
	2019		2018		2017
	(Dollars in thousands)
Current:
Federal	$	19,374	$	(1,525)	$	133,621
State	8,220		1,432		5,213
Non-U.S.	23,690		29,353		35,444
Deferred:
Federal	(2,041)		(5,124)		(258,247)
State	(28,277)		(5,114)		1,459
Non-U.S.	(143,044)		4,174		212,158
	$	(122,078)	$	23,196	$	129,648

U.S. tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “TCJA”) was enacted on December 22, 2017. The legislation significantly changed U.S. tax law by, among other things, permanently reducing corporate income tax rates from a maximum of 35% to 21%, effective January 1, 2018; implementing a territorial tax system, by generally providing for, among other things, a dividends received deduction on the foreign source portion of dividends received from a non-U.S. corporation if specified conditions are met; and imposing a one-time repatriation tax on undistributed post-1986 non-U.S. subsidiary earnings and profits, which are deemed repatriated for purposes of the tax.

On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations where a company does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the TCJA. SAB 118 states that in these circumstances, if a company can determine a reasonable estimate for the income tax effects, the SEC staff would not object if the company includes in its financial statements the reasonable estimate it has determined (and the SEC staff also expressed its belief that it would not be appropriate for a company to exclude a reasonable estimate from its financial statements to the extent a reasonable estimate has been determined).

As a result of the TCJA, we reassessed and revalued our ending net deferred tax liabilities at December 31, 2017 and recognized a $46.1 million provisional tax benefit in our consolidated statement of income for the year ended December 31, 2017. We also recognized a $154.0 million provisional tax expense in our consolidated statement of income for the year ended December 31, 2017, related to the deemed repatriated earnings. We expect to pay this tax over an eight-year period. These two provisional amounts are collectively referred to as the TCJA Provisions.

In accordance with SAB118, during the year ended December 31, 2018, we recognized a net $2.3 million discrete tax benefit for adjustments to the TCJA Provisions, of which, $0.2 million related to the taxes on deemed repatriated earnings and $2.1 million related to the revaluation of deferred tax assets and liabilities; both were the result of additional analysis, changes in interpretations and in our assumptions, and the issuance of additional regulatory guidance. We completed the accounting for the TCJA Provisions in the fourth quarter of 2018 and we made no further adjustments to the TCJA Provisions in 2019.

The GILTI provisions require us to include, in our U.S. income tax return, non-U.S. subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. We were subject to incremental U.S. tax of $10.7 million on GILTI income beginning in 2018. We elected to account for the GILTI tax in the period in which it is incurred.

At December 31, 2019, the cumulative unremitted earnings of subsidiaries outside the U.S. that are considered non-permanently reinvested and for which taxes have been provided approximated $1.7 billion. At December 31, 2019, the cumulative unremitted earnings of subsidiaries outside the U.S. that are considered

permanently reinvested approximated $0.5 billion. Earnings considered permanently reinvested are expected to be reinvested indefinitely and, as a result, no additional deferred tax liability has been recognized with regard to these earnings. It is not practical to determine the deferred income tax liability on these earnings if, in the future, they are remitted to the U.S. because the income tax liability to be incurred, if any, is dependent on circumstances existing when remittance occurs.


	2019		2018		2017
Federal statutory rate	21.0	%	21.0	%	35.0	%

Tax effect of international items	(11.3)		(3.3)		(25.7)
Impacts of the TCJA	—		(1.0)		37.9
Legal entity merger - deferred taxes₍₁₎	(38.0)		—		—
Excess tax benefits related to share-based compensation	(4.5)		(7.2)		(2.3)
State taxes, net of federal benefit	(4.9)		(0.1)		0.1
Uncertain tax contingencies	—		(0.4)		(1.8)
Contingent consideration	3.4		5.3		0.4
Intellectual property impairment charge	—		(2.0)		—
Research and development tax credit	(1.1)		(1.6)		(0.8)
Other, net	(0.5)		(0.1)		2.7
	(35.9)	%	10.6	%	45.5	%

The effective income tax rate for 2019 and 2018 was (35.9)% and 10.6%, respectively. The effective income tax rate for 2019 reflects a tax benefit of $129 million resulting from a non-U.S. legal entity restructuring that eliminated the requirement to provide for withholding taxes on the future repatriation of certain non-permanently reinvested earnings. Additionally, the effective tax rate for 2019 was affected by a tax benefit relating to the revaluation of state deferred tax assets and liabilities due to business integrations and other changes. The effective tax rates for both 2019 and 2018 reflect a net excess tax benefit related to share-based compensation and a tax cost associated with a non-deductible contingent consideration expense recognized in connection with an increase in the fair value of the NeoTract contingent consideration liability.

We are routinely subject to examinations by various taxing authorities. In conjunction with these examinations and as a regular practice, we establish and adjust reserves with respect to its uncertain tax positions to address developments related to those positions. We realized a net benefit of $0.1 million and $0.8 million in 2019 and 2018, respectively, as a result of reducing our reserves with respect to uncertain tax positions, principally due to the expiration of a number of applicable statutes of limitations. We realized a net benefit of $5.2 million in 2017, as a result of reducing our reserves with respect to uncertain tax positions, principally due to the conclusion of a tax audit in Germany and the expiration of various statutes of limitations.


