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Income Taxes | 12 Months Ended
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Dec. 31, 2021
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Income (loss) before income taxes for the Company’s U.S. and non-U.S. operations was as follows:
(In millions) |  | 2021 |  | 2020* |  | 2019*
U.S. |  | $ | (42.1) |  |  | $ | (1,505.4) |  |  | $ | 185.1 |
Non-U.S. |  | 52.7 |  |  | 23.5 |  |  | 51.4 |
Income (loss) before income taxes |  | $ | 10.6 |  |  | $ | (1,481.9) |  |  | $ | 236.5 |
*Years ended December 31, 2020 and 2019 reflect the change in inventory accounting method, as described in Note 1 of the Notes to the Consolidated Financial Statements. There were no adjustments to 2020 amounts as a result of this change. The income tax provision (benefit) was as follows:
(In millions) |  | 2021 |  | 2020 |  | 2019
Current: |  |  |  |  |  |
Federal |  | $ | 0.7 |  |  | $ | 0.6 |  |  | $ | 2.2 |
State |  | (0.3) |  |  | (1.1) |  |  | 0.2 |
Foreign |  | 9.4 |  |  | 6.7 |  |  | 8.1 |
Total |  | 9.8 |  |  | 6.2 |  |  | 10.5 |
Deferred: |  |  |  |  |  |
Federal |  | 18.6 |  |  | 26.6 |  |  | (4.6) |
State |  | (0.9) |  |  | 47.1 |  |  | (40.4) |
Foreign |  | (0.7) |  |  | (2.2) |  |  | 6.0 |
Total |  | 17.0 |  |  | 71.5 |  |  | (39.0) |
Income tax provision (benefit) |  | $ | 26.8 |  |  | $ | 77.7 |  |  | $ | (28.5) |
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):
(In millions) |  | 2021 |  | 2020* |  | 2019*
Taxes computed at the federal rate |  | $ | 2.2 |  |  | $ | (311.2) |  |  | $ | 49.7 |
Goodwill |  | 2.6 |  |  | 50.4 |  |  | — |
State and local income taxes, net of federal tax benefit |  | 0.4 |  |  | (0.2) |  |  | 0.3 |
Valuation allowance |  | 17.6 |  |  | 335.5 |  |  | (89.1) |
Repatriation of foreign earnings (GILTI ) |  | 2.0 |  |  | 0.2 |  |  | 3.5 |
Restructuring |  | — |  |  | — |  |  | 4.2 |
Recognition of stranded deferred tax balance |  | 3.9 |  |  | — |  |  | — |
Foreign earnings taxed at different rate |  | 3.0 |  |  | 1.7 |  |  | 2.7 |
Withholding taxes |  | 3.4 |  |  | 2.1 |  |  | 2.7 |
Preferential tax rate |  | (6.2) |  |  | (4.6) |  |  | (4.1) |
Other |  | (2.1) |  |  | 3.8 |  |  | 1.6 |
Income tax provision (benefit) |  | $ | 26.8 |  |  | $ | 77.7 |  |  | $ | (28.5) |
*Years ended December 31, 2020 and 2019 reflect the change in inventory accounting method, as described in Note 1 of the Notes to the Consolidated Financial Statements. There were no adjustments to 2020 amounts as a result of this change. In 2021, the Company allocated $12.2 million of the goodwill from ATI’s Forged Products reporting unit to the sale of Flowform Products (see Note 6 for further explanation) which was non-deductible for tax purposes, resulting in a $2.6 million expense included as a reconciling item in the table above. In 2020, the Company recorded a $287.0 million pre-tax charge for goodwill impairment (see Note 5 for additional information) which included a portion that was non-deductible for tax purposes, resulting in a $50.4 million expense included as a reconciling item in the table above. The provision for income taxes for the year ended December 31, 2021 is mainly attributable to the $15.5 million in discrete tax effects related to the postretirement medical benefits settlement gain discussed in Note 14, in accordance with ATI’s accounting policy for recognizing deferred tax amounts stranded in accumulated other comprehensive income (loss) (AOCI). This $15.5 million is presented within two lines in the above table, $11.6 million within valuation allowance and $3.9 million on the recognition of stranded deferred tax balance line which represents the difference between current and historical tax rates in AOCI. The $11.6 million has two components: $5.2 million of additional required valuation allowance on ATI’s net deferred tax assets following the reduction of deferred tax liabilities in AOCI associated with the recognition of the AOCI portion of the retirement benefit settlement gain of $21.9 million, and $6.4 million of “trapped” valuation allowances remaining in AOCI from prior periods that are now recognized upon extinguishment of the retirement benefit plan (see Notes 14 and 15). 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 2021, ATI incurred tax expense associated with the valuation allowance due to the postretirement medical benefit settlement gain along with the U.S. operations plus permanent adjustments (goodwill and GILTI) being a loss. The overall balance of the valuation allowance decreased in total mainly due to the overall change in AOCI associated with the Company’s retirement benefit plans. 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 included 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 AOCI in 2021, 2020 and 2019 of $15.8 million, $50.3 million, and $41.5 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 15). The 2019 income tax provision includes $6.0 million of tax expense for the recognition of a stranded deferred tax balance in AOCI arising from deferred tax valuation allowances associated with a cash flow hedge portfolio that fully settled in the fourth quarter of 2019. See Notes 12 and 15 for additional information on cash flow hedge activity. Additionally, the Tax Cuts and Jobs Act (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). In 2021 and 2019, GILTI represents an unfavorable rate item of $2.0 million and $3.5 million which is primarily related to the Company’s income associated with the PRS joint venture operations in China. The impact in 2020 related to GILTI is minimal due to the global COVID-19 pandemic. In 2019, 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). The Company has elected to recognize GILTI liabilities as an element of income tax expense in the period incurred. In the fourth quarter of 2021, the Company was granted a preferential tax rate related to the PRS joint venture operations in China for tax years 2021 through 2023. The preferential tax rate is 15%, compared to the statutory rate of 25%. The Company must re-apply for the High Tech-New Enterprise status every three years to be eligible for the preferential rate. This same preferential tax rate was in effect for tax years 2018 through 2020. 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, 2021 and 2020 were as follows:
