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Income Taxes | 12 Months Ended
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Dec. 31, 2014
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES Provision (Benefit) The provision (benefit) for income taxes from continuing operations is as follows (in millions):
| Successor |  |  | Predecessor
| Three Months Ended December 31, 2014 |  |  | Nine Months Ended September 30, 2014 |  | Year Ended December 31, 2013
Current: |  |  |  |  |  |
Federal | $ | — |  |  |  | $ | — |  |  | $ | — |
State and local | — |  |  |  | (1.0 | ) |  | (1.8 | )
Foreign | — |  |  |  | — |  |  | — |
| — |  |  |  | (1.0 | ) |  | (1.8 | )
Deferred: |  |  |  |  |  |
Federal | (2.4 | ) |  |  | — |  |  | (83.0 | )
State and local | — |  |  |  | — |  |  | (1.7 | )
Foreign | — |  |  |  | — |  |  | — |
| (2.4 | ) |  |  | — |  |  | (84.7 | )
| $ | (2.4 | ) |  |  | $ | (1.0 | ) |  | $ | (86.5 | )
Deferred Taxes Future tax consequences of temporary differences between the carrying amounts for financial reporting purposes and the Company’s estimate of the tax bases of its assets and liabilities result in deferred tax assets and liabilities, as follows (in millions):
| Successor |  |  | Predecessor
| December 31, 2014 |  |  | December 31, 2013
Deferred tax assets: |  |  |  |
Plant lease turnover and other exit costs | $ | 0.9 |  |  |  | $ | 17.4 |
Employee benefits costs | 148.5 |  |  |  | 119.7 |
Inventory | 6.6 |  |  |  | 10.1 |
Property, plant and equipment | 450.2 |  |  |  | 508.8 |
Waste disposition | 1.3 |  |  |  | 2.9 |
Net operating loss and credit carryforwards | 76.7 |  |  |  | 89.2 |
Accrued expenses | 5.4 |  |  |  | 4.7 |
Other | 14.6 |  |  |  | 12.3 |
| $ | 704.2 |  |  |  | $ | 765.1 |
Valuation allowance | (659.6 | ) |  |  | (763.5 | )
Deferred tax assets, net of valuation allowance | $ | 44.6 |  |  |  | $ | 1.6 |
Deferred tax liabilities: |  |  |  |
Intangible assets | 42.0 |  |  |  | — |
Prepaid expenses | 2.6 |  |  |  | 1.6 |
Deferred tax liabilities | $ | 44.6 |  |  |  | $ | 1.6 |
| $ | — |  |  |  | $ | — |
The valuation allowance reduces the net deferred tax assets to their net realizable value. There is a full valuation allowance against net deferred taxes due to annual losses since 2011 and substantial uncertainty to generate future taxable income that would lead to realization of the net deferred tax assets. The ultimate realization of the net deferred tax assets is dependent upon generating sufficient taxable income in future years when deferred tax assets are recoverable or are expected to reverse. During 2014, the valuation allowance decreased by $103.9 million, primarily as a result of attribute reduction, including net operating losses, related to emergence from Chapter 11 bankruptcy and the associated fresh start accounting. Deferred taxes are reported on the balance sheet as current or noncurrent based on the balance sheet classification of the related assets and liabilities to which the deferred taxes are attributable. Therefore, the deferred taxes related to the intangibles assets are classified as noncurrent deferred tax liabilities because the intangibles are classified as noncurrent on the balance sheet, whereas the deferred taxes related to the deferred revenue are classified as a deferred tax current liability because deferred revenue is classified as a current liability. Because there is a full valuation allowance against net deferred taxes, it is anticipated that there will be no net impact to the tax provision as these deferred tax liabilities reverse over time either through amortization or recognition of the deferred revenue for tax purposes. After allocation of the valuation allowance between current and noncurrent deferred tax assets and netting deferred tax assets and liabilities, the company has a net current deferred tax liability of $26.0 million and a net noncurrent deferred tax asset of $26.0 million as of December 31, 2014. Centrus has federal net operating losses of $217.1 million that currently expire through 2034. The federal net operating losses as well as other tax attributes consisting primarily of tax basis in property of approximately $18.1 million have been reduced as a result of Centrus’ cancellation of debt income of approximately $340 million as prescribed by Internal Revenue Code Section 108. The amount of tax carryforwards and tax basis in property that would otherwise be available to offset income starting in 2015 are