
	2020		2019		2018
Current
U.S. federal	$	3.5	$	0.7	$	0.8
Foreign	14.6		36.1		49.0
State and local	0.4		1.5		1.9
Total current	18.5		38.3		51.7
Deferred
U.S. federal	7.1		78.1		4.6
Foreign	(22.6)		(11.7)		(19.8)
State and local	(4.0)		12.0		0.7
Total deferred	(19.5)		78.4		(14.5)
Income tax expense (benefit)	$	(1.0)	$	116.7	$	37.2

Income tax expense (benefit) attributable to loss from operations before taxes differed from the amounts computed by applying the U.S. federal income tax rate of 21 percent to pre-tax loss from operations. The following table presents these differences for the years ended December 31:


	2020		2019		2018
Statutory tax benefit	$	(56.6)	$	(48.1)	$	(100.5)
State and local taxes (net of federal tax benefit)	(3.6)		(3.8)		1.5
Brazil non-taxable incentive	(5.2)		(5.8)		(3.8)
Valuation allowances	32.5		46.2		80.6
Barbados loan restructuring	—		83.1		—
Netherlands liquidation deferred tax	—		5.9		—
Goodwill impairment	—		—		34.0
Foreign tax rate differential	(6.1)		(1.4)		(33.7)
Tax on unremitted foreign earnings	1.8		8.9		4.9
Change to uncertain tax positions	(23.9)		4.0		3.1


Tax Act - rate impact on deferred tax balance	—		—		(2.5)
U.S. taxed foreign income	8.7		10.5		32.6
Business tax credits	—		—		(1.1)
Non-deductible (non-taxable) items	12.2		18.0		18.9
Termination of company owned life insurance	35.1		—		—

Return to provision	(9.6)		(2.6)		1.6
Withholding tax and other taxes	4.6		6.8		1.7
Other	9.1		(5.0)		(0.1)
Income tax expense (benefit)	$	(1.0)	$	116.7	$	37.2

The effective tax rate for 2020 was 0.4 percent. Tax expense items contributing to the difference from the U.S. federal income tax rate included U.S. tax on foreign income, valuation allowances related to certain foreign and U.S. tax attributes for which realization does not meet the more likely than not criteria, non-deductible expenses and the tax effects of terminating certain COLI policies. These items were partially offset by tax credits, benefits related to settling certain open tax years in Germany and the U.S., changes to uncertain tax position accruals and benefit related to regulations issued in 2020 related to US tax reform.

The US Tax Cuts and Jobs Act (the Tax Act) was enacted on December 22, 2017. The Tax Act reduced the U.S. federal corporate income tax rate from 35 percent to 21 percent, required companies to pay a one-time transition tax on earnings for certain foreign subsidiaries and created new taxes on certain foreign sourced earnings. The Company accounted for the estimated impacts of the Tax Act in the year of enactment and finalized its accounting, as required under SAB 118, during 2018. During 2020, further regulations were issued in connection with certain provisions of the Tax Act related to taxes on foreign sourced earnings, with retroactive effect to 2018 and 2019. The Company calculated and recorded a benefit related to these regulatory changes of $9.1 and will amend its 2018 and 2019 returns accordingly.

The effective tax rate for 2019 was (51.0) percent and was primarily due to the U.S. taxed foreign income, including GILTI, valuation allowances recorded on certain foreign and state jurisdictions, U.S. foreign tax credits that management concluded did not meet the more likely than not criteria for realization and the tax effects related to the Barbados structure collapse. The Company’s collapse of its Barbados structure to meet the covenant requirements under its credit agreement resulted in a net tax expense of $46.3 inclusive of the offsetting valuation allowance release relating to the Company’s nondeductible interest expense that was carried forward from December 31, 2018.

The effective tax rate for 2018 was (7.8) percent on the overall loss from operations and was primarily due to a goodwill impairment charge, the impact of the Tax Act, valuation allowances on interest expense carryforward attributes and certain foreign and state credits. 2018 tax expense reflects the reduction of the U.S. federal corporate income tax rate from 35 percent to 21 percent, refinement of the impacts of the Tax Act estimated under SAB 118, goodwill impairment charge, which for tax purposes is primarily nondeductible and the business interest deduction limitation. In addition, the overall effective tax rate is impacted by the jurisdictional income (loss) and varying respective statutory rates which is reflected in the foreign tax rate differential caption of the rate reconciliation.

The Company recognizes the benefit of tax positions taken or expected to be taken in its tax returns in the consolidated financial statements when it is more likely than not that the position will be sustained upon examination by authorities. Recognized tax positions are measured at the largest amount of benefit that is more likely than not of being realized upon settlement.


