Income Taxes

12 Months Ended

Dec. 31, 2019

Components of income (loss) before income taxes - U.S. and outside U.S. components of income (loss) before income taxes were as follows:



	Year Ended December 31,
(In millions)	2019			2018			2017
United States	$	(1,406.5	)	$	(197.0	)	$	284.3
Outside United States	$	(729.3	)	$	(1,291.1	)	$	395.4
Income (loss) before income taxes	$	(2,135.8	)	$	(1,488.1	)	$	679.7

Provision for income tax - The provision for income taxes consisted of:



	Year Ended December 31,
(In millions)	2019			2018		2017
Current
United States	$	34.7		$	52.1	$	30.2
Outside United States	317.0			321.8		373.7
Total current	351.7			373.9		403.9
Deferred
United States	2.6			19.5		71.4
Outside United States	(78.0		)	29.3		70.2
Total deferred	(75.4		)	48.8		141.6
Provision for income taxes	$	276.3		$	422.7	$	545.5

Deferred tax assets and liabilities - Significant components of deferred tax assets and liabilities were as follows:



	December 31,
(In millions)	2019			2018
Deferred tax assets attributable to
Accrued expenses	$	124.4		$	128.0
Capital Loss	21.1			21.2
Non-deductible interest	84.7			89.3
Foreign tax credit carryforwards	135.3			105.9
Other tax credits	113.2			—
Net operating loss carryforwards	430.5			382.8
Inventories	6.3			3.2
Research and development credit	7.6			6.5
Foreign exchange	20.4			32.5
Provisions for pensions and other long-term employee benefits	84.1			72.4
Contingencies related to contracts	89.9			83.7
Other contingencies	73.4			28.7
Margin recognition on construction contracts	115.9			34.4
Leasing	219.8			—
Revenue in excess of billings on contracts accounted for under the percentage of completion method	10.9			—
Other	6.9			15.2
Deferred tax assets	1,544.4			1,003.8
Valuation allowance	(916.9		)	(683.4		)
Deferred tax assets, net of valuation allowance	627.5			320.4

Deferred tax liabilities attributable to
Revenue in excess of billings on contracts accounted for under the percentage of completion method	—			9.2
U.S. tax on foreign subsidiaries’ undistributed earnings not indefinitely reinvested	10.4			9.4
Property, plant and equipment, intangibles and other assets	279.6			278.6
Leasing	215.2			—
Deferred tax liabilities	505.2			297.2
Net deferred tax assets/(liabilities)	$	122.3		$	23.2

At December 31, 2019 and 2018, the carrying amount of net deferred tax assets and the related valuation allowance included the impact of foreign currency translation adjustments.

Non-deductible interest. At December 31, 2019, deferred tax assets include tax benefits related to certain intercompany interest costs which are not currently deductible, but which may be deductible in future periods. If not utilized, these costs will become permanently non-deductible beginning in 2025. Management believes that it is more likely than not that we will not be able to deduct these costs before expiration of the carry forward period; therefore, we have established a valuation allowance against the related deferred tax assets.

Foreign tax credit carryforwards. At December 31, 2019, deferred tax assets included U.S. foreign tax credit carryforwards of $135.3 million, which, if not utilized, will begin to expire in 2024. Realization of these deferred tax assets is dependent on the generation of sufficient U.S. taxable income prior to the above date. Based on long-term forecasts of operating results, management believes that it is more likely than not that our U.S. earnings over the forecast period will not result in sufficient U.S. taxable income to fully realize these deferred tax assets; therefore, we have established a valuation allowance against the related deferred tax assets. In its analysis, management has considered the effect of deemed dividends and other expected adjustments to U.S. earnings that are required in determining U.S. taxable income. Non-U.S. earnings subject to U.S. tax, including deemed dividends for U.S. tax purposes, were $3.8 million in 2019, $307.6 million in 2018 and $1.3 billion in 2017.

Net operating loss carryforwards. As of December 31, 2019, deferred tax assets included tax benefits related to net operating loss carryforwards. If not utilized, these net operating loss carryforwards will begin to expire in 2020. Management believes it is more likely than not that we will not be able to utilize certain of these operating loss carryforwards before expiration; therefore, we have established a valuation allowance against the related deferred tax assets.

The majority of the net operating loss carryforwards are in Brazil, Canada, Malaysia, Mexico, Netherlands, Norway , Saudi Arabia, U.K., and United States. Except in Canada, Mexico, and Netherlands, all of these tax loss carryforwards extend indefinitely.

Certain Adjustments to Valuation Allowance. The net increase in valuation allowance from December 31, 2018 to December 31, 2019 includes certain adjustments which did not impact net tax expense. These adjustments include $105.9 million of deferred tax assets which were recorded in 2019 and are related to certain previously unrecorded tax credits in the Netherlands and Malaysia that are subject to a full valuation allowance. In addition, the Company wrote off $42.0 million of fully valued deferred tax assets, including $33.0 million that were recorded by certain affiliates that were sold in 2018 and 2019. The Company also reclassified $17.9 million of fully valued deferred tax assets the future tax benefits of which are based on uncertain tax positions.

