Income Taxes

The components of the provision for income taxes from continuing operations are as follows:



	Year Ended December 31,
	2018			2017			2016
	(in millions)
Current:
Federal	$	(19.1	)	$	(61.1	)	$	(195.9	)
State	(1.5		)	(1.1		)	(3.2		)
Foreign	5.3			4.5			4.4
Total current	(15.3		)	(57.7		)	(194.7		)
Deferred:
Federal
Effect of Tax Cuts and Jobs Act	(5.9		)	(476.2		)	—
Other	49.1			121.9			294.0
	43.2			(354.3		)	294.0
State	14.7			(2.8		)	11.0
Foreign	—			—			(3.5		)
Total deferred	57.9			(357.1		)	301.5
Provision	$	42.6		$	(414.8	)	$	106.8

The provision for income taxes from continuing operations results in effective tax rates that differ from the statutory rates. The following is a reconciliation between the statutory U.S. federal income tax rate and our effective income tax rate on income before income taxes:



	Year Ended December 31,
	2018		2017		2016
Statutory rate	21.0	%	35.0	%	35.0	%
Effect of Tax Cuts and Jobs Act	(3.9	)	(243.7	)	—
State taxes	2.3		(1.9	)	1.2
Foreign taxes	2.9		—		—
Noncontrolling interest in partially-owned subsidiaries	(0.5	)	(2.0	)	(2.4	)
Settlements with tax authorities	—		(2.1	)	(0.1	)
Equity compensation	(1.4	)	0.8		—
Changes in valuation allowances and reserves	1.6		1.9		(1.2	)
Interest expense limitations	1.3		—		—
Changes in state laws and apportionment	5.2		(0.5	)	1.4
Other, net	(0.4	)	0.3		0.6
Effective rate	28.1	%	(212.2	)%	34.5	%

The effective tax rate is based upon the U.S. statutory rate of 21%, 35%, and 35% for the years ended December 31, 2018, 2017, and 2016, respectively, including the impacts of state income tax expense, income attributable to the noncontrolling interests in partially-owned leasing subsidiaries for which no income tax expense is provided, excess tax deficiencies (benefits) related to equity compensation in accordance with ASU 2016-09, and the completion of income tax audits that resulted in a net tax benefit and other differences. See Note 5 for a further explanation of activities with respect to our partially-owned leasing subsidiaries.

The Tax Act was enacted on December 22, 2017. The Tax Act reduced the U.S. federal corporate income tax rate from 35% to 21%. The Tax Act also required certain calendar year companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that had previously not been taxed in the U.S. as part of their 2017 tax return filing. Beginning with the 2018 tax year, the Tax Act subjects certain earnings of foreign subsidiaries to U.S. taxation; in 2018, the Company did not incur the new U.S. tax on the income of its foreign subsidiaries. For the year ended December 31, 2017, we recognized a provisional net benefit of $476.2 million. During the year ended December 31, 2018, we finalized the accounting for the enactment of the Tax Act and recorded an additional benefit of $5.9 million, primarily as a result of truing up deferred taxes and our calculation of the one-time transition tax.

Income (loss) before income taxes for the years ended December 31, 2018, 2017, and 2016 was $139.8 million, $186.2 million, and $307.8 million, respectively, for U.S. operations, and $11.8 million, $9.2 million, and $2.2 million, respectively, for foreign operations, principally Mexico.

Deferred income taxes represent the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of deferred tax liabilities and assets are as follows:



	December 31,
	2018			2017
	(in millions)
Deferred tax liabilities:
Depreciation, depletion, and amortization	$	718.4		$	578.9
Partially-owned subsidiaries basis difference	131.7			117.2
Convertible debt	—			91.4
Total deferred tax liabilities	850.1			787.5
Deferred tax assets:
Workers compensation, pensions, and other benefits	5.7			6.6
Warranties and reserves	8.1			5.8
Equity items	34.0			31.9
Tax loss carryforwards and credits	65.5			24.8
Inventory	8.9			7.2
Accrued liabilities and other	9.1			8.1
Total deferred tax assets	131.3			84.4
Net deferred tax liabilities before valuation allowances	718.8			703.1
Valuation allowances	15.1			7.8
Net deferred tax liabilities before reserve for uncertain tax positions	733.9			710.9
Deferred tax assets included in reserve for uncertain tax positions	(2.3		)	(1.9		)
Adjusted net deferred tax liabilities	$	731.6		$	709.0

At December 31, 2018, we had $195.5 million of federal consolidated net operating loss carryforwards and $5.7 million of tax-effected state loss carryforwards remaining. $18.9 million of the federal net operating loss carryforwards was acquired as part of an acquisition of a company in 2010 and is subject to limitations on the amount that can be utilized in any one tax year. The acquired federal net operating loss carryforwards are due to expire in 2028 and 2029. The federal net operating loss generated in the current year can be carried forward indefinitely. We have established a valuation allowance for federal, state, and foreign tax operating losses and credits that we have estimated may not be realizable.

Taxing authority examinations

The 2015 and 2016 tax years have been reviewed by the IRS with no significant adjustments. The 2014-2018 tax years remain open. Our subsidiaries in Mexico file separate tax returns and are subject to examination by taxing authorities at different times. The entities statutes of limitations are open for their 2013 tax years and forward.

Unrecognized tax benefits

The change in unrecognized tax benefits for the years ended December 31, 2018, 2017, and 2016 was as follows:



	Year Ended December 31,
	2018			2017			2016
	(in millions)
Beginning balance	$	7.0		$	20.7		$	56.9
Additions for tax positions related to the current year	—			—			—
Additions for tax positions of prior years	3.0			4.5			1.0
Reductions for tax positions of prior years	(0.3		)	—			(25.8		)
Settlements	(1.5		)	(17.2		)	(7.1		)
Expiration of statute of limitations	(0.1		)	(1.0		)	(4.3		)
Ending balance	$	8.1		$	7.0		$	20.7

Additions for tax positions related to the prior years of $3.0 million for the year ended December 31, 2018 were due to state tax positions previously taken that were adjusted upon audits. The reduction in tax positions of prior years of $25.8 million for the year ended December 31, 2016 was related to changes to transfer pricing and state taxes.

Settlements during the year ended December 31, 2018 were due to the resolution of a state audit. Settlements for the year ended December 31, 2017 were due to the Internal Revenue Service's ("IRS'") resolution of our 2006-2009 tax years. Settlements for the year ended December 31, 2016 represent the IRS' resolution of the 2010-2011 tax years. Expiration of statutes of limitations during the years ended December 31, 2018 and 2017 relate to the 2013 and 2012 federal tax return, respectively, as well as some state statutes. Settlements during the year ended December 31, 2016 were due to a state tax position effectively settled upon audit.

The total amount of unrecognized tax benefits including interest and penalties at December 31, 2018 and 2017, that would affect our effective tax rate if recognized, was $9.4 million and $8.2 million, respectively. There is a reasonable possibility that unrecognized federal and state tax benefits will decrease by $5.8 million by December 31, 2019 due to settlements and lapses in statutes of limitations for assessing tax years in which an extension was not requested by the taxing authority.

Trinity accounts for interest expense and penalties related to income tax issues as income tax expense. Accordingly, interest expense and penalties associated with an uncertain tax position are included in the income tax provision. The total amount of accrued interest and penalties from continuing operations as of December 31, 2018 and 2017 was $3.7 million and $3.2 million, respectively. Income tax expense for the years ended December 31, 2018, 2017, and 2016 included increases of $0.5 million and decreases of $3.3 million and $2.8 million, respectively, with regard to interest expense and penalties related to uncertain tax positions.