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Income Taxes (Notes) | 12 Months Ended
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Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes As described in Note 2. “Emergence from the Chapter 11 Cases and Fresh Start Reporting”, the Plan provided that the Company’s pre-petition equity and certain obligations were canceled and extinguished and a significant portion of its long-term debt was discharged in exchange for new Common Stock and other consideration. Generally, absent an exception, for U.S. tax purposes a debtor recognizes cancellation of debt income (CODI) upon discharge of its outstanding indebtedness for an amount of consideration less than the adjusted issue price of such indebtedness. The Company excluded CODI with respect to the Plan from its taxable income in accordance with U.S. Internal Revenue Code (IRC) Section 108, which allows a taxpayer that is a debtor in a reorganization case to exclude CODI from taxable income if the discharge is granted by a bankruptcy court or pursuant to a plan of reorganization approved by a bankruptcy court. However, in such event, Section 108 requires a reduction in certain income tax attributes otherwise available to the taxpayer, in most cases by the amount of such CODI. Generally, the amount of CODI realized by a taxpayer is the adjusted issue price of any indebtedness discharged less the sum of (i) the amount of cash paid, (ii) the issue price of any new indebtedness issued and (iii) the fair market value of any consideration, including equity, issued to the creditors. CODI from the discharge of indebtedness was $8.5 billion, of which, $3.9 billion related to third-party indebtedness. The additional $4.6 billion of CODI resulted from the restructuring of a foreign intercompany receivable as part of the Plan. A previous impairment of the same receivable resulted in a tax deduction which increased the Company’s federal net operating losses (NOLs) by $4.6 billion in 2017. The Company retains approximately $3.6 billion of gross U.S. federal NOLs, $97.4 million of general business credits (GBCs), $91.3 million of alternative minimum tax (AMT) credits, and $262.0 million of foreign tax credits (FTCs) after giving effect to such required reductions. Additionally, the Company’s tax basis in certain assets was reduced by $587.0 million and its capital loss carryovers were reduced by $204.0 million. In connection with the Company’s emergence from bankruptcy, the Company experienced an “ownership change” as defined in U.S. IRC Section 382. As a result, the Company’s ability to use pre-ownership change NOLs, GBCs, AMT credits, FTCs and other tax attributes to offset future taxable income or taxes owed is limited. Under U.S. IRC Section 382 and Section 383, an entity that experiences an ownership change in bankruptcy generally is subject to an annual limitation (the Annual Limitation) on its use of its pre-ownership change NOLs and other tax attributes after the ownership change equal to the equity value of the entity immediately after implementation of the plan of reorganization (reflecting the increase, if any, in value resulting from the surrender or cancellation of any claims against the Company thereunder), multiplied by the long-term tax exempt rate posted by the Internal Revenue Service (IRS), subject to certain adjustments. A significant portion of the Company’s retained NOLs (stated above) are not subject to the Annual Limitation because they are deemed attributable to the period after the ownership change. The Company also had a net unrealized built-in gain at the time of the ownership change; therefore, certain built-in gains recognized within five years after the ownership change will increase the Annual Limitation for the five year recognition period beginning April 3, 2017 through April 2, 2022. The estimated Annual Limitation of $62.0 million, plus the estimated built-in gains recognized, will not prevent the usage of NOLs, GBCs and $1.6 million of FTCs, provided there is sufficient income in the carryforward period. The Company has written off $260.4 million of FTCs based on the Annual Limitation and their short remaining carryover period. The Company maintains a full valuation allowance against its U.S. net deferred tax assets. Income (loss) from continuing operations before income taxes for the periods presented below consisted of the following:
| Successor | Predecessor
| April 2 through December 31, 2017 | January 1 through April 1, 2017 |  | Year Ended December 31, 2016 |  | Year Ended December 31, 2015
| (Dollars in millions)
U.S. | $ | 10.4 |  | $ | 2,408.7 |  |  | $ | (49.7 | ) |  | $ | (515.9 | )
Non-U.S. | 541.7 |  | (2,868.0 | ) |  | (708.6 | ) |  | (1,474.4 | )
Total | $ | 552.1 |  | $ | (459.3 | ) |  | $ | (758.3 | ) |  | $ | (1,990.3 | )
Total income tax benefit for the periods presented below consisted of the following:
| Successor | Predecessor
| April 2 through December 31, 2017 | January 1 through April 1, 2017 |  | Year Ended December 31, 2016 |  | Year Ended December 31, 2015