Unrecognized tax benefits - The following table presents a summary of changes in our unrecognized tax benefits:



(In millions)	Federal, State and Foreign Tax
Balance as of December 31, 2017	$	90.4
Reductions for tax positions related to prior years	(11.5		)
Additions for tax positions related to current year	21.1
Reductions for tax positions due to settlements	(9.0		)
Balance as of December 31, 2018	$	91.0
Reductions for tax positions related to prior years	(62.4		)
Additions for tax positions related to current year	72.9
Reductions for tax positions due to settlements	(20.8		)
Balance as of December 31, 2019	$	80.7

The amounts reported above for uncertain tax positions excludes interest and penalties of $0.1 million, $2.8 million, and $5.9 million at December 31, 2019, 2018, and 2017, respectively. Interest and penalties relating to these uncertain tax positions are included in tax expense in our Consolidated Financial Statements. It is reasonably possible that within twelve months, $2.1 million of liabilities for unrecognized tax benefits will be settled. This amount is reflected in income taxes payable, the remaining balance of the unrecognized tax benefits is recorded in other long term liabilities.

We operate in numerous jurisdictions around the world and could be subject to multiple tax audits at any given time. Most notably, the following tax years and thereafter remain subject to examination: 2010 for Norway, 2016 for Nigeria, 2015 for Brazil, 2017 for France, and 2016 for the United States.

TechnipFMC plc is a public limited company incorporated under the laws of England and Wales. Therefore, our earnings are subject to the United Kingdom statutory rate which is 19.0% for 2019 and 2018, and 19.3% for 2017.

Effective income tax rate reconciliation - The effective income tax rate was different from the statutory U.K. income tax rate due to the following:



	Year Ended December 31,
	2019		2018		2017
Statutory income tax rate	19.0	%	19.0	%	19.3	%
Net difference resulting from
Foreign earnings subject to different tax rates	0.3	%	(9.7	)%	18.2	%
Net change in unrecognized tax benefits	1.3	%	(0.7	)%	4.3	%
Adjustments on prior year taxes	(0.4	)%	(0.7	)%	(4.4	)%
Change in valuation allowance	(8.8	)%	(14.4	)%	19.3	%
Deferred tax asset/liability revaluation for tax rate change	(0.5	)%	(1.7	)%	1.4	%
U.S. transition tax	—	%	(0.8	)%	17.1	%
Impairments	(21.9	)%	(16.5	)%	—	%
Non-deductible legal provision	(0.8	)%	(3.8	)%	—	%
Other	(1.1	)%	0.9	%	5.1	%
Effective income tax rate	(12.9	)%	(28.4	)%	80.3	%

U.S. Tax Cuts and Jobs Act (TCJA) and Other Jurisdictional Tax Reform. Included in the 2017 and 2018 provisions for income taxes are taxes related to the deemed repatriation to the United States of foreign earnings. The Tax Cuts and Jobs Act (TCJA), signed into U.S. law on December 22, 2017, made significant changes to the U.S. federal income taxation of non-U.S. corporate subsidiaries that are controlled by one or more U.S. shareholders. As part of these changes, the TCJA required a deemed repatriation of all accumulated non-U.S. earnings.

The TCJA generally requires that, for the last taxable year of a non-U.S. corporation beginning before January 1, 2018, all U.S. shareholders of such a corporation that is at least 10-percent U.S.-owned must include in income their pro rata share of the corporation’s accumulated post-1986 deferred foreign income that was not previously subject to U.S. tax. Accordingly, the Company recorded income tax expense of approximately $148.7 million in 2017 associated with the deemed repatriation of approximately $2.6 billion of non-U.S. earnings that were not previously subject to U.S. tax. The company recorded additional income tax expense of $11.8 million in 2018 associated with the deemed repatriation of approximately $307 million of non-U.S. earnings that were not previously subject to U.S. tax.

As a result of the deemed repatriation, U.S. income tax has been provided on all undistributed earnings of non-U.S. subsidiaries of the Company’s U.S. affiliates as of December 31, 2017. The cumulative balance of these undistributed earnings was approximately $2.9 billion as of December 31, 2017.

Also included in the 2017 provision for income taxes is the result of the revaluation of deferred tax attributes as a result of changes in corporate tax rates as part of jurisdictional tax reform. The tax expense from the revaluation of U.S. deferred tax attributes is $18.9 million. The tax benefit from the revaluation of deferred tax attributes in other foreign jurisdictions is $9.7 million. For 2018, the tax expense from jurisdictional corporate tax rate reform is $25.6 million.

Income tax holidays. We benefit from income tax holidays in Singapore and Malaysia which will expire after 2023 for Singapore and 2020 for Malaysia. For the year ended December 31, 2019, these tax holidays reduced our provision for income taxes by $3.4 million, or $0.01 per share on a diluted basis.