INCOME TAXES

9 Months Ended

Sep. 30, 2020


	Three Months								Nine Months
For the Periods Ended September 30	2020			2019			Change		2020			2019			Change
Income tax (benefit) expense	$	(16.2)		$	34.1		(147.5)	%	$	(19.6)		$	73.1		(126.8)	%
Effective tax rate	25.4		%	22.3		%	310bp		(31.0)		%	22.1		%	**

** Resulting basis point change not considered meaningful.

The income tax benefit and effective tax rate for the three and nine months ended September 30, 2020 primarily reflects the tax effect of the $135.9 asbestos remeasurement charge recognized during the third quarter. Additionally, the effective tax rate during the third quarter of 2020 includes a benefit of $3.2 related to previously unrecognized tax benefits from statute of limitations expirations. The effective tax rate for the nine month period of 2020 also includes tax benefits of $27.2 resulting from a recently completed internal reorganization in Europe. This reorganization resulted in a refined projection of future earnings, which will result in the realization of a portion of our deferred tax assets.

The Company’s financial condition and results of operations have been and are expected to continue to be adversely affected by the COVID-19 pandemic and the governmental and market reactions to COVID-19. The impacts on earnings have already had, and will continue to have, an impact on the Company’s overall effective tax rate throughout the year.

The Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) was enacted March 27, 2020. The CARES Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of net operating losses, temporary suspension of certain payment requirements for the employer portion of Social Security taxes, technical corrections from prior tax legislation for tax depreciation of certain qualified improvement property, and the creation of certain refundable employee retention credits. During the nine months ended September 30, 2020, the Company recognized a benefit of $8.7 from the CARES Act. The benefit was recorded in operating income and was related to the employer portion of payroll taxes. Certain non-U.S. jurisdictions have enacted similar stimulus measures. We continue to monitor any effects that may result from the CARES Act or other similar legislation globally.

The Company operates in various tax jurisdictions and is subject to examination by tax authorities in these jurisdictions. The Company is currently under examination in several jurisdictions including the Czech Republic, Germany, Hong Kong, India, Italy, the U.S. and Venezuela. The estimated tax liability calculation for unrecognized tax benefits considers uncertainties in the application of complex tax laws and regulations in various tax jurisdictions. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate of the unrecognized tax benefit. Over the next 12 months, the net amount of the tax liability for unrecognized tax benefits in foreign and domestic jurisdictions could change by approximately $15 due to changes in audit status, expiration of statutes of limitations and other

events. In addition, the settlement of any future examinations relating to the 2011 and prior tax years could result in changes in amounts attributable to the Company under its Tax Matters Agreement with Exelis Inc. and Xylem Inc. relating to the Company’s 2011 spin-off of those businesses.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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