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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 before income taxes and equity in net income of unconsolidated investments, and current and deferred income tax expense (benefit) are composed of the following (in thousands):
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019
Income before income taxes and equity in net income of unconsolidated investments: |  |  |  |  |
Domestic | $ | (186,077) |  |  | $ | 41,346 |  |  | $ | 190,195 |
Foreign | 319,695 |  |  | 332,173 |  |  | 372,755 |
Total | $ | 133,618 |  |  | $ | 373,519 |  |  | $ | 562,950 |
Current income tax expense (benefit): |  |  |  |  |
Federal | $ | 11,722 |  |  | $ | (140) |  |  | $ | 21,258 |
State | 694 |  |  | (193) |  |  | 5,453 |
Foreign | 55,530 |  |  | 56,734 |  |  | 47,056 |
Total | $ | 67,946 |  |  | $ | 56,401 |  |  | $ | 73,767 |
Deferred income tax (benefit) expense: |  |  |  |  |
Federal | $ | (38,413) |  |  | $ | 4,564 |  |  | $ | 13,255 |
State | (5,544) |  |  | (2,893) |  |  | (7,369) |
Foreign | 5,457 |  |  | (3,647) |  |  | 8,508 |
Total | $ | (38,500) |  |  | $ | (1,976) |  |  | $ | 14,394 |
Total income tax expense | $ | 29,446 |  |  | $ | 54,425 |  |  | $ | 88,161 |
The reconciliation of the U.S. federal statutory rate to the effective income tax rate is as follows:
| % of Income Before Income Taxes
| 2021 |  | 2020 |  | 2019
Federal statutory rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State taxes, net of federal tax benefit | (3.5) |  |  | 0.3 |  |  | (0.5) |
Change in valuation allowance (a) | 33.7 |  |  | 1.9 |  |  | 1.9 |
Impact of foreign earnings, net(b)(c) | (40.5) |  |  | (8.4) |  |  | (3.7) |
Global intangible low tax inclusion | 12.3 |  |  | 1.9 |  |  | 1.8 |
Section 162(m) limitation | 4.5 |  |  | 0.5 |  |  | 0.3 |
Subpart F income | 4.8 |  |  | 1.3 |  |  | 0.6 |
Stock-based compensation | (7.2) |  |  | (1.0) |  |  | (0.6) |
Depletion | (2.9) |  |  | (0.9) |  |  | (0.7) |
U.S. federal return to provision | (1.7) |  |  | (0.9) |  |  | (0.4) |
Revaluation of unrecognized tax benefits/reserve requirements | 3.0 |  |  | (0.4) |  |  | (2.7) |
Other items, net | (1.5) |  |  | (0.7) |  |  | (1.3) |
Effective income tax rate | 22.0 | % |  | 14.6 | % |  | 15.7 | %
(a)The years ended December 31, 2021 and 2019 includes benefits of $6.0 million and $2.1 million, respectively, due to the release of a foreign valuation allowance due to changes in expected profitability. (b)Includes a discrete tax benefit of $27.9 million related to the revision of an indemnification estimate for an ongoing tax-related matter in Germany. (c)Our statutory rate is decreased by of our share of the income of JBC, a Free Zones company under the laws of the Hashemite Kingdom of Jordan. The applicable provisions of the Jordanian law, and applicable regulations thereunder, do not have a termination provision and the exemption is indefinite. As a Free Zones company, JBC is not subject to income taxes on the profits of products exported from Jordan, and currently, substantially all of the profits are from exports. This resulted in a rate benefit of 34.6%, 11.9%, and 8.0% for 2021, 2020, and 2019, respectively. Deferred income tax assets and liabilities recorded on the consolidated balance sheets as of December 31, 2021 and 2020 consist of the following (in thousands):
| December 31,
| 2021 |  | 2020
Deferred tax assets: |  |  |
Accrued employee benefits | $ | 18,374 |  |  | $ | 21,878 |
Operating loss carryovers | 1,295,925 |  |  | 1,321,942 |
Pensions | 48,720 |  |  | 78,683 |
Tax credit carryovers | 2,448 |  |  | 1,582 |
Other(a) | 212,882 |  |  | 57,370 |
Gross deferred tax assets | 1,578,349 |  |  | 1,481,455 |
Valuation allowance | (1,276,305) |  |  | (1,326,204) |
Deferred tax assets | 302,044 |  |  | 155,251 |
Deferred tax liabilities: |  |  |
Depreciation | (411,336) |  |  | (348,700) |
Intangibles | (83,182) |  |  | (91,645) |
Hedge of net investment of foreign subsidiary | — |  |  | (13,514) |
Other(b) | (142,008) |  |  | (75,927) |
Deferred tax liabilities | (636,526) |  |  | (529,786) |
Net deferred tax liabilities | $ | (334,482) |  |  | $ | (374,535) |
Classification in the consolidated balance sheets: |  |  |
Noncurrent deferred tax assets | $ | 18,797 |  |  | $ | 20,317 |
Noncurrent deferred tax liabilities | (353,279) |  |  | (394,852) |
Net deferred tax liabilities | $ | (334,482) |  |  | $ | (374,535) |
(a) Increase in other primarily related to deferred tax assets for the settlement of an arbitration ruling for a legacy Rockwood legal matter and the expense related to anticipated cost overruns for MRL’s 40% interest in lithium hydroxide conversion assets being built in Kemerton. (b) Increase in other primarily related to deferred tax liabilities recorded for the gain on the sale of the FCS business. Changes in the balance of our deferred tax asset valuation allowance are as follows (in thousands):
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019
Balance at January 1 | $ | (1,326,204) |  |  | $ | (1,148,268) |  |  | $ | (1,213,750) |
Additions | (61,470) |  |  | (182,325) |  |  | (24,986) |
Deductions | 111,369 |  |  | 4,389 |  |  | 90,468 |
Balance at December 31 | $ | (1,276,305) |  |  | $ | (1,326,204) |  |  | $ | (1,148,268) |