| (Dollars in millions)
Current: |  |  |  |  |  |  |  |  |
U.S. federal | $ | (101.4 | ) | $ | (3.1 | ) |  | $ | (12.4 | ) |  | $ | (71.9 | )
Non-U.S. | 40.4 |  | 8.3 |  |  | 14.4 |  |  | 3.7 |
State | (0.4 | ) | (6.7 | ) |  | 0.5 |  |  | (0.6 | )
Total current | (61.4 | ) | (1.5 | ) |  | 2.5 |  |  | (68.8 | )
Deferred: |  |  |  |  |  |  |  |  |  |
U.S. federal | (85.1 | ) | (101.0 | ) |  | (82.1 | ) |  | (117.4 | )
Non-U.S. | (14.5 | ) | (160.4 | ) |  | (12.8 | ) |  | (15.0 | )
State | — |  | (0.9 | ) |  | (2.1 | ) |  | (5.9 | )
Total deferred | (99.6 | ) | (262.3 | ) |  | (97.0 | ) |  | (138.3 | )
Total income tax benefit | $ | (161.0 | ) | $ | (263.8 | ) |  | $ | (94.5 | ) |  | $ | (207.1 | )
The following is a reconciliation of the expected statutory federal income tax expense (benefit) to the Company’s income tax benefit for the periods presented below:
| Successor | Predecessor
| April 2 through December 31, 2017 | January 1 through April 1, 2017 |  | Year Ended December 31, 2016 |  | Year Ended December 31, 2015
| (Dollars in millions)
Expected income tax expense (benefit) at U.S. federal statutory rate | $ | 193.2 |  | $ | (160.8 | ) |  | $ | (265.4 | ) |  | $ | (696.6 | )
Changes in valuation allowance, income tax | (744.9 | ) | (777.2 | ) |  | 2,453.9 |  |  | 452.9 |
Remeasurement due to the Tax Cuts and Jobs Act | 473.5 |  | — |  |  | — |  |  | — |
Reorganization costs | — |  | 2,130.0 |  |  | 29.6 |  |  | — |
Bad debt deduction | — |  | (1,639.6 | ) |  | — |  |  | — |
Worthless partnership | — |  | — |  |  | (2,204.4 | ) |  | — |
Changes in tax reserves | 7.2 |  | (9.2 | ) |  | 2.3 |  |  | (21.4 | )
Excess depletion | (40.4 | ) | (11.2 | ) |  | (37.2 | ) |  | (53.7 | )
Foreign earnings provision differential | (26.3 | ) | 158.2 |  |  | 27.5 |  |  | 146.5 |
General business tax credits | (0.2 | ) | (0.1 | ) |  | (14.2 | ) |  | (15.7 | )
Remeasurement of foreign income tax accounts | (0.3 | ) | 9.4 |  |  | (2.0 | ) |  | (22.1 | )
State income taxes, net of federal tax benefit | (3.1 | ) | 40.6 |  |  | (90.2 | ) |  | (20.1 | )
Other, net | (19.7 | ) | (3.9 | ) |  | 5.6 |  |  | 23.1 |
Total income tax benefit | $ | (161.0 | ) | $ | (263.8 | ) |  | $ | (94.5 | ) |  | $ | (207.1 | )
Certain reconciliation items included in the above table exclude the remeasurement of foreign income tax accounts as these foreign currency effects are separately presented. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the Act) was signed into law making significant changes to the IRC. Key provisions of the Act that impact the Company include: (i) reduction of the U.S. federal corporate tax rate from 35% to 21%, (ii) repeal of the corporate AMT system, (iii) replacement of the worldwide taxation system with a territorial tax system which exempts certain foreign operations from U.S. taxation and includes a one-time deemed repatriation tax on deferred foreign earnings, (iv) further limitation on the deductibility of certain executive compensation and (v) allowance for immediate capital expensing of certain qualified property. Other provisions of the Act that do not have a current impact but could impact the Company in the future include: (i) creation of a new minimum tax on global intangible low-taxed income (GILTI), (ii) creation of a new base erosion anti-abuse tax (Base Erosion), (iii) repeal of the domestic production deductions, (iv) limitation on the deduction for net interest expense incurred by a U.S. corporation and (v) modification and/or repeal of a number of other international provisions. The Company has completed its assessment for the income tax effects of the Act for the following item:
• | One-time tax on deferred foreign earnings: The Company does not have any undistributed earnings from its foreign subsidiaries and is not impacted by the one-time transition tax.
The Company has not completed its assessment for the income tax effects of the Act but has recorded a reasonable estimate of the effects for the items below. The Company anticipates completing the analysis for the estimate by December 31, 2018, within the one year measurement period, for the following items:
• | Repeal of the corporate AMT system: Existing AMT credits as of December 31, 2017 will be refunded over the next four years. The refund may or may not be subject to an IRS budget sequestration reduction rate of approximately 7%. The Company has determined that it will receive a refund of existing AMT credits of approximately $84.9 million after an estimated sequestration reduction of $6.4 million. The valuation allowance previously recorded against these credits has been released and a tax benefit of $84.9 million was recorded as a component of income tax expense from continuing operations. The Company’s accounting policy regarding the balance sheet presentation of the credits is to continue to reflect the balance as a deferred tax asset until a return is filed claiming the credit, at which time the amount will be presented as a tax receivable.
