Note 8 — Income Taxes

Income before income taxes and the provision for income taxes, for the three years ended December 31, 2017, were as follows:

(In millions)	2017			2016			2015
Income before income taxes:
U.S.	$	155.5		$	149.1		$	164.3
International		167.7			188.5			153.9
Total income before income taxes	$	323.2		$	337.6		$	318.2
Provision for income taxes:
Current:
U.S.	$	18.9		$	(9.5	)	$	(0.3	)
International		20.3			37.1			30.1
Current provision for income taxes		39.2			27.6			29.8
Deferred:
U.S.		(1.9	)		54.3			48.6
International		5.2			8.4			4.6
Deferred provision for income taxes		3.3			62.7			53.2
Total provision for income taxes	$	42.5		$	90.3		$	83.0

A reconciliation of the provision for income taxes at the U.S. federal statutory income tax rate of 35% to the effective income tax rate, for the three years ended December 31, 2017, is as follows:

(In millions)	2017			2016				2015
Provision for taxes at U.S. federal statutory rate	$	113.1		$		118.2		$		111.4
State and local taxes, net of federal benefit		0.2				3.1				2.5
Foreign effective rate differential		(14.4	)			(26.8	)			(22.6	)
Tax credits		(16.0	)			(10.1	)			(3.1	)
Change in Valuation Allowance		(9.1	)		10.4				3.1
Remeasurement of deferred taxes		(67.8	)		—				—
Transition Tax on undistributed foreign earnings		45.7			—				—
Excess Tax Benefits of Stock Based Compensation		(7.6	)			(2.8	)		—
Other		4.9				4.9				3.3
Release of reserves for uncertain tax positions		(6.5	)			(6.6	)			(11.6	)
Total provision for income taxes	$	42.5		$		90.3		$		83.0

The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. The Act reduces the US federal corporate tax rate from 35% to 21% in 2018, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign-sourced earnings. At December 31, 2017, we have not fully completed our accounting for the tax effects of enactment of the Act; however, in certain cases, as described below, we have made a reasonable estimate of the effects on our existing deferred tax balances and the one-time transition tax based on the latest Act guidance that currently exists. For the items for which we were able to determine a reasonable estimate, we recognized a provisional tax benefit of $22.1 million, which is included as a component of income tax expense from continuing operations. These adjustments of the Tax Cuts and Jobs Act reduced our effective tax rate for 2017 by 6.8%.

Deferred tax assets and liabilities: We remeasured all U.S. deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. However, we are still analyzing certain aspects of the Act and refining our calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. The provisional amount recorded related to the remeasurement of our deferred tax balance resulted in a tax benefit of $67.8 million. The one-time transition tax is based on our total post-1986 earnings and profits (E&P) which was not previously subject to US income taxes. We recorded a provisional amount for our one-time transition tax liability for all of our controlled foreign corporations, resulting in an increase in income tax expense of $45.7 million, net of foreign tax credits. The tax due on unremitted earnings will be paid over 8 years, as permitted by the Act. The transition tax is based in part on the total post 1986 foreign E&P and the amount of those earnings held in cash and other specified assets. The transition tax may change when we finalize the calculation of post-1986 foreign E&P, which was not previously subject to US federal taxation and as we finalize the amounts held in cash or other specified assets. No additional income or withholding taxes have been provided for any undistributed foreign earnings, including those subject to the transition tax nor have any taxes been provided for outside basis difference inherent in these entities as these amounts continue to be indefinitely reinvested in foreign operations. Additionally, due to withholding tax, basis computations, and other related tax considerations, it is not practicable to estimate any taxes to be provided on outside basis differences at this time. The ultimate tax impact related to the Act may differ, possibly materially, due to further refinement of our calculations, changes in interpretation and assumptions, or issuance of additional guidance issued by the relevant tax authorities.

Deferred Income Taxes

Deferred income taxes result from tax attributes including foreign tax credits, net operating loss carryforwards and temporary differences between the recognition of items for income tax purposes and financial reporting purposes. Principal components of deferred income taxes as of December 31, 2017 and 2016 are:

(In millions)	2017				2016
Assets
Net operating loss carryforwards	$	65.1			$	58.9
Unfunded pension liability and other postretirement obligations		0.5				5.6
Tax credit carryforwards		10.8					13.0
Stock based compensation		7.1				16.2
Other comprehensive income		0.2				4.6
Reserves and other		13.5				20.8
Subtotal		97.2				119.1
Valuation allowance			(54.9	)			(58.9	)
Total assets	$		42.3		$	60.2
Liabilities
Accelerated depreciation			(144.1	)			(160.6	)
Accelerated amortization			(11.3	)			(12.9	)
Other			(1.3	)			(0.4	)
Total liabilities	$		(156.7	)	$		(173.9	)
Net deferred tax liabilities	$		(114.4	)	$		(113.7	)

