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INCOME TAXES: | 12 Months Ended
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Dec. 31, 2020
INCOME TAXES: |
INCOME TAXES: | NOTE 7—INCOME TAXES: ​ Since March 2009, Grupo Mexico, through its wholly-owned subsidiary AMC, owns an interest in excess of 80% of SCC. Accordingly, SCC’s results are included in the consolidated results of the Grupo Mexico subsidiary for U.S. federal income tax reporting. SCC provides current and deferred income taxes, as if it were filing a separate U.S. federal income tax return. ​ The introduction of the Global Intangible Low Tax Income or GILTI for tax years beginning in 2018 impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. For 2018-2020, there was no U.S. tax liability from the GILTI inclusion. The Company does not anticipate a tax on GILTI in the future because of increased fixed asset amounts and given the Mexican tax rate of 30%, no U.S. deferred taxes would be recorded. Accordingly, the Company has elected that if GILTI were to apply in the future, a current period expense would be recorded when incurred. ​ Also introduced with 2017 U.S tax reform and applicable to years 2018 and after is the Base Erosion Anti-Abuse Tax (BEAT). BEAT is a 5% minimum tax for tax year 2018, 10% for the years 2019 through 2025 and 12.5% in years thereafter. It is calculated on a base equal to the Company’s income determined without the tax benefit arising from base erosion payments. The Company did not incur a BEAT liability in 2018, 2019 and 2020 since it has met the safe harbor rule that provides a Company not to be subject to the BEAT if related party payments from the U.S. to foreign entities does not exceed 3% of expenses excluding cost of goods sold. The Company must continue to analyze applicability of the BEAT provisions on a yearly basis. ​ The components of the provision for income taxes for the three years ended December 31, 2020, are as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(in millions) |  | 2020 |  | 2019 |  | 2018
U.S. federal and state: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Current | ​ | $ | — | ​ | $ | — | ​ | $ | 2.6
Deferred | ​ |  | — | ​ |  | — | ​ |  | (13.0)
Uncertain tax positions | ​ |  | — | ​ |  | (1.3) | ​ |  | —
​ | ​ |  | — | ​ |  | (1.3) | ​ |  | (10.4)
Foreign (Peru and Mexico): | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Current | ​ |  | 1,237.9 | ​ |  | 966.3 | ​ |  | 1,102.4
Deferred | ​ | ​ | (63.5) | ​ |  | (30.1) | ​ |  | (38.5)
Uncertain tax positions | ​ |  | — | ​ |  | 10.4 | ​ |  | —
​ | ​ |  | 1,174.4 | ​ |  | 946.6 | ​ |  | 1,063.9
Total provision for income taxes | ​ | $ | 1,174.4 | ​ | $ | 945.3 | ​ | $ | 1,053.5
​ The source of income is as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
(in millions) |  | 2020 |  | 2019 |  | 2018
Earnings by location: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
U.S. | ​ | $ | (15.3) | ​ | $ | (1.9) | ​ | $ | (2.3)
Foreign | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Peru | ​ |  | 723.9 | ​ |  | 513.0 | ​ |  | 441.8
Mexico | ​ |  | 2,037.2 | ​ |  | 1,915.4 | ​ |  | 2,149.9
​ | ​ |  | 2,761.1 | ​ |  | 2,428.4 | ​ |  | 2,591.7
Earnings before taxes on income | ​ | $ | 2,745.8 | ​ | $ | 2,426.5 | ​ | $ | 2,589.4
​ The reconciliation of the statutory income tax rate to the effective tax rate for the three years ended December 31, 2020, is as follows (in percentage points):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2020 |  | 2019 |  | 2018 |
Expected tax at U.S. statutory rate |  | 21.0 | % | 21.0 | % | 21.0 | %
Foreign tax at other than statutory rate, net of foreign tax credit benefit (1) |  | 13.7 | ​ | 14.0 | ​ | 13.9 | ​
Percentage depletion |  | (2.2) | ​ | (2.7) | ​ | (2.1) | ​
Other permanent differences |  | 0.1 | ​ | 0.1 | ​ | 0.4 | ​
Change in 2017 valuation allowance on U.S. deferred tax assets, foreign tax credits and U.S. tax effect on Peruvian deferred taxes | ​ | — | ​ | — | ​ | 7.5 | ​
Additional valuation allowance on 2018 U.S. deferred tax assets, foreign tax credits and U.S. tax effect on Peruvian deferred taxes | ​ | 8.9 | ​ | 10.1 | ​ | 1.0 | ​
