Income Taxes

The income tax provision (benefit) was as follows:



(in millions)	2013			2012			2011
Continuing operations:
Current:
Federal	$	(127.5	)	$	82.3		$	40.3
State	(10.2		)	8.7			7.5
Foreign	7.9			9.0			12.5
Total	(129.8		)	100.0			60.3
Deferred:
Federal	62.7			(27.6		)	48.4
State	4.6			0.1			2.4
Foreign	(1.1		)	(0.1		)	(0.7		)
Total	66.2			(27.6		)	50.1
Income tax provision (benefit) from continuing operations	$	(63.6	)	$	72.4		$	110.4
Income tax provision from discontinued operations	$	161.4		$	3.8		$	5.9
Total company income tax provision	$	97.8		$	76.2		$	116.3

The following is a reconciliation of income taxes computed at the statutory U.S. Federal income tax rate to the actual effective income tax provision (benefit) from continuing operations:



	Income Tax Provision
(in millions)	2013			2012			2011
Taxes computed at the federal rate	$	(54.2	)	$	81.3		$	112.7
State and local income taxes, net of federal tax benefit	(11.8		)	0.6			3.8
Tax reserve adjustments	(10.2		)	(0.4		)	(1.7		)
Repatriation of foreign earnings	9.4			1.3			3.1
Valuation allowance	9.1			2.2			1.2
Adjustment to prior years’ taxes	(5.3		)	1.4			1.2
Foreign earnings taxed at different rate	(2.5		)	(10.2		)	(8.4		)
Manufacturing deduction	—			(7.1		)	(3.3		)
Other	1.9			3.3			1.8
Income tax provision	$	(63.6	)	$	72.4		$	110.4

In general, the Company is responsible for filing consolidated U.S. Federal, foreign and combined, unitary or separate state income tax returns. The Company is responsible for paying the taxes relating to such returns, including any subsequent adjustments resulting from the redetermination of such tax liability by the applicable taxing authorities. No provision has been made for U.S. Federal, state or additional foreign taxes related to approximately $188 million of undistributed earnings of foreign subsidiaries which have been permanently re-invested. It is not practical to determine the deferred tax liability on these earnings.

Income (loss) from continuing operations before income taxes for the Company’s U.S. and non-U.S. operations was as follows:



(in millions)	2013			2012		2011
U.S.	$	(180.0	)	$	178.4	$	265.5
Non-U.S.	25.2			53.9		56.6
Income (loss) from continuing operations before income taxes	$	(154.8	)	$	232.3	$	322.1

Income taxes paid and amounts received as refunds were as follows:



(in millions)	2013			2012			2011
Income taxes paid	$	21.4		$	101.7		$	49.2
Income tax refunds received	(18.3		)	(15.8		)	(41.0		)
Income taxes paid, net	$	3.1		$	85.9		$	8.2

ATI’s income tax payments have benefited over the last several years from provisions under the U.S. tax code allowing companies to immediately deduct a significant portion of the cost of new capital investments placed into service.

Deferred income taxes result from temporary differences in the recognition of income and expense for financial and income tax reporting purposes, and differences between the fair value of assets acquired in business combinations accounted for as purchases for financial reporting purposes and their corresponding tax bases. Deferred income taxes represent future tax benefits or costs to be recognized when those temporary differences reverse. The categories of assets and liabilities that have resulted in differences in the timing of the recognition of income and expense at December 31, 2013 and 2012 were as follows:



(in millions)	2013			2012
Deferred income tax assets
Pensions	$	115.7		$	247.1
Postretirement benefits other than pensions	182.9			210.4
State net operating loss tax carryovers	32.2			35.9
Federal and state tax credits	42.0			39.9
Deferred compensation and other benefit plans	29.4			28.1
Self insurance reserves	10.1			10.4
Other items	79.5			64.3
Gross deferred income tax assets	491.8			636.1
Valuation allowance for deferred tax assets	(33.9		)	(24.8		)
Total deferred income tax assets	457.9			611.3
Deferred income tax liabilities
Bases of property, plant and equipment	488.1			400.2
Inventory valuation	66.5			77.1
Bases of amortizable intangible assets	67.1			70.5
Other items	46.3			16.0
Total deferred tax liabilities	668.0			563.8
Net deferred tax asset (liability)	$	(210.1	)	$	47.5

The Company had $33.9 million and $24.8 million in deferred tax asset valuation allowances at December 31, 2013 and 2012, respectively, related to federal foreign tax credits and state deferred tax assets. The valuation allowance at December 31, 2013 includes $2.3 million for federal foreign tax credits, $18.6 million for state net operating loss tax carryforwards, $10.3 million for state tax credits and $2.7 million for state temporary differences, since the Company has concluded, based on current state tax laws, that it is more likely than not that these tax benefits would not be realized. For these state net operating loss tax carryforwards, expiration will generally occur within 20 years of the year generated and utilization of the tax benefit is limited to $4 million per year or 25% of apportioned income, whichever is greater.

The changes in the liability for unrecognized income tax benefits for the years ended December 31, 2013, 2012 and 2011 were as follows:



(in millions)	2013			2012			2011
Balance at beginning of year	$	29.2		$	29.7		$	17.1
Increases in prior period tax positions	0.1			0.2			1.3
Decreases in prior period tax positions	(5.8		)	(0.3		)	(1.3		)
Increases in current period tax positions	60.4			1.2			0.1
Uncertain tax positions assumed in Ladish acquisition	—			—			14.5
Expiration of the statute of limitations	(0.7		)	(2.0		)	(1.8		)
Settlements	(8.6		)	(0.4		)	(0.7		)
Interest and penalties, net	(1.8		)	0.8			0.5
Balance at end of year	$	72.8		$	29.2		$	29.7

At December 31, 2013, interest and penalties included in the liability for unrecognized tax benefits were $4.7 million.

For the year ended December 31, 2013, $59.4 million of the increases in current period tax positions relate to temporary differences, which would not impact the effective tax rate upon resolution of the uncertainty. Including tax positions for which the Company determined that the tax position would not meet the more-likely-than-not recognition threshold upon examination by the tax authorities based upon the technical merits of the position, the total estimated unrecognized tax benefit that, if recognized, would affect ATI’s effective tax rate was approximately $10 million. At this time, the Company believes that it is reasonably possible that approximately $0.2 million of the estimated unrecognized tax benefits as of December 31, 2013 will be recognized within the next twelve months based on the expiration of statutory review periods.

The Company, and/or one of its subsidiaries, files income tax returns in the U.S. Federal jurisdiction and in various state and foreign jurisdictions. A summary of tax years that remain subject to examination, by major tax jurisdiction, is as follows:



Jurisdiction		Earliest Year Open to Examination
U.S. Federal		2013
States:
Alabama		2011
Illinois		2010
North Carolina		2010
Oregon		2010
Pennsylvania		2010
Foreign:
China		2009
Germany		2011
Poland		2009
United Kingdom		2011