At December 31, 2021, we had approximately $2.4 million of domestic credits available to offset future payments of income taxes, expiring in varying amounts between 2022 and 2039. We have established valuation allowances for $0.2 million of those domestic credits since we believe that it is more likely than not that the related deferred tax assets will not be realized. We believe that sufficient taxable income will be generated during the carryover period in order to utilize the other remaining credit carryovers. At December 31, 2021, we have on a pre-tax basis, domestic state net operating losses of $242.9 million, expiring between 2022 and 2041, which have pre-tax valuation allowances of $30.5 million established. In addition, we have on a pre-tax basis $5.10 billion of foreign net operating losses, which have pre-tax valuation allowances for $4.85 billion established. $2.80 billion of these foreign net operating losses expire in 2035 and $2.06 billion have an indefinite life. We have established valuation allowances for these deferred tax assets since we believe that it is more likely than not that the related deferred tax assets will not be realized. For the same reason, we established pre-tax valuation allowances of $111.0 million and $173.7 million for other state and foreign deferred tax assets, respectively, unrelated to net operating losses. The realization of the deferred tax assets is dependent on the generation of sufficient taxable income in the appropriate tax jurisdictions. Although realization is not assured, we believe it is more likely than not that the remaining deferred tax assets will be realized. However, the amount considered realizable could be reduced if estimates of future taxable income change. As of December 31, 2021, we have not recorded taxes on approximately $5.6 billion of cumulative undistributed earnings of our non-U.S. subsidiaries and joint ventures. The TCJA imposed a mandatory transition tax on accumulated foreign earnings and generally eliminated U.S. taxes on foreign subsidiary distribution with the exception of foreign withholding taxes and other foreign local tax. We generally do not provide for taxes related to our undistributed earnings because such earnings either would not be taxable when remitted or they are considered to be indefinitely reinvested. If in the foreseeable future, we can no longer demonstrate that these earnings are indefinitely reinvested, a deferred tax liability will be recognized. A determination of the amount of the unrecognized deferred tax liability related to these undistributed earnings is not practicable due to the complexity and variety of assumptions necessary based on the manner in which the undistributed earnings would be repatriated. Liabilities related to uncertain tax positions were $27.7 million and $14.7 million at December 31, 2021 and 2020, respectively, inclusive of interest and penalties of $7.0 million and $3.1 million at December 31, 2021 and 2020, respectively, and are reported in Other noncurrent liabilities as provided in Note 16, “Other Noncurrent Liabilities.” These liabilities at December 31, 2021 and 2020 were reduced by $32.9 million and $24.1 million, respectively, for offsetting benefits from the corresponding effects of potential transfer pricing adjustments, state income taxes and rate arbitrage related to foreign structure. These offsetting benefits are recorded in Other assets as provided in Note 11, “Other Assets.” The resulting net asset of $12.2 million as of December 31, 2021 would unfavorably affect earnings if recognized and released, while the net asset of $12.5 million at December 31, 2020 would unfavorably affect earnings if recognized and released. The liabilities related to uncertain tax positions, exclusive of interest, were $20.7 million and $11.6 million at December 31, 2021 and 2020, respectively. The following is a reconciliation of our total gross liability related to uncertain tax positions for 2021, 2020 and 2019 (in thousands):
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019
Balance at January 1 | $ | 11,639 |  |  | $ | 17,548 |  |  | $ | 19,742 |
Additions for tax positions related to prior years | 75 |  |  | 5,646 |  |  | 2,235 |
Reductions for tax positions related to prior years | (6) |  |  | (174) |  |  | — |
Additions for tax positions related to current year | 10,911 |  |  | 315 |  |  | — |
Lapses in statutes of limitations/settlements | (1,931) |  |  | (12,128) |  |  | (4,494) |
Foreign currency translation adjustment | 29 |  |  | 432 |  |  | 65 |
Balance at December 31 | $ | 20,717 |  |  | $ | 11,639 |  |  | $ | 17,548 |
We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Due to the statute of limitations, we are no longer subject to U.S. federal income tax audits by the Internal Revenue Service (“IRS”) for years prior to 2017. Due to the statute of limitations, we also are no longer subject to U.S. state income tax audits prior to 2017. With respect to jurisdictions outside the U.S., several audits are in process. We have audits ongoing for the years 2011 through 2020 related to Germany, Italy, Belgium, South Africa and Chile, some of which are for entities that have since been divested. While we believe we have adequately provided for all tax positions, amounts asserted by taxing authorities could be greater than our accrued position. Accordingly, additional provisions on federal and foreign tax-related matters could be recorded in the future as revised estimates are made or the underlying matters are settled or otherwise resolved. Since the timing of resolutions and/or closure of tax audits is uncertain, it is difficult to predict with certainty the range of reasonably possible significant increases or decreases in the liability related to uncertain tax positions that may occur within the next twelve months. Our current view is that it is reasonably possible that we could record a increase in the liability related to uncertain tax positions, relating to a number of issues, up to approximately $0.3 million as a result of closure of tax statutes.

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