Decrease in 2017 U.S. deferred tax asset due to tax rate changes | ​ | — | ​ | — | ​ | (0.2) | ​
U.S. one time transition tax on accumulated foreign earnings | ​ | — | ​ | — | ​ | 0.4 | ​
Increase (decrease) in unrecognized tax benefits for uncertain tax positions |  | (0.1) | ​ | (2.1) | ​ | — | ​
Amounts (over) / under provided in prior years |  | (0.1) | ​ | (1.1) | ​ | (1.3) | ​
Other |  | 1.5 | ​ | (0.3) | ​ | 0.1 | ​
Effective income tax rate |  | 42.8 | % | 39.0 | % | 40.7 | %
(1) | Foreign tax at other than statutory rates, net of foreign tax credit benefit, also includes the effects of permanent differences in Peru and Mexico, that are determined at the local statutory rate.
​ The Company files income tax returns in three jurisdictions, Peru, Mexico and the United States. For the three years presented above, the statutory income tax rate for Mexico was 30% and the United States tax rate was 21%. The Peruvian tax rate was 29.5% for the three years presented above. While the largest components of income taxes are the Peruvian and Mexican taxes, the Company is a domestic U.S. entity. Therefore, the rate used in the above reconciliation is the U.S. statutory rate. ​ For all of the years presented, both the Peruvian branch and Minera Mexico filed separate tax returns in their respective tax jurisdictions. Although the tax rules and regulations imposed in the separate tax jurisdictions may vary significantly, similar permanent items exist, such as items which are nondeductible or nontaxable. Some permanent differences relate specifically to SCC such as the allowance in the United States for percentage depletion. ​ Deferred taxes include the U.S., Peruvian and Mexican tax effects of the following types of temporary differences and carryforwards: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | At December 31,
(in millions) |  | 2020 |  | 2019
Assets: | ​ | ​ | ​ | ​ | ​ | ​
Inventories | ​ | $ | 62.4 | ​ | $ | 55.7
Capitalized exploration expenses | ​ |  | 13.0 | ​ |  | 14.0
U.S. foreign tax credit carryforward, net of FIN 48 liability | ​ |  | 974.1 | ​ |  | 731.8
U.S. tax effect of Peruvian deferred tax liability | ​ |  | 111.2 | ​ |  | 131.3
Provisions | ​ |  | 169.5 | ​ |  | 145.0
Mexican tax on consolidated dividends | ​ | ​ | — | ​ | ​ | 9.0
Deferred workers participation | ​ | ​ | 37.8 | ​ | ​ | 24.7
Accrued salaries, wages and vacations | ​ | ​ | 8.5 | ​ | ​ | 10.0
Sales price adjustment (PUI) | ​ | ​ | (5.8) | ​ | ​ | 3.0
Social responsibility expenses | ​ | ​ | 4.3 | ​ | ​ | 2.1
Deferred charges | ​ | ​ | 41.8 | ​ | ​ | 14.5
Valuation allowance on U.S. deferred tax assets, foreign tax credits and U.S. tax effect on Peruvian deferred | ​ | ​ | (1,343.2) | ​ | ​ | (1,097.0)
Other | ​ |  | 19.5 | ​ |  | 9.9
Total deferred tax assets | ​ |  | 93.1 | ​ |  | 54.0
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | At December 31,
(in millions) |  | 2020 |  | 2019
Liabilities: | ​ | ​ | ​ | ​ | ​ | ​
Property, plant and equipment | ​ |  | (17.2) | ​ |  | (45.4)
Other | ​ |  | (5.3) | ​ |  | (3.0)
Total deferred tax liabilities | ​ |  | (22.5) | ​ |  | (48.4)
Total net deferred tax (liabilities) / assets | ​ | $ | 70.6 | ​ | $ | 5.6
​ The valuation allowance increased by $246.2 million over 2019’s level, which was primarily due to the valuation of unutilized Foreign Tax Credits generated in 2020 and the valuation of Foreign Tax Credits carried forward from prior years. The Peru branch operations are taxed in the U.S. as a flow through entity to SCC. Prior to 2017 U.S. Tax Reform, the U.S. corporate income tax rate was 35% on the Peru earnings, which enabled the company to use more currently generated foreign tax credits. Since tax reform reduced the U.S. tax rate to 21%, there is less U.S. income tax to absorb currently generated FTC’s or carryforwards. Additionally, allowable expenses in the U.S. for percentage depletion and U.S. sourced interest expense on debt reduced the branch income subject to U.S. tax, further limiting utilization of foreign tax credits. ​ U.S. Tax Matters— ​ As of December 31, 2020, the Company considers its ownership