INCOME TAXES

The domestic and foreign components of (loss) income before (benefit) provision for income taxes were as follows:



(In millions)	2017			2016		2015
Domestic	$	(102.0	)	$	60.9	$	117.5
Foreign	612.2			613.3		530.0
Total	$	510.2		$	674.2	$	647.5

The domestic loss before benefit for income taxes in 2017 is primarily attributable to the domestic portion of certain non-recurring costs incurred in 2017. Please see Note 19, “Segment Data,” for further discussion of these costs.

Taxes paid were $164.6 million, $85.3 million and $91.5 million in 2017, 2016 and 2015, respectively.

The (benefit) provision for income taxes attributable to income consisted of the following:



(In millions)	2017				2016			2015
Federal:
Current	$	51.7			$	(2.7	)	$	6.8
Deferred	(198.3		)	⁽¹⁾	(9.3		)	(4.1		)
State and local:
Current	3.5				(2.4		)	6.4
Deferred	(7.8		)		(0.9		)	(22.2		)
Foreign:
Current	143.5				129.3			70.6
Deferred	(18.5		)		11.5			17.6
Total	$	(25.9	)		$	125.5		$	75.1

⁽¹⁾Includes the impact of the Tax Legislation.

The (benefit) provision for income taxes for the years 2017, 2016 and 2015 was different from the amount computed by applying the statutory United States federal income tax rate to the underlying income as follows:



	2017			2016		2015
Statutory federal income tax rate	33.7	%	⁽¹⁾	35.0	%	35.0	%
State and local income taxes, net of federal income tax benefit	(1.1	)%		0.4	%	(1.3	)%
Effects of international jurisdictions, including foreign tax credits	(20.3	)%		(12.9	)%	(15.0	)%
Change in estimates for uncertain tax positions	(7.5	)%		(3.7	)%	(7.6	)%
Change in valuation allowance	11.0	%	⁽²⁾	(0.1	)%	(0.2	)%
Provisional one-time transition tax due to Tax Legislation	34.0	%		—	%	—	%
Provisional remeasurement due to Tax Legislation	(51.9	)%		—	%	—	%
Excess tax benefits related to stock-based compensation	(2.8	)%	⁽³⁾	—	%	—	%
Other, net	(0.2	)%		(0.1	)%	0.7	%
Effective income tax rate	(5.1	)%		18.6	%	11.6	%


⁽¹⁾	The United States statutory federal income tax rate changed from 35.0% to 21.0%, effective January 1, 2018, as a result of the Tax Legislation. The United States statutory federal income tax rate for 2017 is a blended rate of 33.7%.


⁽²⁾	Includes the recognition of a $38.5 million valuation allowance on the Company’s foreign tax credits as a result of the Tax Legislation.


⁽³⁾	Includes an excess tax benefit from the exercise of stock options by the Company’s Chief Executive Officer.

The Company files income tax returns in more than 40 international jurisdictions each year. All of the international jurisdictions in which the Company files tax returns, with the exception of Japan, had lower statutory tax rates than the United States statutory tax rate during 2015, 2016 and in 2017 prior to enactment of the Tax Legislation. A substantial amount of the Company’s earnings come from international operations, particularly in the Netherlands, Hong Kong, China and Canada. The lower statutory income tax rates in these jurisdictions, as compared to the United States statutory rate prior to the Tax Legislation, coupled with special rates levied on income from certain of the Company’s jurisdictional activities, significantly reduced the Company’s consolidated effective income tax rate during 2017, 2016 and 2015. The effects of international jurisdictions, including foreign tax credits, reflected in the above table for 2017, 2016 and 2015 included those taxes at statutory income tax rates and at special rates levied on income from certain jurisdictional activities. The Company expects to benefit from these special rates until 2023.

The Tax Legislation enacted on December 22, 2017 significantly revised the United States tax code by, among other things, (i) reducing the corporate income tax rate from 35% to 21%, effective January 1, 2018, (ii) imposing a one-time transition tax on earnings of foreign subsidiaries deemed to be repatriated and (iii) implementing a modified territorial tax system.

The Tax Legislation resulted in a one-time net tax benefit of $52.8 million recorded in the fourth quarter of 2017. The net tax benefit included a $265.0 million benefit primarily from the remeasurement of the Company’s net deferred tax liabilities to the lower United States corporate income tax rate, partially offset by a $38.5 million valuation allowance on the Company’s foreign tax credits and a $173.7 million transition tax on undistributed post-1986 earnings and profits of foreign subsidiaries deemed to be repatriated.

