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INCOME TAXES | 12 Months Ended
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Dec. 31, 2013
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES
| Years ended December 31,
Components of Income Before Taxes | 2013 |  | 2012 |  | 2011
| ($ in millions)
Domestic | $ | 222.2 |  |  | $ | 189.9 |  |  | $ | 360.3 |
Foreign | 27.8 |  |  | 35.3 |  |  | 19.1 |
Income before taxes | $ | 250.0 |  |  | $ | 225.2 |  |  | $ | 379.4 |
Components of Income Tax Provision |  |  |  |  |
Current expense: |  |  |  |  |
Federal | $ | 42.1 |  |  | $ | 16.9 |  |  | $ | 36.4 |
State | 9.4 |  |  | 4.3 |  |  | 5.7 |
Foreign | 8.5 |  |  | 10.4 |  |  | 5.5 |
| 60.0 |  |  | 31.6 |  |  | 47.6 |
Deferred | 11.4 |  |  | 44.0 |  |  | 90.1 |
Income tax provision | $ | 71.4 |  |  | $ | 75.6 |  |  | $ | 137.7 |
The following table accounts for the difference between the actual tax provision and the amounts obtained by applying the statutory U.S. federal income tax rate of 35% to the income before taxes.
| Years ended December 31,
Effective Tax Rate Reconciliation (Percent) | 2013 |  | 2012 |  | 2011
Statutory federal tax rate | 35.0 | % |  | 35.0 | % |  | 35.0 | %
Foreign rate differential | (0.1 | ) |  | (0.1 | ) |  | (0.1 | )
Domestic manufacturing/export tax incentive | (1.6 | ) |  | (1.0 | ) |  | (1.0 | )
Dividends paid to CEOP | (0.3 | ) |  | (0.4 | ) |  | (0.3 | )
State income taxes, net | 2.3 |  |  | 1.3 |  |  | 1.1 |
Change in tax contingencies | (3.8 | ) |  | 0.5 |  |  | (1.1 | )
Change in valuation allowance | (2.1 | ) |  | 0.1 |  |  | 0.1 |
Return to provision | (0.1 | ) |  | — |  |  | 0.5 |
Remeasurement of deferred taxes | 0.1 |  |  | 0.7 |  |  | (1.3 | )
Research tax credit | (0.8 | ) |  | — |  |  | — |
Section 45O tax credit | — |  |  | (3.0 | ) |  | — |
Australia dividend residual tax expense | — |  |  | 0.3 |  |  | — |
Incremental tax effect of SunBelt remeasurement | — |  |  | — |  |  | 3.3 |
Other, net | — |  |  | 0.2 |  |  | 0.1 |
Effective tax rate | 28.6 | % |  | 33.6 | % |  | 36.3 | %
The effective tax rate for 2013 included $11.4 million of benefit associated with the expiration of the statutes of limitations in federal and state jurisdictions, $8.3 million of benefit associated with reductions in valuation allowances on our capital loss carryforwards and $1.9 million of benefit associated with the Research Credit, which were partially offset by $1.8 million of expense associated with changes in tax contingencies and $1.3 million of expense associated with increases in valuation allowances on certain state tax credits carryforwards. The effective tax rate for 2012 included a benefit of $6.6 million associated with Section 45O that was claimed on our 2008 to 2012 U.S. federal income tax returns.
| December 31,
Components of Deferred Tax Assets and Liabilities | 2013 |  | 2012
| ($ in millions)
Deferred tax assets: |
Pension and postretirement benefits | $ | 74.6 |  |  | $ | 93.3 |
Environmental reserves | 60.2 |  |  | 60.5 |
Asset retirement obligations | 25.7 |  |  | 28.6 |
Accrued liabilities | 48.2 |  |  | 43.1 |
Tax credits | 13.3 |  |  | 10.8 |
Federal and state net operating losses | 7.2 |  |  | 6.7 |
Capital loss carryforward | 3.0 |  |  | 15.5 |
Other miscellaneous items | 10.7 |  |  | 5.3 |
Total deferred tax assets | 242.9 |  |  | 263.8 |
Valuation allowance | (13.4 | ) |  | (21.1 | )
Net deferred tax assets | 229.5 |  |  | 242.7 |
Deferred tax liabilities: |  |  |
Property, plant and equipment | 182.5 |  |  | 178.9 |
Intangible amortization | 8.4 |  |  | 8.8 |
Inventory and prepaids | 3.1 |  |  | — |
Partnerships | 93.7 |  |  | 95.0 |
Total deferred tax liabilities | 287.7 |  |  | 282.7 |
Net deferred tax liability | $ | (58.2 | ) |  | $ | (40.0 | )
Realization of the net deferred tax assets, irrespective of indefinite-lived deferred tax liabilities, is dependent on future reversals of existing taxable temporary differences and adequate future taxable income, exclusive of reversing temporary differences and carryforwards. Although realization is not assured, we believe that it is more likely than not that the net deferred tax assets will be realized. We completed the acquisition of KA Steel on August 22, 2012, with both parties agreeing to an election under Section 338(h)(10) of the U.S. IRC, which allows us to treat the transaction as an asset acquisition for U.S. federal income tax purposes. KA Steel did not carry forward any significant tax attributes. At December 31, 2013, we had federal tax benefits of $0.7 million recorded associated with the expected future foreign tax credits generated by the deferred tax liabilities of our Canadian subsidiary. Realization of the tax benefits associated with such foreign tax credits is dependent upon reversal of Canadian temporary differences, future U.S. taxable income and future foreign source taxable income. We believe that it is more likely than not that the deferred tax benefits will be realized and no valuation allowance is necessary. At December 31, 2013, we had a U.S. net operating loss carryforward (NOL) of approximately $3.0 million (representing $1.1 million of deferred tax assets), that will expire in years 2017 through 2020, if not utilized. The utilization of this NOL is limited under Section 382 of the U.S. IRC to $0.5 million in each year through 2020. We