of the stock of Minera Mexico to be essentially permanent in duration. ​ As of December 31, 2020, $1,297.3 million of the Company´s total cash, cash equivalents and short-term investments of $2,594.4 million were held by foreign subsidiaries. The cash, cash equivalents and short-term investments maintained in our foreign operations are generally used to cover local operating and investment expenses. The Company has determined that as of December 31, 2020, a deferred tax asset of $0.2 billion exists with respect to its investment in foreign subsidiaries. Tax accounting guidance provided in ASC 740 requires this asset to be recognized only if the basis difference will reverse in the foreseeable future. Management has no plans that would result in the reversal of this temporary difference and consequently no deferred tax asset has been recorded. Future dividends from these subsidiaries are no longer subject to federal income tax in the U.S., and the Company incurs no state income tax liability. Additionally, there are no withholding taxes due to the tax treaty between the United States and Mexico. Earnings from the Company’s Peruvian branch are not subject to transition taxes given that they are taxed in the United States on a current basis. ​ At December 31, 2020, there were $1,040.0 million of foreign tax credits available for carryback or carryforward. These credits have a one-year carryback and a ten-year carryforward period and can only be used to reduce U.S. income tax on foreign earnings. There were no other unused U.S. tax credits at December 31, 2020. These credits will expire if not utilized by the end of the years listed below: ​
​ | ​ | ​ | ​
Year |  | Amount
2023 | ​ |  | 39.4
2024 | ​ |  | 102.0
2025 | ​ | ​ | 189.5
2026 | ​ | ​ | 107.0
2027 | ​ | ​ | —
2028 | ​ | ​ | 159.6
2029 | ​ | ​ | 204.9
2030 | ​ | ​ | 237.6
Total | ​ | $ | 1,040.0
​ These foreign tax credits are presented above on a gross basis and have not been reduced here for any unrecognized tax benefits. These foreign tax credits have been adjusted to include the 2016 Net Operating Loss carryback in the U.S. jurisdiction, increasing foreign tax credits by approximately $15.9 million. In accordance with ASC 740 the Company has recorded $66.1 million for an unrecognized tax benefit as an offset to the Company’s deferred tax asset for foreign tax credits. The remaining foreign tax credits of $973.9 million are being re-valued to zero at December 31, 2020. It is the opinion of management that with the reduction in the U.S. corporate tax rate to 21% and considering the corporate tax rates in Mexico of 30% and in Peru at 29.5%, it is unlikely the excess foreign tax credits can be utilized. Additionally, foreign dividends will no longer be taxed in the U.S., thereby reducing the U.S. tax on the foreign source income that the credits can be used to offset. ​ Peruvian Tax Matters— ​ Royalty mining charge: The royalty charge is based on operating income margins with graduated rates ranging from 1% to 12% of operating profits, with a minimum royalty charge assessed at 1% of net sales. The minimum royalty charge is recorded as cost of sales and those amounts assessed at higher rates are included in the income tax provision. The Company has accrued $60.6 million, $42.3 million and $32.9 million of royalty charges in 2020, 2019 and 2018, respectively, of which $31.4 million, $14.2 million and $9.0 million were included in income taxes in 2020, 2019 and 2018, respectively. ​ Peruvian special mining tax: This tax is based on operating income with graduated rates increasing from 2% to 8.4%. The Company recognized $50.0 million, $38.1 million and $30.6 million in 2020, 2019 and 2018, respectively, with respect to this tax. These amounts are included as “income taxes” in the consolidated statement of earnings. ​ Mexican Tax Matters— ​ In 2013, the Mexican Congress enacted tax law changes that became effective on January 1, 2014. Among other effects, the amounts that Minera Mexico recorded during 2019 and paid in 2020 were: ​
● | Mining royalty at the rate of 7.5% on taxable earnings before taxes: $60.1 million.
