) of U.S. federal and state credit carryforwards, U.S. state net operating loss carryforwards, and non-U.S. net operating loss carryforwards will expire through 2038. The remaining loss carryforwards and interest carryforwards have no expiration.



	Unrecognized Tax Benefits
Balance at December 31, 2016	$	334.5
Additions:
Positions related to the current year	46.1
Positions related to prior years	77.9
Reductions:
Settlements with taxing authorities	(11.1		)
Lapse of statutes of limitation	(0.1		)
Decrease in prior year positions⁽¹⁾	(99.4		)
Balance at December 31, 2017	347.9
Additions:
Positions related to the current year	39.4
Positions related to prior years	6.8
Reductions:
Settlements with taxing authorities	(6.5		)
Lapse of statutes of limitation	(1.1		)
Decrease in prior year positions	(6.4		)
Cumulative translation adjustment	(3.0		)
Balance at December 31, 2018	$	377.1

Although we believe that our tax estimates are reasonable and that we prepare our tax filings in accordance with all applicable tax laws, the final determination with respect to any tax audit and any related litigation could be materially different from our estimates or from our historical income tax provisions and accruals. The results of an audit or litigation could have a material effect on operating results and/or cash flows in the periods for which that determination is made. In addition, future period earnings may be adversely impacted by litigation costs, settlements, penalties, and/or interest assessments.

On August 15, 2017, we filed a complaint in the United States District Court for the Western District of Michigan to recover $163.6 million of Federal income tax, penalties, and interest assessed and collected by the Internal Revenue Service (“IRS”), plus statutory interest thereon from the dates of payment, for the fiscal years ended June 27, 2009, June 26, 2010, June 25, 2011, and June 30, 2012 (the “2009 tax year,” “2010 tax year,” “2011 tax year,” and “2012 tax year,” respectively). The IRS audits of those years culminated in the issuances of two statutory notices of deficiency: (1) on August 27, 2014 for the 2009 and 2010 tax years and (2) on April 20, 2017 for the 2011 and 2012 tax years. The statutory notices of deficiency both included un-agreed income adjustments related principally to transfer pricing adjustments regarding the purchase, distribution, and sale of store-brand OTC pharmaceutical products in the United States. In addition, the statutory notice of deficiency for the 2011 and 2012 tax years included the capitalization of certain expenses that were deducted when paid or incurred in defending

against certain patent infringement lawsuits. We fully paid the assessed amounts of tax, interest, and penalties set forth in the statutory notices and filed timely claims for refund on June 11, 2015 and June 7, 2017 for the 2009-2010 tax years and 2011-2012 tax years, respectively. Our claims for refund were disallowed by certified letters dated August 18, 2015 and July 11, 2017, for the 2009-2010 tax years and 2011-2012 tax years, respectively. The complaint was timely, based upon the refund claim denials, and seeks refunds of tax, interest, and penalties of $37.2 million for the 2009 tax year, $61.5 million for the 2010 tax year, $40.2 million for the 2011 tax year, and $24.7 million for the 2012 tax year. The amounts sought in the complaint for the 2009 and 2010 tax years were recorded as deferred charges in Other non-current assets on our balance sheet during the three months ended March 28, 2015, and the amounts sought in the complaint for the 2011 and 2012 tax years were recorded as deferred charges in Other non-current assets on our balance sheet during the three months ended July 1, 2017.

On December 22, 2016, we received a notice of proposed adjustment for the IRS audit of Athena Neurosciences, Inc. (“Athena”), a subsidiary of Elan acquired in 1996, for the years ended December 31, 2011, December 31, 2012, and December 31, 2013. Perrigo acquired Elan in December 2013. This proposed adjustment relates to the deductibility of litigation costs. We disagree with the IRS’s position asserted in the notice of proposed adjustment and intend to contest it.

On July 11, 2017, we received a draft notice of proposed adjustment associated with transfer pricing positions for the IRS audit of Athena for the years ended December 31, 2011, December 31, 2012, and December 31, 2013. Athena was the originator of the patents associated with Tysabri^® prior to the acquisition of Athena by Elan in 1996. In response to the draft notice of proposed adjustment, we provided the IRS with substantial additional documentation supporting our position. The amount of adjustments that may be asserted by the IRS in the final notice of proposed adjustment cannot be quantified at this time; however, based on the draft notice received, the amount to be assessed may be material. We disagree with the IRS’s position as asserted in the draft notice of proposed adjustment and intend to contest it.

