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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES
Income Tax Benefit

The income tax benefit is as follows (in millions):
Year Ended December 31,
20212020
Current:
  Federal$— $— 
  State and local0.4 0.5 
  Foreign— — 
0.4 0.5 
Deferred:
  Federal (a)(40.7)— 
  State and local1.2 (1.9)
  Foreign— — 
(39.5)(1.9)
Income tax benefit$(39.1)$(1.4)

(a) The income tax benefit for 2021 includes the reversal of a portion of the federal valuation allowance on net deferred tax assets. See further discussion below.
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):
December 31,
20212020
Deferred tax assets:
Employee benefits costs
$36.2 $61.8 
Inventory
18.6 16.2 
Property, plant and equipment
191.5 193.8 
Net operating loss and credit carryforwards
206.2 211.1 
Accrued expenses
0.4 2.1 
Long-term debt and financing costs
10.8 12.6 
Lease liability
0.9 1.5 
Other
0.2 0.2 
Deferred tax assets
464.8 499.3 
Valuation allowance
(414.7)(486.0)
Deferred tax assets, net of valuation allowance
$50.1 $13.3 
Deferred tax liabilities:
Intangible assets
$7.9 $9.9 
Lease asset
0.4 1.1 
Prepaid expenses
0.4 0.4 
Deferred tax liabilities
$8.7 $11.4 
Deferred tax assets, net$41.4 $1.9 

The valuation allowance reduces the net deferred tax assets to their net realizable value. 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.

The Company has maintained a full valuation allowance against federal and state net deferred tax assets since the fourth quarter of 2011 to the second quarter of 2020. In the second quarter of 2020, the Company released the valuation allowance against the state net deferred tax assets for the LEU segment that are more likely than not to be realized.

In the fourth quarter of 2021, the Company released $40.7 million of the valuation allowance against federal net deferred taxes that are more likely than not to be realized. Centrus evaluated both positive and negative evidence that was objectively verifiable to determine the amount of the federal valuation allowance that is required on Centrus’ federal deferred tax assets. Centrus has visibility on a significant portion of revenue in the LEU segment through 2026, primarily from its long-term sales contracts. Centrus considered both its achievement of sustained profitability and cumulative income in 2021, as well as, the forecasted income, to be significant forms of positive evidence. Negative evidence included uncertainty in and the lack of objectively verifiable evidence for profitability in later years when the Company’s existing sales order book and supply contracts reach expiration in its LEU segment. In the Company’s technical solutions segment, negative evidence included uncertainty in the future funding of the HALEU enrichment facility, and thus, no assumption for the future funding of the HALEU enrichment facility were included in the forecast model because it was not objectively verifiable. Centrus determined that the positive evidence outweighed the negative evidence and supported a release of the federal valuation allowance. However, due to lack of objectively verifiable information in later years, it was determined that forecasted future income was not sufficient to realize all the deferred tax assets. Therefore, the Company recorded a partial release of its federal valuation allowance.
In addition to the partial release of the valuation allowance against federal net deferred taxes, the valuation allowance decreased in 2021 by $30.6 million due to changes in deferred tax assets since the beginning of the year. The Company continues to maintain a valuation allowance against its remaining federal and state net deferred tax assets due to significant federal and state net operating losses and insufficient future taxable income.

Going forward, the Company will continue to evaluate both positive and negative evidence that would support any further changes to the remaining valuation allowances. Such evidence in its technical solutions segment may include signing new contracts which could have a significant impact on pre-tax income, follow on-work related to the HALEU program, or abandonment of the commercial deployment of the centrifuge technology. Such evidence in our LEU segment may include renewing SWU sales contracts with existing customers and/or signing new SWU sales or purchase contracts with significantly higher or lower margins than currently forecasted. Additional evidence in the LEU segment may include potential deferrals in the timing of deliveries requested by its customers, which would impact revenue recognition timing. The impact of these and other potential positive and negative events will be weighed and evaluated to determine if the valuation allowance should be increased or decreased in the future.

The net deferred tax assets and related valuation allowance were increased as of December 31, 2020, by $39.5 million for previously unrecorded state deferred tax assets, net of federal benefit, in states where we have had historical losses and a remote likelihood of realizing a tax benefit. This increase to state deferred tax assets, net of the full valuation allowance, had no net impact on income tax expense for 2020. When a change in tax rate or tax law has an impact on deferred taxes, we apply the change based on the years in which the deferred taxes are expected to reverse. The Company records the impact of the change in its consolidated financial statements in the period of enactment.

The Company has federal net operating losses of $732.0 million generated through December 31, 2017, that currently expire through 2037. In addition, the Company has federal net operating losses and business interest expense carry forwards of $131.4 million and $4.1 million, respectively, generated after December 31, 2017, that do not expire. Centrus also has state net operating losses of $0.5 million, with no valuation allowance, and state net operating losses of $465.4 million, with a full valuation allowance, that currently expire through 2037.

Effective Tax Rate

A reconciliation of income taxes calculated based on the federal statutory income tax rate and the effective tax rate follows:
Year Ended December 31,
20212020
Federal statutory tax rate21 %21 %
Valuation allowance against net deferred tax assets(53)(26)
State rate changes1 (1)
Executive compensation1 2 
State income tax expense, net of federal benefit1 — 
Uncertain tax positions— 1 
Effective tax rate
(29)%(3)%


The effective tax rate for the year ended December 31, 2021, includes a decrease to the valuation allowance against net deferred tax assets of $71.3 million, or a change to the effective tax rate of (53%). Included in the valuation allowance decrease is the release of the valuation allowance against federal net deferred taxes of $40.7 million, or a change to the effective tax rate of (30%).
The effective tax rate for the year ended December 31, 2020, includes a decrease to the valuation allowance against net deferred tax assets of $13.9 million, or a change to the effective tax rate of (26%). Included in the valuation allowance decrease is the release of the valuation allowance against state net deferred taxes of $2.0 million, or a change to the effective tax rate of (4%).

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 $1.0 million as of December 31, 2021, and $0.8 million as of December 31, 2020. If recognized, these tax benefits would impact the effective tax rate. As a result of changes to unrecognized tax benefits, the income tax provision (state tax, net of federal benefit) increased $0.2 million and $0.4 million during the years ended December 31, 2021 and December 31, 2020, respectively. The liability for unrecognized tax benefits in the table below relates to unrecognized state income tax benefits. Centrus believes that the liability for unrecognized tax benefits will not change significantly in the next 12 months.

A reconciliation of the beginning and ending amount of unrecognized tax benefits follows (in millions):
Year Ended December 31,
20212020
Balance at beginning of the period$0.8 $0.4 
Additions to tax positions of current period0.4 0.5 
Reductions to tax positions of prior years(0.2)(0.1)
Balance at end of the period$1.0 $0.8 

Centrus and its subsidiaries file income tax returns with the U.S. government and various states and foreign jurisdictions. As of December 31, 2021, the federal, Maryland and Tennessee statutes of limitation are closed with respect to all tax years through 2017.

Centrus recognizes accrued interest related to uncertain tax positions as a component of Interest Expense. Reversals of previously accrued interest for income taxes is typically offset against 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 in the consolidated statement of operations.

The impact of accrued interest and penalties for income taxes in the consolidated statement of operations was an increase to expenses of less than $0.1 million for the years ended December 31, 2021 and December 31, 2020, respectively. Accrued interest and penalties for income taxes, included as a component of Other Long-Term Liabilities, totaled less than $0.1 million as of December 31, 2021 and 2020.