● | Additional royalty of 0.5% over gross income from sales of gold, silver and platinum: $0.9 million.
​ On December 09, 2019, the Federal Revenue Law for fiscal year 2020, was published in the Federal Official Gazette, effective as of January 1, 2020. The main tax matters are reported as follows: ​ Income tax changes - Interest expense limitation based on profit levels: The Reform would subject taxpayers with interest expenses over 20 million Mexican pesos to a net interest expense deduction limitation equal to 30% of “adjusted taxable income.” Nondeductible interest expense for each year could be carried forward for 10 years. “Adjusted taxable income” is defined as taxable income for the year, with an addback for interest deductions on debt, as well as deductions for fixed assets, deferred charges and expenses, and pre-operating expenses. The interest limitation is calculated based on net interest, which is determined as interest income less interest expense. If interest income is greater, there is no limitation. Interest paid to Mexican residents, as well as non-residents, is subject to the limitation, as is interest to related and unrelated parties. ​ Accounting for Uncertainty in Income Taxes— ​ The total amount of unrecognized tax benefits in 2020, 2019 and 2018, was as follows (in millions): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2020 |  | 2019 |  | 2018
Unrecognized tax benefits, opening balance | ​ | $ | 58.4 | ​ | $ | 214.5 | ​ | $ | 214.5
Gross increases—tax positions in prior period | ​ |  | — | ​ |  | (7.5) | ​ |  | —
Gross increases—current-period tax positions | ​ |  | 7.7 | ​ |  | (4.2) | ​ |  | —
Decreases related to settlements with taxing authorities | ​ |  | — | ​ |  | (144.4) | ​ |  | —
​ | ​ |  | 7.7 | ​ |  | (156.1) | ​ |  | —
Unrecognized tax benefits, ending balance | ​ | $ | 66.1 | ​ | $ | 58.4 | ​ | $ | 214.5
​ The amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was zero at December 31, 2020 for unrecognized tax benefits in the Peruvian jurisdiction. Any recognition of unrecognized tax benefits within the U.S. jurisdiction would not affect the effective tax rate as long as the Company continues to value U.S. deferred tax assets including foreign tax credits. The Company has no unrecognized Mexican tax benefits. ​ The Company’s U.S. IRS audit of 2014 -2016 commenced in 2019 and is expected to settle in the first half of 2021. ​ As of December 31, 2020, the Company’s liability for uncertain tax positions did not include accrued interest and penalties in the U.S. jurisdiction. As of December 31, 2019 and December 31, 2018 the Company’s liability for uncertain tax positions included Peruvian accrued interest and penalties of $10.5 and $1.9 million, respectively. ​ The following tax years remain open to examination and adjustment in the Company’s three major tax jurisdictions: ​
​ | ​ | ​
Peru: |  | 2014 and all subsequent years
U.S.: | ​ | 2014 and all subsequent years
Mexico: | ​ | 2015 and all subsequent years
​ Management does not expect that any of the open years will result in a cash payment within the U.S. jurisdiction in the upcoming twelve months ending December 31, 2021. Additionally, the Company expects that $0.6 million in cash payments in the Peruvian jurisdiction will be paid within the upcoming twelve months ending December 31, 2021. The Company’s reasonable expectations about future resolutions of uncertain items did not materially change during the year ended December 31, 2020.

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- Definition 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. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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