On October 31, 2018, we received an audit finding letter from the Irish Office of the Revenue Commissioners (“Irish Revenue”) for the years ended December 31, 2012 and December 31, 2013. The audit finding letter relates to the tax treatment of the 2013 sale of the Tysabri^® intellectual property and other assets related to Tysabri^® to Biogen Idec from Elan Pharma. The consideration paid by Biogen to Elan Pharma took the form of an upfront payment and future contingent royalty payments. Irish Revenue issued a Notice of Amended Assessment (“NoA”) on November 29, 2018 which assesses an Irish corporation tax liability against Elan Pharma in the amount of €1,636 million, not including interest or any applicable penalties. We disagree with this assessment and believe that the NoA is without merit and incorrect as a matter of law. We filed an appeal of the NoA on December 27, 2018 and will pursue all available administrative and judicial avenues as may be necessary or appropriate. As part of this strategy to pursue all available administrative and judicial avenues, Elan Pharma was, on February 25, 2019, granted leave by the Irish High Court to seek judicial review of the issuance of the NoA by Irish Revenue. The judicial review filing is based on our belief that Elan Pharma's legitimate expectations as a taxpayer have been breached, not on the merits of the NoA itself. If we are ultimately successful in the judicial review proceedings, the NoA will be invalidated and Irish Revenue will not be able to re-issue the NoA. The proceedings before the Tax Appeals Commission has been stayed until a decision on the judicial review application has been made, which could take up to, or more than, a year.

We have ongoing audits in multiple other jurisdictions, the resolution of which remains uncertain. These jurisdictions include, but are not limited to, the United States, Ireland and other jurisdictions in Europe. In addition to the matters discussed above, the IRS is currently auditing our fiscal years ended June 29, 2013, June 28, 2014, and June 27, 2015 (which covers the period of the Elan transaction). The Israel Tax Authority's audit of our fiscal years ended June 29, 2013 and June 28, 2014 concluded with no material impact to the financial statements. The Ireland Tax Authority's audit of our years ended December 31, 2012 and December 31, 2013 concluded with a Notice of Amended Assessment.

Based on the final resolution of tax examinations, judicial or administrative proceedings, changes in facts or law, expirations of statute of limitations in specific jurisdictions or other resolutions of, or changes in, tax positions, it is reasonably possible that unrecognized tax benefits for certain tax positions taken on previously filed tax returns may change materially from those represented on the financial statements as of December 31, 2018. During the next 12 months, it is reasonably possible that such circumstances may occur that would have a material effect on

On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (“U.S. Tax Act”). The U.S. Tax Act includes a number of significant changes to existing U.S. tax laws that impact us. These changes include a corporate income tax rate reduction from 35% to 21% and the elimination or reduction of certain U.S. deductions and credits including limitations on the U.S. deductibility of interest expense and executive compensation. The U.S. Tax Act also transitions the U.S. taxation of international earnings from a worldwide system to a modified territorial system. These changes were effective beginning in 2018. The U.S. Tax Act also includes a one-time mandatory deemed repatriation tax on accumulated U.S. owned foreign corporations’ previously untaxed foreign earnings (“Transition Toll Tax”). We paid our full Transition Toll Tax liability as of December 31, 2018.

On December 22, 2017, Staff Accounting Bulletin No. 118 ("SAB 118") was issued to address the application of the U.S. GAAP ASC 740 income tax accounting for tax law changes enacted in the U.S. during 2017, 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 U.S. Tax Act. In accordance with SAB 118, for the year ended December 31, 2017, we recorded an income tax benefit of $2.4 million in connection with the remeasurement of certain deferred tax assets and liabilities and also recorded a $17.5 million increase of current tax expense in connection with the Transition Toll Tax on cumulative U.S. owned foreign earnings of $1.2 billion. For the year ended December 31, 2018, we completed the accounting for the income tax effects of the U.S. Tax Act. Based on additional guidance issued by the IRS and updates to our calculations we recorded a benefit of $6.3 million related to the Transition Toll Tax. There were no other material changes to the amounts recorded at December 31, 2017. We also finalized the provisional estimate related to our assertion on unremitted earnings of foreign subsidiaries recording an additional deferred tax liability of $8.3 million for the state income tax impacts of repatriating undistributed foreign earnings.

The U.S. Tax Act subjects a U.S. shareholder to tax on global intangible low-taxed income ("GILTI") earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred. We have elected an accounting policy to provide for the tax expense related to GILTI in the year the tax is incurred ("period cost method"). At December 31, 2018, we made a reasonable estimate of the tax effect of a GILTI inclusion for 2018 and recorded additional tax expense of $9.4 million, net of U.S. foreign tax credits. We have no tax expense resulting from the base erosion anti-avoidance tax ("BEAT") in 2018 and we recorded an immaterial tax benefit for deductions related to foreign-derived intangible income ("FDII").