Deferred tax assets and deferred tax liabilities as presented in the consolidated balance sheets as of December 31, 2017 and 2016 are as follows and are recorded in prepaid expenses and other current assets, deferred tax assets, other accrued liabilities and other non-current liabilities in the consolidated balance sheets:

(In millions)	2017			2016
Long-term deferred tax assets, net		14.3			8.9
Long-term deferred tax liability, net		(128.7	)		(122.6	)
Net deferred tax liabilities	$	(114.4	)	$	(113.7	)

The deferred tax assets for the respective periods were assessed for recoverability and, where applicable, a valuation allowance was recorded to reduce the total deferred tax asset to an amount that will, more likely than not, be realized in the future. The valuation allowance as of December 31, 2017 and 2016 relates primarily to net operating loss carryforwards of our foreign subsidiaries for which we have determined, based upon historical results and projected future book and taxable income levels, that a valuation allowance should continue to be maintained. The net change in the total valuation allowance for the years ended December 31, 2017 and 2016 was a decrease of $4.0 million and an increase of $1.1 million, respectively.

Although realization is not assured, we have concluded that it is more-likely-than-not that the deferred tax assets, for which a valuation allowance was determined to be unnecessary, will be realized in the ordinary course of operations based on the available positive and negative evidence, including scheduling of deferred tax liabilities and projected income from operating activities. The amount of the net deferred tax assets considered realizable, however, could be reduced in the near term if actual future income or income tax rates are lower than estimated, or if there are differences in the timing or amount of future reversals of existing taxable or deductible temporary differences.

Net Operating Loss & Tax Credit Carryforwards

At December 31, 2017, we had tax credit carryforwards for U.S. tax purposes of $10.8 million available to offset future income taxes. These credits will begin to expire if not utilized in 2018.

We also had net operating loss carryforwards for U.S. state and foreign income tax purposes of $25.6 million and $242.0 million, respectively, for which there were foreign valuation allowances of $202.9 million as of December 31, 2017. Our foreign net operating losses can be carried forward without limitation in Belgium, Luxembourg, Spain and the U.K. The carryforward period in China is limited to 5 years. We have a full valuation allowance against certain foreign net operating losses for which the Company believes it is not more likely than not that the net operating losses will be utilized.

Uncertain Tax Positions

Our unrecognized tax benefits at December 31, 2017, relate to various Foreign and U.S. jurisdictions.

The following table summarizes the activity related to our unrecognized tax benefits.

(In millions)	2017			2016			2015
Balance as of January 1,	$	16.7		$	25.3		$	43.1
Additions based on tax positions related to the current year		5.3			7.3			1.7
(Reductions) additions for tax positions of prior years		(6.1	)		(11.1	)		(16.6	)
Expiration of the statute of limitations for the assessment of taxes		(4.8	)		(4.2	)		(0.6	)
Other, including currency translation		1.2			(0.6	)		(2.3	)
Balance as of December 31,	$	12.3		$	16.7		$	25.3

Included in the unrecognized tax benefits of $12.3 million at December 31, 2017 was $11.3 million of tax benefits that, if recognized, would impact our annual effective tax rate. In addition, we recognize interest accrued related to unrecognized tax benefits as a component of interest expense and penalties as a component of income tax expense in the consolidated statements of operations. The Company recognized $0.3 million, $1.1 million, $0.6 million of interest expense and penalties related to the above unrecognized tax benefits in 2017, 2016 and 2015, respectively. The Company had accrued interest of approximately $0.8 million and $2.1 million as of December 31, 2017 and 2016, respectively. During 2017, we reversed $1.8 million of interest related to unrecognized tax benefits.

We are subject to taxation in the U.S. and various states and foreign jurisdictions. The U.S. tax returns have been audited through 2013. Foreign and U.S. state jurisdictions have statutes of limitations generally ranging from 3 to 5 years. Years that are still open to examination in our major jurisdictions include the U.S. (2014 onward), Austria (2016 onward), Belgium (2014 onward), France (2014 onward), Spain (2013 onward) and the U.K. (2014 onward). We are currently under examination in the U.S. and certain foreign jurisdictions.

As of December 31, 2017, we had uncertain tax positions for which it is reasonably possible that amounts of unrecognized tax benefits could significantly change over the next year. These uncertain tax positions relate to our tax returns from 2004 onward, some of which are currently under examination by certain U.S. and European tax authorities. The Company believes it is reasonably possible that the total amount of unrecognized tax benefits disclosed as of December 31, 2017 may decrease approximately $2 to $3 million in the fiscal year ending December 31, 2018. Such possible decrease primarily relates to audit settlements and the expiration of statutes of limitation.