Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Provision for Income Taxes

Our income before taxes is as follows:

(in millions) For year ended December 31,	2021		2020		2019
U.S. operations	$	316.5	$	102.2	$	37.2
Non-U.S. operations	160.7		99.6		106.7
Total	$	477.2	$	201.8	$	143.9

Our provision (benefit) for income taxes consists of: 

(in millions) For the year ended December 31,	2021		2020		2019
Current:
U.S. federal tax	$	34.5	$	8.6	$	28.5
U.S. state and local tax	3.4		1.6		2.1
Non-U.S. tax	34.2		12.4		29.0
Total current	72.1		22.6		59.6
Deferred:
U.S. federal tax	12.2		14.9		(28.8)
U.S. state and local tax	(2.0)		(0.6)		2.2
Non-U.S. tax	0.6		1.7		(1.7)
Total deferred	10.8		16.0		(28.3)
Total provision for income taxes *	$	82.9	$	38.6	$	31.3

* Included in the above amounts are excess tax benefits from share-based compensation of $5.4 millions $0.4 millions and $3.6 millions in 2021, 2020 and 2019, respectively, which were reflected as reductions in our provision for income taxes in 2021, 2020 and 2019.

A reconciliation of the statutory U.S. federal tax rate to our effective tax rate is as follows:

For the year ended December 31,	2021		2020		2019
Statutory U.S. federal tax rate	21.0	%	21.0	%	21.0	%
Increase (reduction) from:
Income taxed at non-U.S. rates	0.2	%	(3.4)	%	3.1	%
Non-U.S. income inclusion, net of tax credits	(1.6)	%	2.5	%	4.0	%
State and local taxes, net of federal benefit	0.2	%	0.3	%	2.3	%
U.S. research and development tax credit	(0.6)	%	(2.5)	%	(2.0)	%
U.S. deduction for foreign - derived intangible income	(1.0)	%	(0.4)	%	(5.7)	%
Other	(0.8)	%	1.6	%	(1.0)	%
Effective tax rate	17.4	%	19.1	%	21.7	%

As of December 31, 2021, we have made the following determinations with regard to our non-U.S. earnings:

(in millions)	Permanently reinvested		Not permanently reinvested
Amount of earnings	$	333.2	$	1,294
Associated tax	NA *		$	14.3

* Determination of U.S. income taxes and non-U.S. withholding taxes due upon repatriation of this $333.2 million of earnings is not practicable because the amount of such taxes depends upon circumstances existing in numerous taxing jurisdictions at the time the remittance occurs.

Tax Related to Comprehensive Income

During 2021, 2020 and 2019, tax (benefit) provision of $29.9 million, $(13.5) million and $(12.6) million, respectively, related to changes in pension and post-retirement plan assets and benefit obligations, were recorded to accumulated other comprehensive loss.

Deferred Taxes and Valuation Allowances

The components of deferred tax assets and liabilities included in our Consolidated Balance Sheets are as follows:

(in millions) December 31,	2021		2020
Deferred tax assets:
Asbestos-related liabilities	$	138.9	$	150.3
Tax loss and credit carryforwards	111.2		124.5
Pension and post-retirement benefits	24.1		66.0
Inventories	28.7		29.5
Other	34.9		40.2
Total	$	337.8	$	410.5
Less: valuation allowance	141.5		153.4
Total deferred tax assets, net of valuation allowance	$	196.3	$	257.1
Deferred tax liabilities:
Basis difference in fixed assets	$	(42.9)	$	(55.6)
Basis difference in intangible assets	(185.9)		(191.4)
Other	(20.9)		(22.7)
Total deferred tax liabilities	$	(249.7)	$	(269.7)
Net deferred tax asset (liability)	$	(53.4)	$	(12.6)
Balance sheet classification:
Long-term deferred tax assets	17.7		41.0
Long-term deferred tax liability	(71.1)		(53.6)
Net deferred tax asset (liability)	$	(53.4)	$	(12.6)

As of December 31, 2021, we had U.S. federal, U.S. state and non-U.S. tax loss and credit carryforwards that will expire, if unused, as follows:

