10.	Income Taxes

The components of income before taxes are as follows:

	2017		2016		2015
Domestic	$	683.2	$	665.0	$	595.6
Foreign		9.5		40.9		39.8
Total	$	692.7	$	705.9	$	635.4

The following table summarizes the provision for U.S. federal, state and foreign income taxes:

	2017			2016		2015
Current:
U.S. federal	$	146.7		$	183.4	$	161.4
State		29.0			27.2		25.5
Foreign		11.2			11.4		14.1
		186.9			222.0		201.0
Deferred:
U.S. federal		(235.0	)		19.2		22.8
State		3.8			4.1		3.3
Foreign		(6.4	)		1.6		(2.1	)
		(237.6	)		24.9		24.0
Total provision	$	(50.7	)	$	246.9	$	225.0

Deferred tax assets (liabilities) consist of the following at December 31:

	2017			2016
Deferred tax assets:
Accounts receivable	$	3.7		$	4.8
Deferred compensation		45.5			69.7
Pension, postretirement and postemployment benefits		7.5			7.7
Investment in Natronx		0.0			7.7
Other		23.4			30.8
Tax credit carryforwards/other tax attributes		3.9			12.8
International operating loss carryforwards		11.6			8.0
Total gross deferred tax assets		95.6			141.5
Valuation allowances		(23.5	)		(20.2	)
Total deferred tax assets		72.1			121.3
Deferred tax liabilities:
Goodwill		(153.6	)		(212.3	)
Trade names and other intangibles		(411.8	)		(322.9	)
Property, plant and equipment		(65.8	)		(97.1	)
Total deferred tax liabilities		(631.2	)		(632.3	)
Net deferred tax liability	$	(559.1	)	$	(511.0	)
Long term net deferred tax asset		2.1			1.2
Long term net deferred tax liability		(561.2	)		(512.2	)
Net deferred tax liability	$	(559.1	)	$	(511.0	)

The difference between tax expense and the tax that would result from the application of the federal statutory rate is as follows:

	2017			2016			2015
Statutory rate		35	%		35	%		35	%
Tax that would result from use of the federal statutory rate	$	242.4		$	247.1		$	222.4
State and local income tax, net of federal effect		21.4			20.3			18.7
Varying tax rates of foreign affiliates		(0.1	)		(4.1	)		(2.6	)
Benefit from domestic manufacturing deduction		(15.2	)		(14.2	)		(14.4	)
Valuation Allowances		(6.2	)		2.9			8.5
Stock Options Exercised		(15.1	)		0.0			0.0
US Tax Reform		(272.9	)		0.0			0.0
Other		(5.0	)		(5.1	)		(7.6	)
Recorded tax expense	$	(50.7	)	$	246.9		$	225.0
Effective tax rate		-7.3	%		35.0	%		35.4	%

On December 22, 2017, the U.S. government enacted the Tax Act, which significantly revises the U.S. corporate income tax regime by, among other things, lowering U. S. corporate income tax rates to 21%. However, the Tax Act eliminates the domestic manufacturing deduction and moves towards a territorial system, which also eliminates the ability to credit certain foreign taxes that existed prior to enactment of the Tax Act. There are also certain transitional impacts of the Tax Act. As part of the transition to the new territorial tax system, the Tax Act imposes a one-time repatriation tax on a deemed repatriation of historical earnings of foreign subsidiaries. The Company intends to repatriate some of its non-U.S. earnings and elect to pay the associated repatriation tax. In addition, the reduction of the U.S. corporate tax rate caused the Company to adjust its U.S. deferred tax assets and liabilities to the lower federal base rate of 21%. These transitional impacts resulted in a provisional net credit of approximately $273 for the quarter and year ended December 31, 2017. The credit is primarily due to the adjustment to the U.S. deferred tax asset and liabilities.