	2019		2018
	(Dollars in thousands)
Deferred tax assets:
Tax loss and credit carryforwards	$	174,997	$	234,940
Lease assets	28,577		—
Pension	14,971		19,972
Reserves and accruals	60,799		68,767
Other	3,207		3,267
Less: valuation allowances	(119,233)		(143,971)
Total deferred tax assets	163,318		182,975
Deferred tax liabilities:
Property, plant and equipment	23,053		24,315
Intangibles — stock acquisitions	441,079		541,445
Unremitted non-U.S. earnings	81,967		218,769
Lease liabilities	28,577		—
Other	22,628		4,221
Total deferred tax liabilities	597,304		788,750
Net deferred tax liability	$	(433,986)	$	(605,775)

As a result of enactment of the TCJA, we reassessed and revalued our deferred tax positions, resulting in a $46.1 million decrease in the net deferred tax liability at December 31, 2017. Subsequently, in accordance with SAB 118, adjustments were made to the provisional amounts for the revaluation of deferred tax assets and liabilities due to additional analysis. During 2018, we recognized a net $2.1 million tax benefit as a result of changes in its revaluation of deferred tax assets and liabilities related to the TCJA. The accounting for these changes was completed in the fourth quarter of 2018. We made no further adjustments to the provisional amounts in 2019.

Under the tax laws of various jurisdictions in which we operate, deductions or credits that cannot be fully utilized for tax purposes during the current year may be carried forward, subject to statutory limitations, to reduce taxable income or taxes payable in a future tax year. At December 31, 2019, the tax effect of such carryforwards approximated $175.0 million. Of this amount, $10.9 million has no expiration date, $4.8 million expires after 2019 but before the end of 2024 and $159.3 million expires after 2024. A portion of these carryforwards consists of tax losses and credits obtained by us as a result of acquisitions; the utilization of these carryforwards are subject to an annual limitation imposed by Section 382 of the Internal Revenue Code, which limits a company’s ability to deduct prior net operating losses following a more than 50 percent change in ownership. It is not expected that the Section 382 limitation will prevent us ultimately from utilizing the applicable loss carryforwards. The determination of state net operating loss carryforwards is dependent upon the U.S. subsidiaries’ taxable income or loss, the state’s proportion of each subsidiary's taxable net income and the application of state laws, which can change from year to year and impact the amount of such carryforward.

The valuation allowance for deferred tax assets of $119.2 million and $144.0 million at December 31, 2019 and 2018, respectively, relates principally to the uncertainty of our ability to utilize certain deferred tax assets, primarily tax loss and credit carryforwards in various jurisdictions. The valuation allowance was calculated in accordance with applicable accounting standards, which require that a valuation allowance be established and maintained when it is “more likely than not” that all or a portion of deferred tax assets will not be realized.


	2019		2018		2017
	(Dollars in thousands)
Balance at January 1	$	8,106	$	9,336	$	15,054
Increase in unrecognized tax benefits related to prior years	351		—		—
Decrease in unrecognized tax benefits related to prior years	(201)		—		—
Unrecognized tax benefits related to the current year	1,237		899		895
Reductions in unrecognized tax benefits due to settlements	—		—		—
Reductions in unrecognized tax benefits due to lapse of applicable statute of limitations	(1,881)		(1,955)		(6,813)
Increase (decrease) in unrecognized tax benefits due to foreign currency translation	(51)		(174)		200
Balance at December 31	$	7,561	$	8,106	$	9,336

We accrue interest and penalties associated with unrecognized tax benefits in income tax expense in the consolidated statements of income, and the corresponding liability is included in the consolidated balance sheets. The net interest expense (benefit) and penalties reflected in income from continuing operations for the year ended December 31, 2019 was $0.2 million and $(0.1) million, respectively; for the year ended December 31, 2018 was $0.2 million and $(0.3) million, respectively; and for the year ended December 31, 2017 was $0.2 million and $(0.2) million, respectively. The liabilities in the consolidated balance sheets for interest and penalties at December 31, 2019 were $0.6 million and $2.2 million, respectively, and at December 31, 2018 were $0.6 million and $2.2 million, respectively.

We are routinely subject to income tax examinations by various taxing authorities. As of December 31, 2019, the most significant tax examination in process was in Germany. The date at which this examination may be concluded and the ultimate outcome of the examination are uncertain. As a result of the uncertain outcome of this ongoing examination, future examinations or the expiration of statutes of limitation, it is reasonably possible that the related unrecognized tax benefits for tax positions taken could materially change from those recorded as liabilities at December 31, 2019. Due to the potential for resolution of certain examinations, and the expiration of various statutes of limitation, it is reasonably possible that our unrecognized tax benefits may change within the next year by a range of zero to $1.5 million.