• | Remeasurement of deferred tax assets and liabilities: Deferred tax assets and liabilities attributable to the U.S. were remeasured from 35% to the reduced tax rate of 21%. The Company recorded a provision amount of $473.5 million and an offsetting valuation allowance adjustment for the remeasurement. The Company is still analyzing certain aspects of the Act and refining the calculation, which could potentially affect the measurement of these balances. Filing of both U.S. and foreign tax returns for the 2017 tax years is required to complete the analysis.
• | Elimination of executive compensation exemptions: The Act made major changes to the $1 million limit on deductible compensation paid to certain “covered” employees. The Act eliminated exemptions for qualified performance based compensation and compensation paid after termination and expanded the number of employees to which the limit applies. The Company recorded a provisional amount of $0.5 million and an offsetting valuation allowance adjustment for the impact of these changes. This amount is equal to the elimination of deferred tax assets associated with deferred compensation amounts that will likely exceed the $1 million limit when paid. The Act contains transitional rules, the implementation of which is not entirely clear at this time. The Company is still analyzing related aspects of the Act including the impact of the transitional rules. The provisional amount detailed above may change when further guidance is released that addresses these rules.
The Company has not completed its assessment for the income tax effects of the Act and is unable to calculate a reasonable estimate of such effect for the item below. The Company anticipates completing the analysis for this item by December 31, 2018, within the one year measurement period:
• | Changes to international taxation: The Act modifies various aspects of international taxation and the application of these changes to the current foreign tax credit system is unclear. These rules are complex and require further clarity through the issuance of regulations and final technical interpretation. The Company has a deferred tax asset of $1.6 million relating to FTCs that carry a full valuation allowance. Depending on the final interpretation of the new Act, it may be more likely than not that realization of a portion of the credits may occur. The Company has determined that a reasonable estimate cannot be made at this time. Information needed to complete the analysis is as follows: (i) final technical analysis of the new tax law and (ii) finalization of necessary calculations, including an assessment on how these new provisions will impact the utilization of these credits in the future.
The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and liabilities as of December 31, 2017 and 2016 consisted of the following:
| Successor | Predecessor
| December 31, 2017 | December 31, 2016
| (Dollars in millions)
Deferred tax assets: |  |  |  |
Tax loss carryforwards and credits | $ | 2,068.0 |  | $ | 4,284.4 |
Property, plant, equipment and mine development, principally due to differences in depreciation, depletion and asset impairments | 463.8 |  | 424.4 |
Accrued postretirement benefit obligations | 194.2 |  | 364.5 |
Asset retirement obligations | 30.6 |  | 163.6 |
Financial guarantees | 2.0 |  | 77.9 |
Employee benefits | 25.3 |  | 57.0 |
Take or pay obligations | 27.2 |  | — |
Hedge activities | 10.5 |  | 21.0 |
Investments and other assets | 137.2 |  | — |
Workers’ compensation obligations | 6.4 |  | 7.5 |
Other | 16.1 |  | 2.1 |
Total gross deferred tax assets | 2,981.3 |  | 5,402.4 |
Valuation allowance, income tax | (2,432.5 | ) | (4,037.5 | )
Total deferred tax assets | 548.8 |  | 1,364.9 |
Deferred tax liabilities: |  |  |  |
Property, plant, equipment and mine development, principally due to differences in depreciation, depletion and asset impairments | 353.3 |  | 1,324.8 |
Unamortized discount on Convertible Junior Subordinated Debentures | — |  | 127.7 |
Coal supply agreements | 29.6 |  | — |
Investments and other assets | 85.7 |  | 86.3 |
Total deferred tax liabilities | 468.6 |  | 1,538.8 |
Net deferred tax asset (liability) | $ | 80.2 |  | $ | (173.9 | )
Deferred taxes are classified as follows: |  |  |  |
Noncurrent deferred income tax asset | $ | 85.6 |  | $ | — |
Noncurrent deferred income tax liability | (5.4 | ) | (173.9 | )
Net deferred tax asset (liability) | $ | 80.2 |  | $ | (173.9 | )