The Company’s estimates are provisional and subject to adjustment in 2018 under the measurement period allowed by the SEC. The Company expects to finalize its accounting related to the impacts of the Tax Legislation on the one-time transition tax liability, deferred taxes, valuation allowances, state tax considerations, and any remaining outside basis differences in the Company’s foreign subsidiaries during 2018. As the Company completes its analysis of the Tax Legislation, collects and prepares necessary data and interprets any additional guidance issued by the United States Department of the Treasury, the Internal Revenue Service and other standard-setting bodies, the Company may make adjustments during 2018 to the provisional amounts recorded in 2017.

The Tax Legislation includes a provision to tax global intangible low-taxed income (“GILTI”). The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations for tax years beginning after December 31, 2017. The Company must make an accounting policy election to either record deferred taxes related to GILTI inclusions or treat any taxes on GILTI inclusions as period costs. The Company is currently in the process of analyzing the effects of the GILTI provisions and plans to make an accounting policy election within the measurement period allowed by the SEC; therefore, the Company has not recorded deferred taxes for GILTI as of February 4, 2018.

The components of deferred income tax assets and liabilities were as follows:



(In millions)	2017			2016
Gross deferred tax assets
Tax loss and credit carryforwards	$	247.0		$	248.1
Employee compensation and benefits	72.2			88.7
Inventories	22.1			27.2
Accounts receivable	17.6			26.6
Accrued expenses	25.5			31.7
Derivative financial instruments	18.3			—
Other, net	8.7			0.0
Subtotal	411.4			422.3
Valuation allowances	(106.3		)	(43.9		)
Total gross deferred tax assets, net of valuation allowances	$	305.1		$	378.4
Gross deferred tax liabilities
Intangibles	$	(898.9	)	$	(1,157.0	)
Property, plant and equipment	(43.8		)	(67.6		)
Derivative financial instruments	—			(5.8		)
Other, net	—			(8.3		)
Total gross deferred tax liabilities	$	(942.7	)	$	(1,238.7	)
Net deferred tax liability	$	(637.6	)	$	(860.3	)

At the end of 2017, the Company had on a tax effected basis approximately $271.5 million of net operating loss and tax credit carryforwards available to offset future taxable income in various jurisdictions. This included net operating loss carryforwards of approximately $3.6 million and $54.2 million for federal and various state and local jurisdictions, respectively, and $30.4 million for various foreign jurisdictions. The Company also had federal and state tax credit and other carryforwards of $183.3 million. The carryforwards expire principally between 2018 and 2037.

The Company is in the process of evaluating the impact of the Tax Legislation on its permanent reinvestment assertion. Prior to the enactment of the Tax Legislation, the Company’s undistributed foreign earnings were considered permanently reinvested and, as such, United States federal and state income taxes were not previously recorded on these earnings. As substantially all of the Company’s earnings of foreign subsidiaries are deemed to have been repatriated as part of the one-time transition tax, no additional United States income taxes or foreign withholding taxes have been provided on these earnings. The Company will complete its evaluation within the measurement period allowed by the SEC and record the tax effects of any change in its assertion in the period that its analysis is completed and that it is able to make a reasonable estimate of any unrecognized tax liability related to its foreign investments, if practicable.

Uncertain tax positions activity for each of the last three years was as follows:



(In millions)	2017			2016			2015
Balance at beginning of year	$	245.6		$	226.8		$	244.5
Increases related to prior year tax positions	15.4			2.8			4.3
Decreases related to prior year tax positions	(10.3		)	(9.9		)	(12.5		)
Increases related to current year tax positions	79.7			52.0			40.0
Lapses in statute of limitations	(46.3		)	(24.4		)	(44.6		)
Effects of foreign currency translation	13.0			(1.7		)	(4.9		)
Balance at end of year	$	297.1		$	245.6		$	226.8

The entire amount of uncertain tax positions as of February 4, 2018, if recognized, would reduce the future effective tax rate under current accounting provisions.

Interest and penalties related to uncertain tax positions are recorded in the Company’s income tax provision. Interest and penalties recognized in the Company’s Consolidated Income Statements for the years 2017, 2016 and 2015 totaled an expense of $0.9 million, an expense of $1.0 million and a benefit of $(0.9) million, respectively. Interest and penalties accrued in the Company’s Consolidated Balance Sheets as of February 4, 2018, January 29, 2017 and January 31, 2016 totaled $29.8 million, $27.8 million and $27.6 million, respectively. The Company recorded its liabilities for uncertain tax positions principally in accrued expenses and other liabilities in its Consolidated Balance Sheets.

The Company files income tax returns in the United States and in various foreign, state and local jurisdictions. Most examinations have been completed by tax authorities or the statute of limitations has expired for United States federal, foreign, state and local income tax returns filed by the Company for years through 2005. It is reasonably possible that a reduction of uncertain tax positions in a range of $40.0 million to $50.0 million may occur within 12 months of February 4, 2018.