subject to adjustment based upon the finalization of attribute reduction after the filing of Centrus’ 2014 federal income tax return in September 2015. Centrus also has state net operating losses of $17.3 million that currently expire in 2034. The deferred tax assets for state net operating losses and state unrealized built-in loss deductions have been reduced as a result of Centrus’ ownership change and cancellation of debt income. Centrus experienced an ownership change as defined under Internal Revenue Code Section 382 (i.e., a more than 50% change in stock ownership change on the Effective Date of September 30, 2014). Because the ownership change occurred on the Effective Date, Centrus is subject to the rules either under Internal Revenue Code Section 382(l)(5) or 382(l)(6) as explained below. Under Internal Revenue Code Section 382(l)(6), the use of any federal and state net operating loss carryforwards and tax credits generated prior to the ownership change (that are not reduced by attribute reduction as mentioned above) are subject to an annual limitation of approximately $2.9 million for federal purposes and a pre-apportioned $2.9 million for state purposes. Centrus has an unrealized built-in loss as of the Effective Date that limits certain depreciation and loss deductions recognized during the five-year period following the Effective Date that would also be subject to the annual limitation. Internal Revenue Code Section 382(l)(5) provides that no annual limitation would apply for certain corporations that emerge from bankruptcy that qualify as of the emergence Effective Date and do not experience a second ownership change during the two-year period immediately following the Effective Date. As of December 31, 2014, Centrus believes the requirements under Internal Revenue Code Section 382(l)(5) have been met and has prepared its financial statements assuming there will be no annual limitation. If another ownership change occurs during the two-year period immediately following the Effective Date, the annual limitation will be zero starting at the date of the second ownership change. Therefore, a second ownership change would result in no federal and state net operating loss carryforwards and no built-in loss deductions recognized during the five-year period following the ownership change. If a taxpayer emerging from bankruptcy qualifies under Internal Revenue Code Section 382(l)(5), Internal Revenue Code Section 382(l)(5)(G) provides that such a taxpayer can elect out of the provisions of Internal Revenue Code Section 382(l)(5) by filing such election with the taxpayer’s tax return for the year of the ownership change. Centrus would need to file the election with the calendar year 2014 federal income tax return that is due no later than September 15, 2015. However, at this time, Centrus does not intend to file this election. If an election is made, the provisions of Internal Revenue Code Section 382(l)(6) would apply. Centrus will continue to monitor its ownership shifts as well as its tax position relative to Internal Revenue Code Section 382(l)(5). Effective Tax Rate A reconciliation of income taxes calculated based on the federal statutory income tax rate of 35% and the effective tax rate follows:
| Successor |  |  | Predecessor
| Three Months Ended December 31, 2014 |  |  | Nine Months Ended September 30, 2014 |  | Year Ended December 31, 2013
Federal statutory tax rate | 35 | % |  |  | 35 | % |  | 35 | %
State income taxes, net of federal | 1 |  |  |  | — |  |  | 2 |
Basis allocated to exempt income | 17 |  |  |  | — |  |  | — |
Excess reorganization value | — |  |  |  | (14 | ) |  | — |
Other nondeductible expenses | (4 | ) |  |  | — |  |  | (1 | )
Preferred stock issuance costs and dividends paid-in-kind | — |  |  |  | — |  |  | (2 | )
Valuation allowance against deferred tax assets | (39 | ) |  |  | (23 | ) |  | 3 |
Restructuring costs | — |  |  |  | 2 |  |  | (1 | )
State rate changes and tax attributes | (5 | ) |  |  | — |  |  | (4 | )
| 5 | % |  |  | — | % |  | 32 | %