The Company’s tax loss carryforwards and credits included gross federal NOL carryforwards of $3.6 billion, state NOL carryforwards of $97.0 million, FTCs of $1.6 million, U.S. AMT credits of $91.3 million, tax GBCs of $97.4 million, charitable contribution carryforwards of $2.7 million and foreign NOL carryforwards of $1,021.3 million as of December 31, 2017. The AMT credits and foreign NOLs have no expiration date. The federal NOLs begin to expire in 2036. The state NOLs begin to expire in 2018. The FTCs and GBCs begin to expire in 2025 and 2027, respectively. In assessing the near-term use of NOLs and tax credits and corresponding valuation allowance adjustments, the Company evaluated the expected level of future taxable income, available tax planning strategies, reversals of existing taxable temporary differences and taxable income in carryback years. For the year ended December 31, 2017, the Company continued to record valuation allowance of $2.4 billion against net deferred tax asset positions, comprised primarily of $0.9 billion in the U.S. and $1.5 billion in Australia. Recognition of those valuation allowances was driven by recent cumulative book losses, as determined by considering all sources of available income (including items classified as discontinued operations or recorded directly to “Accumulated other comprehensive income (loss)”), which limited the Company’s ability to look to future taxable income in assessing the realizability of the related assets. Unrecognized Tax Benefits Net unrecognized tax benefits (excluding interest and penalties) were recorded as follows in the consolidated balance sheets as of December 31, 2017 and 2016:
| Successor | Predecessor
| December 31, 2017 | December 31, 2016
| (Dollars in millions)
Deferred income taxes | $ | 10.9 |  | $ | 8.9 |
Other noncurrent liabilities | 1.8 |  | 11.2 |
Net unrecognized tax benefits | $ | 12.7 |  | $ | 20.1 |
Gross unrecognized tax benefits | $ | 12.7 |  | $ | 20.1 |
The amount of the Company’s gross unrecognized tax benefits decreased by $7.4 million since January 1, 2017 due to adjustments to existing positions as part of fresh start reporting, finalization settlement of state audits and additions for current positions. The amount of the net unrecognized tax benefits that, if recognized, would directly affect the effective tax rate was $12.7 million and $20.1 million at December 31, 2017 and 2016, respectively. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits for the periods presented below is as follows:
| Successor | Predecessor
| April 2 through December 31, 2017 | January 1 through April 1, 2017 |  | Year Ended December 31, 2016 |  | Year Ended December 31, 2015
| (Dollars in millions)
Balance at beginning of period | $ | 12.5 |  | $ | 20.1 |  |  | $ | 22.9 |  |  | $ | 44.5 |
Additions for current year tax positions | 0.8 |  | — |  |  | 1.5 |  |  | 2.3 |
Reductions for prior year tax positions | (0.5 | ) | (7.6 | ) |  | (2.8 | ) |  | (23.5 | )
Reductions for settlements with tax authorities | (0.1 | ) | — |  |  | (1.5 | ) |  | (0.4 | )
Balance at end of period | $ | 12.7 |  | $ | 12.5 |  |  | $ | 20.1 |  |  | $ | 22.9 |
The Company recognizes interest and penalties related to unrecognized tax benefits in its income tax provision. The Company recorded $4.8 million of gross interest and penalties for the Successor period April 2 through December 31, 2017 and reversed gross interest and penalties of $2.1 million, $0.4 million and $2.1 million for the Predecessor period January 1 through April 1, 2017 and the years ended December 31, 2016 and 2015, respectively. The Company had $5.0 million and $2.4 million of accrued gross interest and penalties related to unrecognized tax benefits at December 31, 2017 and 2016, respectively. The Company expects that during the next twelve months it is reasonably possible for a $0.5 million decrease in its net unrecognized tax benefits due to potential audit settlements and the expiration of statutes of limitations. Tax Returns Subject to Examination The Company’s federal income tax returns for the 2014 and 2016 tax years are subject to potential examinations by the IRS. The Company’s state income tax returns for the tax years 1999 and thereafter remain potentially subject to examination by various state taxing authorities due to NOL carryforwards. Australian income tax returns for tax years 2013 through 2016 continue to be subject to potential examinations by the Australian Taxation Office (ATO). Foreign Earnings As of December 31, 2017, the Company has a consolidated earnings deficit outside the U.S. but with some immaterial unremitted earnings in certain jurisdictions. The Company continues to be permanently reinvested with respect to its current and historical earnings. However, when appropriate, the Company has the ability to access foreign cash without incurring residual cash taxes due to the existence of NOLs. Tax Payments and Refunds The following table summarizes the Company’s income tax (refunds) payments, net for the periods presented below:
| Successor | Predecessor
| April 2 through December 31, 2017 | January 1 through April 1, 2017 |  | Year Ended December 31, 2016 |  | Year Ended December 31, 2015
| (Dollars in millions)
U.S. — federal | $ | (11.2 | ) | $ | — |  |  | $ | (56.5 | ) |  | $ | (38.1 | )
U.S. — state and local | — |  | — |  |  | 1.4 |  |  | 0.4 |
Non-U.S. | 10.4 |  | 5.5 |  |  | 15.0 |  |  | 11.9 |
Total income tax (refunds) payments, net | $ | (0.8 | ) | $ | 5.5 |  |  | $ | (40.1 | ) |  | $ | (25.8 | )

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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 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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