
(In millions)	2020		2019		2018
Current:
Federal	$	0.6	$	2.2	$	1.0
State	(1.1)		0.2		(0.8)
Foreign	6.7		8.1		10.1
Total	6.2		10.5		10.3
Deferred:
Federal	26.6		(4.6)		1.3
State	47.1		(40.4)		(0.5)
Foreign	(2.2)		6.0		(0.1)
Total	71.5		(39.0)		0.7
Income tax provision (benefit)	$	77.7	$	(28.5)	$	11.0


(In millions)	2020		2019		2018
Taxes computed at the federal rate	$	(311.2)	$	50.7	$	52.0
Goodwill impairment	50.4		—		—
State and local income taxes, net of federal tax benefit	(0.2)		0.3		(0.5)
Valuation allowance	335.5		(90.1)		(48.0)
Repatriation of foreign earnings (GILTI )	0.2		3.5		5.4
Restructuring	—		4.2		—
Impacts of U.S. Tax Act	—		—		5.9
Foreign earnings taxed at different rate	1.7		2.7		3.2
Adjustment to prior years’ taxes	—		—		(5.8)
Withholding taxes	2.1		2.7		2.7
Preferential tax rate	(4.6)		(4.1)		(4.8)
Other	3.8		1.6		0.9
Income tax provision (benefit)	$	77.7	$	(28.5)	$	11.0

A $287.0 million pre-tax charge for goodwill impairment (see Note 4 for additional information) included a portion that was non-deductible for tax purposes, resulting in a $50.4 million charge included as a reconciling item in the table above.

The Company recognizes deferred tax assets to the extent it believes these deferred tax assets are more likely than not to be realized. Valuation allowances are established when it is estimated that it is more likely than not the tax benefit of the deferred tax asset will not be realized. In making such determination, the Company considers all available evidence, both positive and negative, regarding the estimated future reversals of existing taxable temporary differences, estimated future taxable income exclusive of reversing temporary differences and carryforwards, historical taxable income in prior carryback periods if carryback is permitted, and potential tax planning strategies which may be employed to prevent an operating loss or tax credit carryforward from expiring unused. The verifiable evidence such as future reversals of existing temporary differences and the ability to carryback are considered before the subjective sources such as estimate future taxable income exclusive of temporary

differences and tax planning strategies. In situations where a three-year cumulative loss position exists, the ability to consider projections of future results as positive evidence to assess the realizability of deferred tax assets is subjective. If the Company determines that it would not be able to realize its deferred tax assets in the future in excess of their recorded net amount, an adjustment to the deferred tax asset valuation allowance would result.

In 2020, ATI’s U.S. operations returned to a three-year cumulative loss position, limiting the ability to utilize future projections as verifiable sources of income when analyzing the need for a valuation allowance. The consolidated income tax provision for fiscal year 2020 includes a $335.5 million increase to the deferred tax asset valuation allowance based on an analysis of the expected more likely than not realization of deferred tax assets and liabilities within applicable expiration periods, primarily on U.S. federal and state tax attributes.

Previously, at December 31, 2019, the Company’s U.S. results reported a three-year cumulative income position, allowing the Company to utilize forecasts of future profits as a verifiable source of income when evaluating whether it was more likely than not that the deferred tax assets would be realized. The Company determined that a valuation allowance on certain net deferred tax asset balances for federal and certain state jurisdictions were no longer required. Certain individual tax attributes still required a valuation allowance based on the expected utilization of the tax attributes was not more likely than not to be realized by the Company. The change in the overall valuation allowance for 2019 included amounts utilized during the year as part of the reported effective tax rate, as well as a $45.1 million reduction at December 31, 2019 based on a change in judgment on the realizability of deferred tax assets.

The Company also maintained valuation allowances on deferred tax amounts recorded in accumulated other comprehensive loss in 2018, 2019 and 2020 of $49.3 million, $41.5 million and $50.3 million, respectively, which are not reflected in the preceding table reconciling amounts recognized in the income tax provision (benefit) recorded in the statement of operations (see Note 17). The 2019 income tax provision includes $6.0 million of tax expense for the recognition of a stranded deferred tax balance in accumulated other comprehensive loss arising from deferred tax valuation allowances that was associated with a cash flow hedge portfolio that fully settled in the fourth quarter of 2019. See Notes 14 and 17 for additional information on cash flow hedge activity.

On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) in response to the global COVID-19 pandemic. The CARES Act enacted tax credits and various temporary changes to current tax regulations. Changes impacting the Company’s tax provision include the following:

•As part of the Tax Cuts and Jobs Act (Tax Act) in 2017, a new limitation on deductible interest expense was created, for which the Company was limited to deductible interest expense based upon 30% of adjusted taxable income. As part of the CARES Act, the limitation was increased from 30% of adjusted taxable income to 50% of adjusted taxable income for tax years 2019 and 2020. Additionally, a taxpayer is able to utilize the 2019 adjusted taxable income calculation for the 2020 tax year. The Company did not have a limitation for the 2019 tax year with the change in limitation percentage, therefore no limitation was calculated as part of the 2020 tax provision.