The effective tax rate for the three months ended December 31, 2014 includes an adjustment to the valuation allowance against net deferred tax assets of $17.3 million or 39%, the effective tax rate for the nine months ended September 30, 2014 includes an adjustment to the valuation allowance of $77.4 million or 23% and the 2013 effective tax rate includes an adjustment to the valuation allowance of $9.1 million or 3%. The effective tax rate for the three months ended December 31, 2014 also includes a benefit for additional tax basis of $22.2 million or 17% written off related to retirements at the Paducah plant for depreciation previously allocated to exempt income under the extraterritorial income exclusion. The 2013 effective tax rate includes the impact of quarterly dividends on the Old Preferred Stock that were issued or accrued in additional shares of preferred stock (paid-in-kind). The preferred stock investment is considered equity for income tax purposes. The paid-in-kind dividends are permanent differences that are not deductible for tax purposes and are included in the effective tax rate calculation. Intraperiod Tax Allocation Intraperiod tax allocation rules require that all items, including other comprehensive income and discontinued operations, be considered for purposes of determining the amount of tax benefit that results from a loss in continuing operations. As a result, an income tax benefit of $2.4 million was recorded in continuing operations for the three months ended December 31, 2014, with an offsetting income tax expense of $2.4 million recorded in other comprehensive income. An income tax benefit of $86.5 million was recorded in continuing operations for the year ended December 31, 2013, with offsets of income tax expense of $75.0 million recorded in other comprehensive income and $11.0 million recorded in discontinued operations. Uncertain Tax Positions Accounting standards require that a tax position meet a minimum recognition threshold in order for the related tax benefit to be recognized in the financial statements. The liability for unrecognized tax benefits, included in other long-term liabilities, was $1.3 million at December 31, 2014 and $2.3 million at December 31, 2013. If recognized, these tax benefits would impact the effective tax rate. As a result of changes to unrecognized tax benefits, the tax provision (state tax, net of federal benefit) decreased $0.7 million during the nine months ended September 30, 2014 and $0.4 million during 2013. The liability for unrecognized tax benefits in the table below relates to state tax unrecognized tax benefits. Centrus believes that the liability for unrecognized tax benefits will be reduced by $0.3 million in the next 12 months. A reconciliation of the beginning and ending amount of unrecognized tax benefits follows (in millions):
| Successor |  |  | Predecessor
| Three Months Ended December 31, 2014 |  |  | Nine Months Ended September 30, 2014 |  | Year Ended December 31, 2013
Balance at beginning of the period | $ | 1.3 |  |  |  | $ | 2.3 |  |  | $ | 3.0 |
Reductions to tax positions of prior years | — |  |  |  | (1.0 | ) |  | (0.7 | )
Balance at end of the period | $ | 1.3 |  |  |  | $ | 1.3 |  |  | $ | 2.3 |
Centrus and its subsidiaries file income tax returns with the U.S. government and various states and foreign jurisdictions. The IRS started an examination of Centrus’ 2008 through 2011 federal income tax returns during 2012 that was completed in the second quarter of 2014 with no adjustment to the reported tax. As of December 31, 2014, the federal statute of limitations is closed with respect to all tax years through 2010. As of December 31, 2014, the Kentucky statute of limitations for calendar tax years 2010 forward had not yet expired. Centrus recognizes accrued interest related to uncertain tax positions as a component of interest expense. Reversals of previously accrued income tax related interest is typically offset to interest expense, but if the amount is significant, it is reclassified to interest income in the consolidated statement of operations. Centrus recognizes the increase or decrease of accrued penalties for income taxes as a component of selling, general and administrative expense in the consolidated statement of operations. The impact of accrued interest and penalties in the consolidated statement of operations was an increase to expenses of less than $0.1 million for the three months ended December 31, 2014 and a reduction to expenses of $0.3 million for the nine months ended September 30, 2014, and $0.2 million in 2013. Accrued interest and penalties, included as a component of accounts payable and accrued liabilities, totaled $0.3 million as of December 31, 2014 and $0.6 million as of December 31, 2013.

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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