The changes included in the Tax Act are broad and complex. The final transitional impacts of the Tax Act may differ from the above estimate, possibly materially, due to, among other things, changes in interpretations of the Tax Act, any legislative action to address questions that arise because of the Tax Act, any changes in accounting standards for income taxes or related interpretations in response to the Tax Act, or any updates or changes to estimates the company has utilized to calculate the transitional impacts. The Commission has issued guidance that allows for a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impacts. The Company currently anticipates finalizing and recording any resulting adjustments by the end of the measurement period.

At December 31, 2017, certain foreign subsidiaries of the Company had net operating loss carryforwards of approximately $36.5. Approximately $0.5 of such net operating loss carryforwards expire on various dates through December 31, 2022. The remaining net operating loss carryforwards are not subject to expiration.

The Company believes that it is more likely than not that the benefit from most of these net operating loss carryforwards will not be realized. In recognition of this risk, the Company has provided a valuation allowance of $11.2 and $8.0 at December 31, 2017 and 2016, respectively, on the deferred tax asset relating to these net operating loss carryforwards.

The Company also believes that it is more likely than not that the benefit from certain additional deferred tax assets of a foreign subsidiary will not be realized. In recognition of this risk, the Company maintains a valuation allowance of $2.4 and $4.5 at December 31, 2017 and 2016, respectively, on these deferred tax assets.

Due to a change in the ability to credit certain foreign taxes that existed prior to enactment of the Tax Act, the Company has determined that it is more likely than not that the benefit from certain foreign tax credit carryforwards will not be realized. In recognition of this risk, the Company has provided a valuation allowance of $9.9 at December 31, 2017 on the deferred tax asset relating to these foreign tax credit carryforwards. The expense relating to the provision of this valuation allowance is included in the provisional net credit of approximately $273 that the Company recorded in connection with the enactment of the Tax Act.

In 2015, the Company reported an impairment charge relating to its investment in Natronx. At the time, the Company believed that it was more likely than not that a tax benefit relating to the impairment would not be realized. In recognition of this risk, the Company established a valuation allowance of $7.7 in 2015, and maintained a valuation allowance of $7.7 at December 31, 2016. Based on new facts, the Company determined that it was more likely than not that the tax benefit relating to the impairment would be realized and reversed the valuation allowance in 2017.

In 2015, the Company liquidated its subsidiary in the Netherlands and decided that the earnings of its subsidiary in France would no longer be permanently reinvested outside of the U.S. As a result, the Company repatriated cash of $93.0. The funds repatriated were used to reduce outstanding commercial paper. As a result of liquidating its subsidiary in the Netherlands, the Company recorded a tax benefit of $2.7 in the 2015 Consolidated Statement of Income and a deferred tax benefit of $11.6 through Accumulated Other Comprehensive Income.

The Tax Act imposes a one-time repatriation tax of $10.0 on deemed repatriation of historical earnings of foreign subsidiaries. As a result of the Tax Act, the Company will no longer have undistributed earnings of foreign subsidiaries that are considered to be permanently reinvested outside of the U.S.

In prior years, the Company has recorded liabilities in connection with uncertain tax positions, which, although supportable by the Company, may be challenged by tax authorities. Under applicable accounting guidance, these tax positions do not meet the minimum threshold required for the related tax benefit to be recognized in the income statement. The Company has no uncertain tax positions or unrecognized tax benefits at December 31, 2017.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	2017		2016		2015
Unrecognized tax benefits at January 1	$	0.0	$	0.0	$	4.0
Gross decreases - tax positions in prior period		0.0		0.0		(3.7	)
Lapse of statute of limitations		0.0		0.0		(0.3	)
Unrecognized tax benefits at December 31	$	0.0	$	0.0	$	0.0

The Company is subject to U.S. federal income tax as well as income tax in multiple state and international jurisdictions. The IRS has completed its audit of tax years through 2014. The Company is currently under audit by several state and international taxing authorities for the years 2013 through 2016.