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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES Income Tax Expense (Benefit) The income tax expense (benefit) is as follows (in millions):
| Year Ended December 31,
| 2022 |  | 2021 |  | 2020
Current: |  |  |  |  |
Federal | $ | — |  |  | $ | — |  |  | $ | — |
State and local | 1.0 |  |  | 0.4 |  |  | 0.5 |
Foreign | — |  |  | — |  |  | — |
| 1.0 |  |  | 0.4 |  |  | 0.5 |
Deferred: |  |  |  |  |
Federal (a) | 14.9 |  |  | (40.7) |  |  | — |
State and local | (0.3) |  |  | 1.2 |  |  | (1.9) |
Foreign | — |  |  | — |  |  | — |
| 14.6 |  |  | (39.5) |  |  | (1.9) |
Income tax expense (benefit) | $ | 15.6 |  |  | $ | (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,
| 2022 |  | 2021
Deferred tax assets: |  |  |
Employee benefits costs | $ | 33.5 |  |  | $ | 36.2 |
Inventory | 21.3 |  |  | 18.6 |
Property, plant and equipment | 190.2 |  |  | 191.5 |
Research and experimental expenditures | 3.5 |  |  | — |
Net operating loss and credit carryforwards | 188.6 |  |  | 206.2 |
Accrued expenses | 4.9 |  |  | 0.4 |
Long-term debt and financing costs | 7.6 |  |  | 10.8 |
Lease liability | 2.1 |  |  | 0.9 |
Other | 0.4 |  |  | 0.2 |
Deferred tax assets | 452.1 |  |  | 464.8 |
Valuation allowance | (414.1) |  |  | (414.7) |
Deferred tax assets, net of valuation allowance | $ | 38.0 |  |  | $ | 50.1 |
Deferred tax liabilities: |  |  |
Intangible assets | $ | 9.0 |  |  | $ | 7.9 |
Lease asset | 1.8 |  |  | 0.4 |
Prepaid expenses | 0.4 |  |  | 0.4 |
Deferred tax liabilities | $ | 11.2 |  |  | $ | 8.7 |
Deferred tax assets, net | $ | 26.8 |  |  | $ | 41.4 |
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. In 2022, there was a $0.6 million decrease to the valuation allowance that resulted from the change in state deferred tax assets. 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. In 2021, Centrus evaluated both positive and negative evidence that was objectively verifiable to determine the amount of the federal valuation allowance that was required on Centrus’ federal deferred tax assets. Centrus has visibility on a significant portion of revenue in the LEU segment for 2023 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 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, and a partial release of the federal valuation allowance was recorded. 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 o f the year. In 2022, an analysis of the positive and negative evidence was performed to determine if a change to the federal valuation allowance was required. Centrus evaluated both positive and negative evidence that was objectively verifiable to determine the amount of the valuation allowance that was required on Centrus’ deferred tax assets. Centrus has visibility on a significant portion of revenue in the LEU segment for the next few years, primarily from its long-term sales contracts. Centrus considered both its achievement of sustained profitability and cumulative income in 2022, 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 in Centrus’ LEU segment when existing Order Book and supply contracts expire and in Centrus’ Technical Solutions segment related to future funding of the HALEU enrichment facility. Based on the analysis, positive evidence continued to outweigh negative evidence as was the case in the 2021 analysis. However, it was determined that no further change to the federal valuation allowance was necessary in 2022. The Company continues to maintain a partial 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. As of December 31, 2022, the valuation allowance against the remaining federal and state net deferred tax assets was $414.1 million. Going forward, Centrus will continue to evaluate both positive and negative evidence that would support any further changes to the remaining federal and state valuation allowances. Such evidence in our Technical Solutions segment may include events that could have a significant impact on pre-tax income, such as signing new contracts with significantly higher or lower margins than currently forecasted, 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 could 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 allowances should be increased or decreased in the future. The Company has federal NOLs of $649.1 million generated through December 31, 2017, that currently expire through 2037. In addition, the Company has federal NOL carryforwards of $131.4 million generated after December 31, 2017, that do not expire. Centrus also has state NOL carryforwards of $479.2 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,
| 2022 |  | 2021 |  | 2020
Federal statutory tax rate | 21 | % |  | 21 | % |  | 21 | %
Valuation allowance against net deferred tax assets | (1) |  |  | (53) |  |  | (26) |
State rate changes | 2 |  |  | 1 |  |  | (1) |
Executive compensation | 1 |  |  | 1 |  |  | 2 |
State income tax expense, net of federal benefit | (1) |  |  | 1 |  |  | — |
Uncertain tax positions | 1 |  |  | — |  |  | 1 |
Effective tax rate | 23 | % |  | (29) | % |  | (3) | %
The effective tax rate for the year ended December 31, 2022, includes a decrease to the valuation allowance against state net deferred tax assets of $0.6 million, or a change to the effective tax rate of (1%). 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 $1.9 million as of December 31, 2022, and $1.0 million as of December 31, 2021. 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 $0.9 million and $0.2 million during the year ended December 31, 2022 and 2021, 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,
| 2022 |  | 2021
Balance at beginning of the period | $ | 1.0 |  |  | $ | 0.8 |
Additions to tax positions of current period | 0.9 |  |  | 0.4 |
Reductions to tax positions of prior years | — |  |  | (0.2) |
Balance at end of the period | $ | 1.9 |  |  | $ | 1.0 |
Centrus and its subsidiaries file income tax returns with the U.S. Government and various states and foreign jurisdictions. As of December 31, 2022, the federal, Maryland and Tennessee statutes of limitation are closed with respect to all tax years through 2018. 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 S elling, 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 $0.1 million for the year ended December 31, 2022, and less than $0.1 million for the year ended December 31, 2021. Accrued interest and penalties for income taxes, included as a component of Other Long-Term Liabilities, totaled $0.1 million as of December 31, 2022, and less than $0.1 million as of December 31, 2021.

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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 https://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 https://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 https://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 https://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 https://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 https://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 https://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 https://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 https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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