Income taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income taxes

Income taxes

The following table summarizes the components of the provision for income taxes from continuing operations:

	2020		2019		2018
Current:
Federal	$	11,148	$	19,374	$	(1,525)
State	9,644		8,220		1,432
Non-U.S.	35,042		23,690		29,353
Deferred:
Federal	(9,475)		(2,041)		(5,124)
State	(13,734)		(28,277)		(5,114)
Non-U.S.	(10,694)		(143,044)		4,174
	$	21,931	$	(122,078)	$	23,196

At December 31, 2020, 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, 2020, the cumulative unremitted earnings of subsidiaries outside the U.S. that are considered permanently reinvested approximated $0.7 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.

The following table summarizes the U.S. and non-U.S. components of income from continuing operations before taxes:

	2020		2019		2018
U.S.	$	233,034	$	89,021	$	37,201
Non-U.S.	124,698		250,882		182,427
	$	357,732	$	339,903	$	219,628

Reconciliations between the statutory federal income tax rate and the effective income tax rate are as follows:

	2020		2019		2018
Federal statutory rate	21.0	%	21.0	%	21.0	%
Tax effect of international items	(5.3)		(11.3)		(3.3)
Impacts of the TCJA (1)	—		—		(1.0)
Foreign Merger - Deferred Taxes (2)	—		(38.0)		—
Excess tax benefits related to share-based compensation	(4.9)		(4.5)		(7.2)
State taxes, net of federal benefit	(0.3)		(4.9)		(0.1)
Uncertain tax contingencies	(0.5)		—		(0.4)
Contingent consideration	(2.2)		3.4		5.3
Intellectual property impairment charge	(1.2)		—		(2.0)
Research and development tax credit	(1.1)		(1.1)		(1.6)
Other, net	0.6		(0.5)		(0.1)
	6.1	%	(35.9)	%	10.6	%

(1)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, reducing the corporate income tax rate and imposing a one-time repatriation tax on undistributed post-1986 non-U.S. subsidiary earnings and profits. This legislation required significant one-time adjustments to our consolidated tax provision.

(2)During 2019, we recognized a discrete tax benefit of $129.0 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.

The effective income tax rate for 2020 was 6.1% compared to (35.9)% for 2019. Taxes on income from continuing operations in 2020 reflects non-taxable contingent consideration adjustments, recognized in connection with a decrease in the fair value of our contingent consideration liabilities. The effective income tax rate for 2019 reflects a tax benefit of $129.0 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 rates for both 2020 and 2019 reflect a net excess tax benefit related to share-based compensation and a tax benefit relating to the revaluation of state deferred tax assets and liabilities due to business integrations and other changes.

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 $1.7 million, $0.1 million and $0.8 million in 2020, 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.

The following table summarizes significant components of our deferred tax assets and liabilities at December 31, 2020 and 2019:

	2020		2019
Deferred tax assets:
Tax loss and credit carryforwards	$	180,782	$	174,997
Lease assets	25,429		28,577
Pension	12,237		14,971
Reserves and accruals	72,931		60,799
Other	7,996		3,207
Less: valuation allowances	(155,008)		(119,233)
Total deferred tax assets	144,367		163,318
Deferred tax liabilities:
Property, plant and equipment	25,633		23,053
Intangibles — stock acquisitions	476,150		441,079
Unremitted non-U.S. earnings	91,539		81,967
Lease liabilities	25,429		28,577
Other	2,221		22,628
Total deferred tax liabilities	620,972		597,304
Net deferred tax liability	$	(476,605)	$	(433,986)

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, 2020, the tax effect of such carryforwards approximated $180.8 million. Of this amount, $14.4 million has no expiration date, $9.1 million expires after 2020 but before the end of 2025 and $157.3 million expires after 2025. 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 $155.0 million and $119.2 million at December 31, 2020 and 2019, 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.

Uncertain Tax Positions: The following table is a reconciliation of the beginning and ending balances for liabilities associated with unrecognized tax benefits for the years ended December 31, 2020, 2019 and 2018:

	2020		2019		2018
Balance at January 1	$	7,561	$	8,106	$	9,336
Increase in unrecognized tax benefits related to prior years	1,286		351		—
Decrease in unrecognized tax benefits related to prior years	—		(201)		—
Unrecognized tax benefits related to the current year	—		1,237		899
Reductions in unrecognized tax benefits due to lapse of applicable statute of limitations	(1,864)		(1,881)		(1,955)
Increase (decrease) in unrecognized tax benefits due to foreign currency translation	247		(51)		(174)
Balance at December 31	$	7,230	$	7,561	$	8,106

The total liabilities associated with the unrecognized tax benefits that, if recognized, would impact the effective tax rate for continuing operations, were $4.4 million at December 31, 2020.

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, 2020 was $0.2 million and $(0.5) million, respectively; for the year ended December 31, 2019 was $0.2 million and $(0.1) million, respectively; and for the year ended December 31, 2018 was $0.2 million and $(0.3) million, respectively. The liabilities in the consolidated balance sheets for interest and penalties at December 31, 2020 were $0.6 million and $2.1 million, respectively, and at December 31, 2019 were $0.6 million and $2.2 million, respectively.

The taxable years for which the applicable statute of limitations remains open by major tax jurisdictions are as follows:

	Beginning	Ending
U.S.	2017	2020
Canada	2016	2020
China	2015	2020
Czech Republic	2017	2020
France	2018	2020
Germany	2011	2020
India	2002	2020
Ireland	2016	2020
Italy	2016	2020
Malaysia	2016	2020
Singapore	2016	2020

We are routinely subject to income tax examinations by various taxing authorities. As of December 31, 2020, the most significant tax examinations in process were in Ireland and 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, 2020. 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 $0.7 million.

Supplemental cash flow information

	Year Ended December 31,
	2020		2019		2018
Income taxes paid, net of refunds	$	77,163	$	73,632	$	65,605