(In millions) |  | 2021 |  | 2020
Deferred income tax assets |  |  |  |
Net operating loss tax carryovers |  | $ | 298.7 |  |  | $ | 309.4 |
Pensions |  | 94.3 |  |  | 153.8 |
Postretirement benefits other than pensions |  | 69.8 |  |  | 86.5 |
Tax credits |  | 40.2 |  |  | 37.7 |
Other items |  | 103.9 |  |  | 82.9 |
Gross deferred income tax assets |  | 606.9 |  |  | 670.3 |
Valuation allowance for deferred tax assets |  | (431.0) |  |  | (461.8) |
Total deferred income tax assets |  | 175.9 |  |  | 208.5 |
Deferred income tax liabilities |  |  |  |
Bases of property, plant and equipment |  | 114.0 |  |  | 119.2 |
Inventory valuation |  | 32.5 |  |  | 53.3 |
Bases of amortizable intangible assets |  | 18.0 |  |  | 12.5 |
Other items |  | 24.7 |  |  | 35.9 |
Total deferred tax liabilities |  | 189.2 |  |  | 220.9 |
Net deferred tax liability |  | $ | (13.3) |  |  | $ | (12.4) |
Changes in the valuation allowance for deferred tax assets in 2021 in the above table compared to 2020 include the following: • $17.6 million of additional valuation allowance recorded as income tax expense and included in the reconciliation of the current year income tax provision; •reductions in the valuation allowance related to the benefit in AOCI of $66.1 million (as discussed in Note 15); •the amount adjusted through additional paid-in capital and retained earnings of $12.3 million associated with new accounting methods adopted in the first quarter of 2021 (see Note 1); and •$5.4 million related to the presentation of state taxes and certain adjustments that have a direct valuation allowance offset, resulting in no net tax expense or benefit. As part of the Tax Act in 2017, a limitation on deductible interest expense was created, which limits deductible interest expense to 30% of adjusted taxable income, as defined in the Tax Act, for various periods. As part of the 2020 Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the limitation was increased from 30% of adjusted taxable income to 50% of adjusted taxable income, as defined, for tax years 2019 and 2020. Additionally, a taxpayer was able to utilize the 2019 adjusted taxable income calculation for the 2020 tax year. The Company has calculated an interest expense limitation as part of the 2021 income tax provision and has reflected a deferred tax asset associated with the limitation within the “other items” asset category above at December 31, 2021. The Company was not limited in its deductible interest expense in years 2020 or 2019. The following summarizes the carryforward periods for the tax attributes related to NOLs and credits by jurisdiction.
($ 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 | $734 | 20 years | $— | $734
U.S. | NOL | $129 | Indefinite | $— | $—
U.S. | Foreign Tax Credit | $22 | 10 years | $19 | $3
U.S. | Research and Development Credit | $7 | 20 years | $— | $7
State | NOL | $140 | Various | $31 | $109
State | NOL | $1 | Indefinite | $— | $—
State | Credits | $11 | Various | $4 | $7
U.K. | NOL | $55 | Indefinite | $— | $—
Poland | Economic Zone Credit | $3 | 7 years | $3 | $—
Income taxes paid and amounts received as refunds were as follows:
(In millions) |  | 2021 |  | 2020 |  | 2019
Income taxes paid |  | $ | 14.2 |  |  | $ | 7.8 |  |  | $ | 15.1 |
Income tax refunds received |  | (0.6) |  |  | (2.5) |  |  | (9.2) |
Income taxes paid, net |  | $ | 13.6 |  |  | $ | 5.3 |  |  | $ | 5.9 |
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 $7.8 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, 2021, 2020 and 2019 were as follows:
(In millions) |  | 2021 |  | 2020 |  | 2019
Balance at beginning of year |  | $ | 15.2 |  |  | $ | 14.4 |  |  | $ | 14.7 |
Increases in prior period tax positions |  | — |  |  | — |  |  | — |
Decreases in prior period tax positions |  | — |  |  | — |  |  | — |
Increases in current period tax positions |  | 0.3 |  |  | 2.7 |  |  | 0.9 |
Expiration of the statute of limitations |  | (1.3) |  |  | (1.9) |  |  | (1.2) |
Settlements |  | — |  |  | — |  |  | — |
Balance at end of year |  | $ | 14.2 |  |  | $ | 15.2 |  |  | $ | 14.4 |
For years ended December 31, 2021, 2020 and 2019, the liability includes $12.3 million, $13.0 million and $11.5 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, 2021 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, 2021, 2020 and 2019 were not significant. At December 31, 2021 and 2020, the accrued liabilities for interest and penalties related to unrecognized tax benefits were $1.9 million and $2.3 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:
Jurisdiction |  | Earliest Year Open to Examination
U.S. Federal |  | 2020
States: |  |
Pennsylvania |  | 2018
Foreign: |  |
China |  | 2018
Poland |  | 2015
United Kingdom |  | 2019

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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=121826272&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=122134291&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=121826272&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=122134291&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=121826272&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 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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