
(In millions)	2019		2018		2017
Current:
Federal	$	6.9	$	4.6	$	29.7
Foreign	15.1		14.3		10.2
State	1.4		1.2		1.1
Total current	23.4		20.1		41.0
Deferred:
Federal	(0.6)		3.6		(10.7)
Foreign	(2.5)		(2.6)		(4.5)
State	0.5		(6.2)		0.2
Total deferred	$	(2.6)	$	(5.2)	$	(15.0)
	$	20.8	$	14.9	$	26.0

A reconciliation of the tax provision for continuing operations at the U.S. statutory rate to the effective income tax expense rate as reported is as follows:


	2019		2018		2017
U.S. Federal statutory rate	21.0	%	21.0	%	35.0	%
State income taxes, net of federal benefit	1.1		1.1		1.0
Foreign operations	(1.0)		(3.5)		(10.2)
R&D tax credits	(0.8)		(0.7)		(0.9)
Uncertain tax position adjustments	(0.6)		(0.5)		(0.5)
Deferred tax adjustments - restructuring and rate adjustments	—		—		(1.2)
Valuation allowance on state and foreign deferred tax	0.4		(2.4)		(1.2)
Purchase of noncontrolling interest	—		—		(2.3)
Share-based compensation	(0.8)		(1.3)		(1.9)
Realized foreign currency loss	(0.4)		(0.1)		(1.5)
Other items	0.9		0.9		(1.3)
Impact of the Tax Act
Transition tax	—		0.5		18.1
Deferred tax effects	—		(0.3)		(8.3)
Foreign Derived Intangible Income	(2.0)		(2.3)		—
Effective tax rate	17.8	%	12.4	%	24.8	%

The effective tax rate continues to be lower than the statutory rate of 21 percent primarily due to foreign earnings taxed at rates below the U.S. statutory rate, as well as recognition of the U.S. deduction for Foreign Derived Intangible Income, and certain incentives and discrete events.

The Company recorded discrete excess tax benefits from share-based compensation of $1.3 million in the twelve-month period ended December 31, 2019 pursuant to ASU 2016-09. ASU 2016-09 can add variability to the Company’s provision for income taxes, mainly due to the timing of stock option exercises, vesting of restricted stock, and the stock price.

During the twelve-month period ended December 31, 2018, the Company recorded a net discrete benefit related to the release of valuation allowances on deferred taxes of $4.2 million in domestic and foreign jurisdictions.

The U.S. Tax Cuts and Jobs Act (Tax Act) was enacted on December 22, 2017 and introduced significant changes to U.S. income tax law. Effective in 2018, the Tax Act reduced the U.S. statutory tax rate from 35 percent to 21 percent, modified existing provisions, and created new provisions including a U.S. based foreign export incentive referred to as Foreign Derived Intangible Income.


(In millions)	2019		2018
Deferred tax assets:
Accrued expenses and reserves	$	10.1	$	9.4
Compensation and employee benefits	17.7		16.2
Net operating losses, tax credit carryforwards, and other	18.8		18.1
Lease liability	7.0		—
Valuation allowance on state and foreign deferred tax	(6.4)		(6.8)
Total deferred tax assets	47.2		36.9
Deferred tax liabilities:
Accelerated depreciation on fixed assets	11.9		12.2
Amortization of intangibles	46.5		45.0
Right-of-Use asset, net	7.0		—
Other items	0.2		—
Total deferred tax liabilities	65.6		57.2
Net deferred tax liabilities	$	(18.4)	$	(20.3)

The Company assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss for certain state and foreign income tax purposes incurred over the 3-year period ended December 31, 2019. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth.

On the basis of this evaluation, as of December 31, 2019, a valuation allowance of $6.4 million has been recorded to recognize only the portion of the deferred tax assets that are more likely than not to be realized. The Company has foreign income tax net operating loss (“NOL”) and credit carryforwards of $12.0 million and state income tax NOL and credit carryforwards of $6.8 million, which will expire on various dates as follows:

The Company believes that it is more likely than not that the benefit from certain foreign NOL carryforwards as well as certain state credit carryforwards will not be realized. In recognition of this risk, the Company has provided a valuation allowance of $4.6 million on the deferred tax assets related to these foreign NOL carryforwards and a valuation allowance of $1.8 million on the deferred tax assets related to these state credit carryforwards.

As of December 31, 2019, the Company has accumulated undistributed earnings generated by our foreign subsidiaries of approximately $438.1 million. Any taxes due with respect to such earnings or the excess of the amount for financial reporting over the tax basis of our foreign investments would generally be limited to foreign and state taxes. The Company intends, however, to indefinitely reinvest these earnings and expects future U.S. cash generation to be sufficient to meet future U.S. cash needs. The Company, therefore, has not recorded a deferred tax liability of $4.8 million.

As of the beginning of fiscal year 2019, the Company had gross unrecognized tax benefits of $1.1 million, excluding accrued interest and penalties. The unrecognized tax benefits increased due to uncertain tax positions identified in the current year based on evaluations made during 2019. The Company had gross unrecognized tax benefits, excluding accrued interest and penalties, of $0.4 million as of December 31, 2019.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits for 2019, 2018, and 2017 (excluding interest and penalties) is as follows:


(In millions)	2019		2018		2017
Beginning balance	$	1.1	$	1.3	$	1.3
Additions for tax positions of the current year	—		—		0.4
Additions for tax positions of prior years	—		0.3		0.2
Reductions for tax positions of prior years	(0.4)		—		—
Statute expirations	(0.3)		(0.5)		(0.6)
Settlements	—		—		—
Ending balance	$	0.4	$	1.1	$	1.3

If recognized, each annual effective tax rate would be affected by the net unrecognized tax benefits of $0.4 million, $1.0 million, and $1.3 million as of year-end 2019, 2018, and 2017, respectively.

The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense. In 2019, interest and penalties decreased $0.2 million, for prior year tax positions. The Company has accrued interest and penalties as of December 31, 2019, December 31, 2018, and December 31, 2017 of approximately $0.1 million, $0.3 million, and $0.6 million, respectively.

The Company is subject to taxation in the United States and various state and foreign jurisdictions. With few exceptions, as of December 31, 2019, the Company is no longer subject to U.S. federal income tax examinations by tax authorities for years before 2016 and is no longer subject to foreign or state income tax examinations by tax authorities for years before 2014.

It is reasonably possible that the amounts of unrecognized tax benefits could change in the next twelve months as a result of an audit or due to the expiration of a statute of limitation. Based on the current audits in process and pending statute expirations, the payment of taxes as a result could be up to $0.5 million.