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Income Taxes
 12 Months Ended
Dec. 31, 2020
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
Income before income taxes was taxed in the following jurisdictions in each of the years ended December 31:
202020192018
 (Dollars in thousands)
Domestic$309,236 $194,822 $215,354 
Foreign97,842 57,314 77,947 
Total$407,078 $252,136 $293,301 
The components of the provision (benefit) for income taxes were as follows:
 
202020192018
 (Dollars in thousands)
Current:
Federal$31,104 $41,949 $17,846 
State4,501 13,924 3,336 
Foreign38,632 23,308 24,385 
Current income tax provision74,237 79,181 45,567 
Deferred:
Federal30,813 (11,521)25,887 
State72 (5,013)3,382 
Foreign(6,766)(4,325)(5,529)
Deferred income tax provision (benefit) 24,119 (20,859)23,740 
$98,356 $58,322 $69,307 
The provision for income taxes varied from income taxes computed at the statutory U.S. federal income tax rate as a result of the following:
202020192018
 (Dollars in thousands)
Income taxes computed at the statutory
U.S. federal income tax rate		$85,486 $52,949 $61,543 
State income taxes, net of federal tax benefit5,012 7,133 6,326 
Tax liabilities (no longer required) required (5,110)(2,002)1,908 
Valuation allowance1,323 1,699 240 
Tax credit refunds, net(1,669)(3,493)(3,415)
Foreign earnings taxed at other than 21%12,197 3,741 7,851 
Deferred tax rate changes(717)92 (1,947)
Other1,834 (1,797)(3,199)
$98,356 $58,322 $69,307 
Effective tax rate24.2 %23.1 %23.6 %
Deferred income taxes reflect the net tax effect of temporary differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Significant components of our deferred tax assets and liabilities at December 31 were as follows:
20202019
 (Dollars in thousands)
Deferred tax assets:
Pension and other postretirement liabilities$30,517 $22,632 
Rationalization and other accrued liabilities30,105 23,038 
AMT and other credit carryforwards2,885 3,802 
Net operating loss carryforwards49,882 34,792 
Other intangible assets2,464 5,251 
Foreign currency translation281 246 
Inventory and related reserves21,584 26,677 
Long term operating lease liabilities54,218 48,889 
Other7,135 5,265 
Total deferred tax assets199,071 170,592 
Deferred tax liabilities:
Property, plant and equipment(233,109)(195,039)
Pension and other postretirement liabilities(24,316)(25,016)
Other intangible assets(187,269)(112,680)
Operating lease right of use assets(51,902)(46,709)
Other(8,770)(6,258)
Total deferred tax liabilities(505,366)(385,702)
Valuation allowance(20,624)(15,025)
$(326,919)$(230,135)
At December 31, 2020, the net deferred tax liability in our Consolidated Balance Sheets was comprised of long-term deferred tax assets of $29.1 million and long-term deferred tax liabilities of $356.0 million. At December 31, 2019, the net deferred tax liability in our Consolidated Balance Sheets was comprised of long-term deferred tax assets of $24.7 million and long-term deferred tax liabilities of $254.8 million. Long-term deferred tax assets were classified as other assets, net in our Consolidated Balance Sheets.
The valuation allowance in 2020 includes deferred tax assets of $20.6 million resulting from state and foreign net operating loss carryforwards, or NOLs. The valuation allowance for deferred tax assets increased in 2020 by $5.6 million primarily due to an increase in the valuation allowance related to foreign tax loss carryforwards.
At December 31, 2020, we had foreign NOLs of approximately $43.2 million that are available to offset future taxable income. Of that amount, approximately $15.3 million will expire from 2022 to 2031. The remaining portion has no expiration date. At December 31, 2020, we had state tax NOLs of approximately $6.7 million that are available to offset future taxable income and that will expire from 2024 to 2039.
We recognize accrued interest and penalties related to unrecognized taxes as additional income tax expense. At December 31, 2020 and 2019, we had $5.4 million and $5.0 million, respectively, accrued for potential interest and penalties.
The total amount of unrecognized tax benefits recorded in other liabilities as of December 31, 2020 and 2019 were $36.4 million and $41.4 million, respectively, excluding associated tax assets and including the federal tax benefit of state taxes, interest and penalties.
Tax assets associated with uncertain tax positions primarily represent our estimate of the potential tax benefits in one tax jurisdiction that could result from the payment of income taxes in another jurisdiction. At December 31, 2020 and 2019, we had approximately $17.5 million and $17.3 million, respectively, in assets associated with uncertain tax positions recorded in other assets, net in our Consolidated Balance Sheets.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits included as other liabilities in our Consolidated Balance Sheets was as follows:
20202019
 (Dollars in thousands)
Balance at January 1,$38,283 $43,508 
Increase (decrease) based upon tax positions of current year508 (488)
Increase based upon tax positions of a prior year487 604 
Increase due to acquisitions131 — 
Decrease based upon settlements with taxing authorities— (1,316)
Decrease based upon a lapse in the statute of limitations(6,632)(4,025)
Balance at December 31,$32,777 $38,283 
The total amount of unrecognized tax benefits that would impact the effective tax rate, if recognized, at December 31, 2020 and 2019 were $20.1 million and $25.5 million, respectively.
Silgan and its subsidiaries file U.S. Federal income tax returns, as well as income tax returns in various states and foreign jurisdictions. We expect the Internal Revenue Service, or IRS, will complete its review of the 2019 tax year with no change to our filed tax return. We have been accepted into the Compliance Assurance Program for the 2020 tax year which provides for the review by the IRS of tax matters relating to our tax return prior to filing. We are subject to examination by state and local tax authorities generally for the period mandated by statute, with the exception of states where waivers of the statute of limitations have been executed. The earliest open period for a state audit is 2014. Our foreign subsidiaries are generally not subject to examination by tax authorities for periods before 2008, and we have contractual indemnities with third parties with respect to open periods that predate our ownership of certain foreign subsidiaries. Subsequent periods may be examined by the relevant tax authorities. In the next twelve months, it is reasonably possible that our reserve for unrecognized tax benefits will decrease by approximately $5.5 million primarily related to tax attributes acquired from and expenses related to certain acquisitions, as we anticipate the expiration of the applicable statute of limitations with respect to certain tax matters.
As a result of the Tax Cuts and Jobs Act enacted in December 2017, or the 2017 Tax Act, we have changed our assertion of indefinite reinvestment of the earnings of certain of our foreign subsidiaries. In connection with this change, we are estimating that there is no deferred tax to record for any U.S. income tax and foreign taxes on previously unremitted earnings of such foreign subsidiaries. For our foreign subsidiaries where we expect to be indefinitely reinvested, we estimate that the unremitted earnings as of December 31, 2020 are approximately
$82.4 million. The amount of unrecognized deferred tax liabilities on these indefinitely reinvested earnings is estimated to be approximately $4.5 million. As of January 1, 2018, the 2017 Tax Act imposed a minimum tax on foreign earnings in excess of a return on tangible assets, commonly referred to as the tax on Global Intangible Low-Taxed Income. We have elected to account for this tax as a component of current income tax expense.