(in millions) Year of expiration	U.S. Federal Tax Credits		U.S. Federal Tax Losses		U.S. State Tax Credits		U.S. State Tax Losses		Non- U.S. Tax Losses		Total
2022-2026	$	—	$	—	$	2.7	$	114.3	$	5.3
After 2026	3.8		0.7		1.7		764.2		5.8
Indefinite	—		—		22.0		9.5		184.8
Total tax carryforwards	$	3.8	$	0.7	$	26.4	$	888.0	$	195.9
Deferred tax asset on tax carryforwards	$	3.8	$	0.2	$	21.1	$	43.9	$	42.2	$	111.2
Valuation allowance on tax carryforwards	(3.8)		(0.2)		(20.3)		(42.2)		(39.9)		(106.4)
Net deferred tax asset on tax carryforwards	$	—	$	—	$	0.8	$	1.7	$	2.3	$	4.8

As of December 31, 2021 and 2020, we determined that it was more likely than not that $106.4 million and $118.3 million, respectively, of our deferred tax assets related to tax loss and credit carryforwards will not be realized. As a result, we recorded a valuation allowance against these deferred tax assets. We also determined that it is more likely than not that a portion of the benefit related to U.S. state and non-U.S. deferred tax assets other than tax loss and credit carryforwards will not be realized. Accordingly, as of December 31, 2021 and 2020, a valuation allowance of $35.1 million and $35.1 million, respectively, was established against these U.S. state and non-U.S. deferred tax assets. Our total valuation allowance as of December 31, 2021 and 2020 was $141.5 million and $153.4 million, respectively.

Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of our gross unrecognized tax benefits, excluding interest and penalties, is as follows:

(in millions)	2021		2020		2019
Balance of liability as of January 1,	$	34.0	$	39.8	$	42.0
Increase as a result of tax positions taken during a prior year	0.7		5.4		1.1
Decrease as a result of tax positions taken during a prior year	(0.3)		(0.4)		(0.5)
Increase as a result of tax positions taken during the current year	2.6		1.8		3.2
Decrease as a result of settlements with taxing authorities	(0.8)		(2.5)		—
Reduction as a result of a lapse of the statute of limitations	(4.6)		(10.1)		(6.0)
Balance of liability as of December 31,	$	31.6	$	34.0	$	39.8

As of December 31, 2021, 2020 and 2019, the amount of our unrecognized tax benefits that, if recognized, would affect our effective tax rate were $33.5 million, $32.6 million and $43.8 million, respectively. The difference between these amounts and those reflected in the table above relates to (1) offsetting tax effects from other tax jurisdictions, and (2) interest expense, net of deferred taxes and (3) unrecognized tax benefits whose reversals would be recorded to goodwill.

We recognize interest and penalties related to unrecognized tax benefits as a component of our income tax expense. During the years ended December 31, 2021, 2020 and 2019, we recognized interest and penalty (income)/ expense of $(2.6) million, $(0.5) million and $0.8 million, respectively, in our Consolidated Statements of Operations. As of December 31, 2021 and 2020, we had accrued $4.9 million and $7.5 million, respectively, of interest and penalties related to unrecognized tax benefits on our Consolidated Balance Sheets.

During the next twelve months, it is reasonably possible that our unrecognized tax benefits could change by $6.6 million due to settlements of income tax examinations, the expiration of statutes of limitations or other resolution of uncertainties. However, if the ultimate resolution of income tax examinations results in amounts that differ from this estimate, we will record additional income tax expense or benefit in the period in which such matters are effectively settled.

Income Tax Examinations

Our income tax returns are subject to examination by the U.S. federal, U.S. state and local, and non-U.S. tax authorities. With few exceptions, the years for which we filed returns that are open to examination are as follows:

Jurisdiction	Year
U.S. federal	2018 - 2020
U.S. state and local	2015 - 2020
Non-U.S.	2015 - 2020

Currently, we and our subsidiaries are under examination in various jurisdictions, including Germany (2016 through 2019), Canada (2013 through 2015) and Luxembourg (2017 through 2018).