Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

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)	2020		2019		2018
United States	$	(3,073.5)	$	(1,406.5)	$	(197.0)
Outside United States	$	(11.5)	$	(729.3)	$	(1,291.1)
Loss before income taxes	$	(3,085.0)	$	(2,135.8)	$	(1,488.1)

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

	Year Ended December 31,
(In millions)	2020		2019		2018
Current
United States	$	(4.7)	$	34.7	$	52.1
Outside United States	164.8		317.0		321.8
Total current income taxes	160.1		351.7		373.9
Deferred
United States	(3.1)		2.6		19.5
Outside United States	(3.6)		(78.0)		29.3
Total deferred income taxes	(6.7)		(75.4)		48.8
Provision for income taxes	$	153.4	$	276.3	$	422.7

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

	December 31,
(In millions)	2020		2019
Deferred tax assets attributable to
Accrued expenses	$	147.8	$	124.4
Capital loss	21.1		21.1
Non-deductible interest	77.0		84.7
Foreign tax credit carryforwards	145.8		135.3
Other tax credits	166.8		113.2
Net operating loss carryforwards	489.0		430.5
Inventories	16.5		6.3
Research and development credit	3.4		7.6
Foreign exchange	—		20.4
Provisions for pensions and other long-term employee benefits	96.1		84.1
Contingencies	43.4		163.3
Margin recognition on construction contracts	113.9		115.9
Leases	254.9		219.8
Revenue in excess of billings on contracts accounted for under the percentage of completion method	—		10.9
Other	—		6.9
Deferred tax assets	1,575.7		1,544.4
Valuation allowance	(935.3)		(916.9)
Deferred tax assets, net of valuation allowance	640.4		627.5
Deferred tax liabilities attributable to
Revenue in excess of billings on contracts accounted for under the percentage of completion method	42.6		—
U.S. tax on foreign subsidiaries’ undistributed earnings not indefinitely reinvested	4.2		10.4
Property, plant and equipment, intangibles and other assets	185.8		279.6
Foreign exchange	27.8		—
Leases	237.0		215.2
Other	4.7		—
Deferred tax liabilities	502.1		505.2
Net deferred tax assets	$	138.3	$	122.3

At December 31, 2020 and 2019, 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, 2020, 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, 2020, deferred tax assets included U.S. foreign tax credit carryforwards of $145.8 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 $61 thousand in 2020, $3.8 million in 2019 and $307.6 million in 2018.

Net operating loss carryforwards. As of December 31, 2020, deferred tax assets include tax benefits relating to net operating loss carryforwards. If not utilized, these net operating loss carryforward will begin to expire in 2021. Except in Norway (net operating losses of $373.7 million), management believes it is more likely than not that we will not be able to utilize these operating loss carryforwards before expiration; thus, we have established a valuation allowance against the related deferred tax assets (inclusive of NOL’s generated in United Kingdom, Saudi Arabia, Netherlands, Mexico, Brazil, Canada, United States, Luxembourg, and Germany). 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, 2019 to December 31, 2020 includes certain adjustments which did not impact net tax expense. These adjustments include $62.0 million of deferred tax assets which were recorded in 2020 and are related to certain previously unrecorded tax credits in the Netherlands that are subject to a full valuation allowance. In addition, the Company wrote off $15.3 million and $11.3 million of deferred tax assets in Italy and Mexico, respectively, that had been subject to a full valuation allowance.

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

(In millions)	Federal, State and Foreign Tax
Balance at 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 at December 31, 2019	$	80.7
Reductions for tax positions related to prior years	(7.9)
Additions for tax positions related to current year	0.9
Reductions for tax positions due to settlements	(2.6)
Balance at December 31, 2020	$	71.1

The amounts reported above for uncertain tax positions excludes interest and penalties of $3.7 million, $0.1 million, and $2.8 million for the years ended December 31, 2020, 2019, and 2018, respectively. Interest and penalties relating to these uncertain tax positions were included in income tax expense in our consolidated statements of income. It is reasonably possible that within twelve months, $4.2 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, 2016 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 U.K. statutory rate which is 19.0% for 2020, 2019, and 2018.

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,
	2020		2019		2018
Statutory income tax rate	19.0	%	19.0	%	19.0	%
Net difference resulting from
Foreign earnings subject to different tax rates	(1.5)	%	0.3	%	(9.7)	%
Adjustments to prior year taxes	(1.3)	%	(0.4)	%	(0.7)	%
Changes in valuation allowance	—	%	(8.8)	%	(14.4)	%
Deferred tax asset/liability revaluation for tax rate change	—	%	(0.5)	%	(1.7)	%
Impairments	(22.5)	%	(21.9)	%	(16.5)	%
Non-deductible legal provision	—	%	(0.8)	%	(3.8)	%
Other	1.3	%	0.2	%	(0.6)	%
Effective income tax rate	(5.0)	%	(12.9)	%	(28.4)	%

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, 2020, these tax holidays reduced our provision for income taxes by $5.8 million, or $0.01 per share on a diluted basis.