|12 Months Ended|
Dec. 31, 2016
|Income Tax Disclosure [Abstract]|
Historically, AFI was included with the AWI and affiliated entities in filing a consolidated U.S. federal income tax return, and as part of a unitary or combined group in some states. Income taxes are computed and reported herein under the separate return method as if AFI were a separate taxpayer for periods prior to and on March 31, 2016. Use of the separate return method requires significant judgment and may result in differences when the sum of the amounts allocated to stand-alone tax provisions are compared with amounts presented in Consolidated Financial Statements. In that event, the related deferred tax assets and liabilities could be significantly different from those presented herein.
The following table presents income (loss) from continuing operations before income taxes for U.S. and international operations based on the location of the entity to which such earnings are attributable:
The following table presents the components of the income tax expense (benefit):
As of December 31, 2016, we reviewed our position with regard to foreign unremitted earnings and determined that unremitted earnings would continue to be permanently reinvested. Accordingly, we have not recorded U.S. income or foreign withholding taxes on approximately $7.2 million of undistributed earnings of foreign subsidiaries that could be subject to taxation if remitted to the U.S. because we currently plan to keep these amounts permanently invested overseas. It is not practicable to calculate the residual income tax which would result if these basis differences reversed due to the complexities of the tax law and the hypothetical nature of the calculations.
NOTE 12. INCOME TAXES (continued)
The following table presents the differences between AFI’s income tax expense at the U.S. federal statutory income tax rate and our effective income tax rate:
NOTE 12. INCOME TAXES (continued)
The tax effects of principal temporary differences between the carrying amounts of assets and liabilities and their tax bases are summarized in the following table. Management believes it is more likely than not that the results of future operations will generate sufficient taxable income in the appropriate jurisdiction and foreign source income to realize deferred tax assets, net of valuation allowances. In arriving at this conclusion, we considered the profit before tax generated for the years 2014 through 2016, as well as future reversals of existing taxable temporary differences and projections of future profit before tax and foreign source income.
As of December 31, 2016 and 2015, we had valuation allowances of $28.2 million and $18.4 million, respectively. As of December 31, 2016, our valuation allowance consisted of $4.9 million and $23.3 million for state and foreign deferred tax assets, respectively. The valuation allowance primarily offsets state and foreign operating loss carryforwards.
As of December 31, 2016 and 2015, we had $152.0 million and $94.9 million, respectively, of state net operating loss (“NOL”) carryforwards expiring between 2017 and 2036. State NOL carryforwards as of December 31, 2015 were calculated under the separate return method. Compared to the amount transferred to AFI as of March 31, 2016 of $155.2 million, state NOL carryforwards at December 31, 2016 have decreased $3.2 million.
NOTE 12. INCOME TAXES (continued)
In addition, as of December 31, 2016 and 2015, we had $79.9 million and $74.2 million, respectively, of foreign NOL carryforwards expiring between 2017 and 2021. As of December 31, 2016, AFI has no foreign tax credit ("FTC") carryforwards. The domestic FTC carryforward deferred tax asset of $3.5 million at December 31, 2015, recorded under the separate return method, remained an attribute of AWI upon separation.
The valuation allowance for foreign deferred tax assets of $23.3 million as of December 31, 2016 increased $5.3 million in comparison to December 31, 2015. This increase was primarily a result of incurring additional foreign losses in 2016. The valuation allowance for state deferred tax assets of $4.9 million as of December 31, 2016 increased $4.5 million in comparison to December 31, 2015. The valuation allowance for state deferred tax assets as of December 31, 2015 was recorded under the separate return method.
We estimate we will need to generate future taxable income of approximately $177.0 million for state income tax purposes during the respective realization periods (ranging from 2017 to 2036) in order to fully realize the net deferred income tax assets discussed above.
We have $5.0 million of unrecognized tax benefits ("UTBs") as of December 31, 2016. Of this amount, $1.7 million ($1.6 million, net of federal benefit), if recognized in future periods, would impact the reported effective tax rate.
It is reasonably possible that certain UTBs may increase or decrease within the next twelve months due to tax examination changes, settlement activities, expirations of statute of limitations, or the impact on recognition and measurement considerations related to the results of published tax cases or other similar activities. Over the next twelve months we estimate no changes to UTBs.
The following table presents a reconciliation of the total amounts of UTBs, excluding interest and penalties:
The $78.2 million decrease for prior period positions were UTBs, allocated to AFI as a result of the separate return method, which remained with AWI upon separation.
We conduct business globally, and as a result, we file income tax returns in the U.S., various states and international jurisdictions. In the normal course of business, we are subject to examination by taxing authorities throughout the world in such major jurisdictions as Australia, Canada, China and the U.S. Generally, we have open tax years subject to tax audit on average of between three years and six years. With few exceptions, the statute of limitations is no longer open for state or non-U.S. income tax examinations for the years before 2010. We have not significantly extended any open statutes of limitation for any major jurisdiction and have reviewed and accrued for, where necessary, tax liabilities for open periods. The tax years 2010 through 2015 are subject to future potential tax adjustments.
The following table details amounts related to other taxes:
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://www.xbrl.org/2003/role/presentationRef