	2020		2019		2018
Balance at January 1	$	50.9	$	49.5	$	48.4
Increases (decreases) related to prior year tax positions, net	0.9		5.1		(1.5)
Increases related to current year tax positions	—		4.4		4.8
Settlements	(7.7)		(5.5)		(1.5)
Reductions due to lapse of applicable statute of limitations	(7.3)		(2.6)		(0.7)
Balance at December 31	$	36.8	$	50.9	$	49.5

The Company classifies interest expense and penalties related to the underpayment of income taxes in the consolidated financial statements as income tax expense. As of December 31, 2020 and 2019, accrued interest and penalties related to unrecognized tax benefits totaled $3.7 and $8.5, respectively.

Within the next 12 months, it is reasonably possible that we could decrease our unrecognized tax benefits by an estimate of up to $15, primarily as a result of a foreign tax examination resolution.

During 2020, the Company concluded the Internal Revenue Service (IRS) audit for the tax year ended December 31, 2016. There are no other outstanding audits by the IRS and all U.S. federal tax years prior to 2016 are closed by statute. The Company is subject to tax examination in various U.S. state jurisdictions for tax years 2010 to the present. In addition, the Company is subject to a German tax audit for tax years 2016-2017 and other various foreign jurisdictions for tax years 2011 to the present.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities at December 31 are as follows:


	2020		2019
Deferred tax assets
Accrued expenses	$	40.7	$	12.4
Warranty accrual	6.5		8.7
Deferred compensation	6.8		9.8
Allowances for doubtful accounts	4.8		5.4
Inventories	17.6		12.7
Deferred revenue	14.0		18.3
Pensions, post-retirement and other benefits	71.2		69.1

Tax credits	66.0		65.1
Net operating loss carryforwards	175.6		197.1
Capital loss carryforwards	0.4		3.1
State deferred taxes	10.9		8.8
Lease liability	28.4		32.8
Other	5.0		17.3
	447.9		460.6
Valuation allowances	(229.5)		(217.7)
Net deferred tax assets	$	218.4	$	242.9

Deferred tax liabilities
Property, plant and equipment, net	$	15.9	$	26.9
Goodwill and intangible assets	145.9		154.1
Undistributed earnings	32.7		30.0
Right-of-use assets	29.8		32.5
Net deferred tax liabilities	224.3		243.5
Net deferred tax (liability) asset	$	(5.9)	$	(0.6)


	2020		2019
Deferred income taxes - assets	$	97.5	$	120.8
Deferred income taxes - liabilities	(103.4)		(134.5)
Net deferred tax assets classified as held-for-sale	—		13.1
Net deferred tax (liabilities) assets	$	(5.9)	$	(0.6)

As of December 31, 2020, the Company had domestic and international net operating loss (NOL) carryforwards of $1,003.3, resulting in an NOL deferred tax asset of $175.6. Of these NOL carryforwards, $601.0 expire at various times between 2021 and 2040 and $402.3 do not expire. At December 31, 2020, the Company had a domestic foreign tax credit carryforward resulting in a deferred tax asset of $61.2 that will expire between 2021 and 2029 and a general business credit carryforward resulting in a deferred tax asset of $4.9 that will expire between 2035 and 2039. The Company has a full valuation allowance on the domestic foreign tax credit carryforward.

The Company recorded a valuation allowance to reflect the estimated amount of certain U.S., foreign and state deferred tax assets that, more likely than not, will not be realized. The net change in total valuation allowance for the years ended December 31, 2020 and 2019 was an increase of $11.8 and $42.3, respectively. The 2020 valuation allowance increase was driven primarily by an increase to nondeductible business interest expense carryforwards in excess of amounts that are expected to be utilized on a more likely than not basis, as well as foreign net operating loss activity offset by utilization of U.S.

foreign tax credits. Of the total 2020 net increase of $11.8, the Company recorded $32.5 to tax expense, ($10.7) was recorded to shareholder’s equity and ($10.0) was reversed against expired attributes.

For the years ended December 31, 2020 and 2019, provisions were made for foreign withholding taxes and estimated foreign income taxes which may be incurred upon the remittance of certain undistributed earnings in foreign subsidiaries and foreign unconsolidated affiliates. Provisions have not been made for income taxes on $531.1 of undistributed earnings at December 31, 2020 in foreign subsidiaries and corporate joint ventures that were deemed permanently reinvested. Determination of the amount of unrecognized deferred income tax liabilities on these earnings is not practicable because such liability, if any, depends on certain circumstances existing if and when remittance occurs. A deferred tax liability will be recognized if and when the Company no longer plans to permanently reinvest these undistributed earnings.

The Company’s undistributed earnings in foreign subsidiaries that are deemed permanently reinvested decreased compared to the prior year amount and was primarily impacted by current year income and restructuring initiatives.