•Deferral of payments related to payroll taxes. The employer portion of the Social Security payroll tax payments related to tax year 2020 were deferred beginning in April 2020 and will be paid in two installments: one-half on December 31, 2021 and the remaining one-half on December 31, 2022. The Company disallowed the expense and established a deferred tax asset which will be deductible when the payments are made in 2021 and 2022.

In 2018, the Tax Act required companies to pay a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries, with $5.9 million included in the 2018 tax provision, shown as “Impact of U.S. tax reform” in 2018.

Additionally, the Tax Act, requires a current year inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations, commonly referred to as Global Intangible Low-Taxed Income (GILTI). The impact in 2020 related to GILTI is minimal due to the global COVID-19 pandemic. In 2019 and 2018, the Company utilized pre-January 1, 2018 net operating losses (NOLs) to offset the 2019 income inclusion of $16.8 million ($3.5 million net tax effect) and to offset the 2018 income inclusion of $25.7 million ($5.4 million net tax effect). The Company has elected to recognize GILTI liabilities as an element of income tax expense in the period incurred.

In 2018, the Company was granted a preferential tax rate related to the STAL PRS joint venture operations in China for tax years 2018 through 2020. The preferential tax rate is 15%, compared to the statutory rate of 25%. As of December 31, 2020, the preferential tax rate has expired and the Company will prospectively utilize the 25% statutory tax rate pending a ruling by the Chinese government on a new preferential tax rate application.

In 2019, the Company restructured certain foreign legal entities, including the elimination of entities that were no longer cost-effective following changes of the Tax Act, which resulted in $4.2 million of tax expense related to previously-recognized net operating loss carryforwards.

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, 2020 and 2019 were as follows:


(In millions)	2020		2019
Deferred income tax assets
Net operating loss tax carryovers	$	309.4	$	264.4
Pensions	153.8		155.5
Postretirement benefits other than pensions	86.5		83.8
Tax credits	37.7		42.6
Other items	82.9		86.1
Gross deferred income tax assets	670.3		632.4
Valuation allowance for deferred tax assets	(461.8)		(94.5)
Total deferred income tax assets	208.5		537.9
Deferred income tax liabilities
Bases of property, plant and equipment	119.2		364.2
Inventory valuation	53.3		65.5
Bases of amortizable intangible assets	12.5		23.7
Other items	35.9		27.0
Total deferred tax liabilities	220.9		480.4
Net deferred tax asset (liability)	$	(12.4)	$	57.5


($ in millions, U.S. and U.K. NOL amounts are pre-tax and all other items are after-tax)
Jurisdiction	Attribute	Amount	Expiration Period	Amount expiring within 5 years	Amount expiring in 5-20 years
U.S.	NOL	$800	20 years	$—	$800
U.S.	NOL	$126	Indefinite	$—	$—
U.S.	Foreign Tax Credit	$22	10 years	$5	$17
U.S.	Research and Development Credit	$4	20 years	$—	$4
State	NOL	$146	Various	$31	$115
State	NOL	$1	Indefinite	$—	$—
State	Credits	$11	Various	$3	$8
U.K.	NOL	$39	Indefinite	$—	$—
Poland	Economic Zone Credit	$3	7 years	$—	$3

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.

Deferred taxes of $4.4 million have been recorded for foreign withholding taxes on earnings expected to be repatriated to the U.S. The Company does not intend to distribute previously taxed earnings resulting from the one-time transition tax under the Tax Act, and has not recorded any deferred taxes related to such amounts. The remaining excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries is indefinitely reinvested, and the determination of any deferred tax liability on this amount is not practicable.

Uncertain tax positions are recorded using a two-step process based on (1) determining whether it is more-likely-than-not the tax positions will be sustained on the basis of the technical merits of the position and (2) for those positions that meet the more-likely-than-not recognition threshold, the Company records the largest amount of the tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. The changes in the liability for unrecognized income tax benefits for the years ended December 31, 2020, 2019 and 2018 were as follows:


(In millions)	2020		2019		2018
Balance at beginning of year	$	14.4	$	14.7	$	14.7
Increases in prior period tax positions	—		—		—
Decreases in prior period tax positions	—		—		(0.1)
Increases in current period tax positions	2.7		0.9		0.7
Expiration of the statute of limitations	(1.9)		(1.2)		(0.6)
Settlements	—		—		—
Balance at end of year	$	15.2	$	14.4	$	14.7

For years ended December 31, 2020, 2019 and 2018, the liability includes $13.0 million, $11.5 million and $12.1 million, respectively, of unrecognized tax benefits that are classified within deferred income taxes as a reduction of NOL carryforwards and other tax attributes. The total estimated unrecognized tax benefit that, if recognized, would affect ATI’s effective tax rate is approximately $2 million. At this time, the Company believes that it is reasonably possible that approximately $2 million of the estimated unrecognized tax benefits as of December 31, 2020 will be recognized within the next twelve months based on the expiration of statutory review periods.

The Company recognizes accrued interest and penalties related to uncertain tax positions as income tax expense. The amounts accrued for interest and penalty charges for the years ended December 31, 2020, 2019 and 2018 were not significant. At December 31, 2020 and 2019, the accrued liabilities for interest and penalties related to unrecognized tax benefits were $2.3 million.and $2.7 million, respectively.

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: