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Income Taxes
12 Months Ended
Oct. 31, 2016
Income Tax Disclosure [Abstract]  
Income Taxes
INCOME TAXES
Geographic Sources of Income Before Income Taxes
 
Years Ended October 31,
(in millions)
2016
 
2015
 
2014
United States
$
45.1

 
$
60.5

 
$
104.5

Foreign
6.8

 
11.9

 
6.1

Income before income taxes
$
51.9

 
$
72.4

 
$
110.6


Components of Income Tax Benefit (Provision)
 
Years Ended October 31,
(in millions)
2016
 
2015
 
2014
Current:
 
 
 
 
 
Federal
$
17.5

 
$
(3.7
)
 
$
(32.6
)
State
(9.3
)
 
(3.7
)
 
(7.6
)
Foreign
(1.5
)
 
(2.8
)
 
(1.3
)
Deferred:
 
 
 
 
 
Federal
3.6

 
(7.9
)
 
(0.8
)
State
(0.5
)
 
(0.3
)
 
(1.4
)
Foreign
0.6

 
0.1

 

Income tax benefit (provision)
$
10.4

 
$
(18.3
)
 
$
(43.7
)

Reconciliation of the U.S. Statutory Tax Rate to Annual Effective (Benefit) Tax Rate
 
Years Ended October 31,
 
2016
 
2015
 
2014
U.S. statutory rate
35.0
 %
 
35.0
 %
 
35.0
 %
State and local income taxes, net of federal tax benefit
7.8

 
6.5

 
6.7

Federal and state tax credits
(22.7
)
 
(9.6
)
 
(2.2
)
Impact of foreign operations
(5.0
)
 
(3.6
)
 
(1.1
)
Changes in uncertain tax positions
(40.0
)
 
(5.2
)
 
(2.0
)
Incremental tax benefit from share-based compensation awards
(4.2
)
 

 

Nondeductible expenses
7.7

 
3.8

 
2.6

Other, net
1.4

 
(1.6
)
 
0.5

Annual effective (benefit) tax rate
(20.0
)%
 
25.3
 %
 
39.5
 %

Our income taxes for 2016 were favorably impacted by (i) a benefit of $20.8 million, including interest of $0.6 million, primarily related to a lapse of statutes of limitations, (ii) $6.7 million of WOTC related to new hires in 2016, (iii) $5.1 million of WOTC from the retroactive reinstatement of the WOTC for calendar year 2015, (iv) $2.2 million in benefits resulting from the adoption of ASU 2016-09, and (v) $1.2 million of tax deductions for energy efficient government buildings.
The effective tax rates on income from continuing operations for 2015 and 2014 were 25.3% and 39.5%, respectively. The effective tax rate for 2015 was lower than the rate for 2014 principally due to (i) $2.8 million of WOTC from the retroactive reinstatement of the WOTC for calendar year 2014, (ii) $2.0 million of tax deductions for energy efficient government buildings, (iii) $1.6 million of state employment-based tax credits, and (iv) $1.6 million of tax benefits related to a lapse of statutes of limitations.
Components of Deferred Tax Assets and Liabilities
 
As of October 31,
(in millions)
2016
 
2015
Deferred tax assets attributable to:
 
 
 
Self-insurance claims (net of recoverables)
$
108.4

 
$
109.5

Deferred and other compensation
33.4

 
35.5

Impairment loss on assets held for sale
9.2

 

Accounts receivable allowances
6.6

 
2.9

Settlement liabilities
2.6

 
3.5

Other accruals
2.9

 
2.6

Other comprehensive income
1.5

 
1.3

State taxes
0.6

 
0.5

State net operating loss carryforwards
5.7

 
5.9

Tax credits
9.9

 
7.4

Other
2.5

 
0.4

Gross deferred tax assets
183.3

 
169.5

Valuation allowance
(5.4
)
 
(5.5
)
Total deferred tax assets
177.9

 
164.0

 
 
 
 
Deferred tax liabilities attributable to:
 
 
 
Property, plant and equipment
(2.2
)
 
(0.4
)
Goodwill and other acquired intangibles
(141.8
)
 
(129.5
)
Total deferred tax liabilities
(144.0
)
 
(129.9
)
 
 
 
 
Net deferred tax assets
$
33.9

 
$
34.1


Operating Loss Carryforwards
Operating loss carryforwards totaling $8.7 million at October 31, 2016 are being carried forward in a number of state jurisdictions where we are permitted to use tax operating losses from prior periods to reduce future taxable income. These operating losses will expire between 2017 and 2036.
The valuation allowance represents the amount of tax benefits related to state net operating loss carryforwards that are not likely to be realized. We believe the remaining net deferred tax assets are more likely than not to be realizable based on estimates of future taxable income.
Changes to the Deferred Tax Asset Valuation Allowance
 
Years Ended October 31,
(in millions)
2016
 
2015
 
2014
Valuation allowance at beginning of year
$
5.5

 
$
6.2

 
$
6.2

Sale of Security business

 
(0.8
)
 

Other, net
(0.1
)
 
0.1

 

Valuation allowance at end of year
$
5.4

 
$
5.5

 
$
6.2


Unrecognized Tax Benefits
At October 31, 2016, 2015, and 2014, there were $52.0 million, $75.6 million, and $78.6 million, respectively, of unrecognized tax benefits that if recognized in the future, would impact our effective tax rate. We estimate that a decrease in unrecognized tax benefits of up to approximately $17 million is reasonably possible over the next twelve months due to the resolution of certain tax matters. At October 31, 2016 and 2015, accrued interest and penalties were $2.3 million and $3.2 million, respectively. For interest and penalties in 2016, 2015, and 2014, we recognized a benefit of $0.9 million and expense of $1.0 million and $0.9 million, respectively.
Reconciliation of Total Unrecognized Tax Benefits
 
Years Ended October 31,
(in millions)
2016
 
2015
 
2014
Balance at beginning of year
$
82.5

 
$
85.5

 
$
87.6

Additions for tax positions related to the current year

 
2.1

 
1.4

Reductions for tax positions related to the current year

 

 

Additions for tax positions related to prior years

 
0.1

 

Reductions for tax positions related to prior years
(3.2
)
 

 

Reductions for lapse of statute of limitations
(21.9
)
 
(5.2
)
 
(3.2
)
Settlements
(0.2
)
 

 
(0.3
)
Balance at end of year
$
57.2

 
$
82.5

 
$
85.5

Jurisdictions
We conduct business in all 50 states, significantly in California, Texas, and New York, as well as in various foreign jurisdictions. Our most significant income tax jurisdiction is the United States.
Tax Years Open for Examination, by Entity
Entity
Open by Statute
ABM state tax returns(1)
10/31/2012 – 10/31/2016
ABM federal tax returns
10/31/2013 – 10/31/2016
(1) We are currently being examined by the taxing authorities in the states of Alabama, Arizona, Connecticut, New Jersey, North Carolina, and Tennessee.