believe that it is more likely than not that the NOL will be realized and no valuation allowance is necessary. At December 31, 2013, we had deferred state tax benefits of $1.7 million relating to state NOLs, which are available to offset future state taxable income through 2032. Due to uncertainties regarding realization of the tax benefits, a valuation allowance of $0.7 million has been applied against the deferred state tax benefits at December 31, 2013. At December 31, 2013, we had deferred state tax benefits of $12.7 million relating to state tax credits, which are available to offset future state tax liabilities through 2027. Due to uncertainties regarding the realization of these state tax credits, a valuation allowance of $9.7 million has been applied against the deferred state tax credits at December 31, 2013. At December 31, 2013, we had a capital loss carryforward of $7.6 million (representing $3.0 million of deferred tax assets) that is available to offset future consolidated capital gains that will expire in years 2014 through 2018 if not utilized. Due to uncertainties regarding the realization of the capital loss carryforward, a valuation allowance of $3.0 million has been applied against the deferred tax benefit at December 31, 2013. The total amount of undistributed earnings of foreign subsidiaries was approximately $9.1 million at December 31, 2013. Deferred taxes are provided for earnings of non-U.S. affiliates when we plan to remit those earnings. A portion of the undistributed earnings have been permanently reinvested and for those earnings no deferred taxes have been provided. Deferred taxes have not been provided on the excess book basis in the shares of certain foreign subsidiaries because these basis differences are not expected to reverse in the foreseeable future. The undistributed earnings and excess book basis differences could reverse through a sale, receipt of dividends from the subsidiaries, as well as various other events. It is not practical to calculate the residual income tax that would result if these basis differences reversed due to the complexities of the tax law and the hypothetical nature of the calculations. As of December 31, 2013, we had $34.5 million of gross unrecognized tax benefits, which would have a net $31.1 million impact on the effective tax rate, if recognized. As of December 31, 2012, we had $40.1 million of gross unrecognized tax benefits, which would have a net $38.4 million impact on the effective tax rate, if recognized. The change for 2013 primarily relates to the expiration of statue of limitations in domestic jurisdictions and settlement of ongoing audits, as well as additional gross unrecognized benefits for prior year tax positions. The change for 2012 primarily relates to additional gross unrecognized benefits for prior year and current year tax position, as well as the expiration of the statute of limitations in domestic jurisdictions and settlement of ongoing audits. The amounts of unrecognized tax benefits were as follows:
| December 31,
| 2013 |  | 2012
| ($ in millions)
Beginning balance | $ | 40.1 |  |  | $ | 37.9 |
Increase for prior year tax positions | 4.5 |  |  | 3.1 |
Reductions due to statute of limitations | (10.0 | ) |  | (0.3 | )
Decrease for prior year tax positions | (0.1 | ) |  | (0.4 | )
Increase for current year tax positions | — |  |  | 0.1 |
Decrease due to tax settlements | — |  |  | (0.3 | )
Ending balance | $ | 34.5 |  |  | $ | 40.1 |
We recognize interest and penalty expense related to unrecognized tax positions as a component of the income tax provision. As of December 31, 2013 and 2012, interest and penalties accrued were $2.8 million and $3.3 million, respectively. For 2013, 2012 and 2011, we recorded (benefit) expense related to interest and penalties of $(0.5) million, $0.5 million and $0.7 million, respectively. As of December 31, 2013, we believe it is reasonably possible that our total amount of unrecognized tax benefits will decrease by approximately $3.8 million over the next twelve months. The anticipated reduction primarily relates to settlements with tax authorities and the expiration of federal, state and foreign statutes of limitation. We operate primarily in North America and file income tax returns in numerous jurisdictions. Our tax returns are subject to examination by various federal, state and local tax authorities. Our U.S. federal income tax returns are under examination by the Internal Revenue Service (IRS) for tax years 2008, 2010 and 2011. Our Canadian federal income tax returns are under examination by Canada Revenue Authority (CRA) for tax years 2010 and 2011. Our Canadian provincial income tax returns are under examination by Quebec Revenue Authority for tax years 2008 to 2011. We believe we have adequately provided for all tax positions; however, amounts asserted by taxing authorities could be greater than our accrued position. For our primary tax jurisdictions, the tax years that remain subject to examination are as follows:
| Tax Years
U.S. federal income tax | 2008; 2010 - 2012
U.S. state income tax | 2006 - 2012
Canadian federal income tax | 2009 - 2012
Canadian provincial income tax | 2008 - 2012

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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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