INCOME TAXES

12 Months Ended

Dec. 31, 2019

12. INCOME TAXES

2017 Tax Cuts and Jobs Act

On December 22, 2017, the 2017 Tax Cuts and Jobs Act (the Tax Act) was enacted into law. The new legislation contained several key tax provisions, including a one-time mandatory transition tax on accumulated foreign earnings and a reduction of the U.S. corporate income tax rate to 21%. The Corporation will also generally be eligible for a 100% dividends received exemption on its foreign earnings. The Tax Act subjects a U.S. shareholder to tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries. The Corporation has applied an accounting policy election to provide for the tax expense related to GILTI in the year in which the tax is incurred.

The Corporation has summarized the most significant impacts from the Tax Act below:

Reduction of the U.S. Corporate Income Tax Rate

The Corporation measures deferred tax assets and liabilities using enacted tax rates that are applicable in the years in which the temporary differences are expected to be recovered or paid. Accordingly, the Corporation’s deferred tax assets and liabilities were remeasured to reflect the reduction of the U.S. corporate income tax rate from 35 percent to 21 percent, resulting in a provisional $13.4 million decrease in income tax expense for the year ended December 31, 2017.

Transition Tax on Foreign Earnings

The Corporation recorded provisional income tax expense of $18.2 million for the year ended December 31, 2017 related to the one-time transition tax on certain foreign earnings. The finalized transition tax of $23.6 million was to be paid over eight years pursuant to the Tax Act, with $1.9 million paid in 2018. An additional $12.7 million carryforward from the 2017 income tax return further reduced the transition tax liability to $9.0 million as of December 31, 2018. The liability of $9.0 million, which is expected to be paid in 2024 and 2025, remained unchanged as of December 31, 2019.

Given that foreign undistributed earnings are no longer considered permanently reinvested, the Corporation also recorded provisional income tax expense of $3.8 million for the year ended December 31, 2017 for withholding taxes that would arise upon distribution of the Corporation’s foreign undistributed earnings.

During the year ended December 31, 2018, the Corporation recorded additional tax expense of $9.3 million for foreign withholding taxes associated with the Tax Act, $6.5 million of which related to the prior period.

During the year ended December 31, 2019, the Corporation recorded tax expense of $4.4 million for foreign withholding taxes. The Corporation is considered permanently reinvested to the extent of any outside basis differences in its foreign subsidiaries in excess of the amount of undistributed earnings.

Earnings before income taxes for the years ended December 31 consist of:


(In thousands)	2019		2018		2017
Domestic	$	273,036	$	217,374	$	179,006
Foreign	123,426		138,865		120,613
	$	396,462	$	356,239	$	299,619

The provision for income taxes for the years ended December 31 consists of:


(In thousands)	2019		2018		2017
Current:
Federal	$	14,195	$	37,648	$	54,963
State	3,766		9,228		2,648
Foreign	24,816		25,285		23,162
Total current	42,777		72,161		80,773

Deferred:
Federal	38,647		8,518		2,595
State	6,632		(1,047)		4,282
Foreign	823		858		(2,922)
Total deferred	46,102		8,329		3,955
Provision for income taxes	$	88,879	$	80,490	$	84,728

The effective tax rate varies from the U.S. federal statutory tax rate for the years ended December 31, principally: