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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes
The components of pre-tax book income (loss) consist of the following:
| Year Ended December 31,
| 2022 |  | 2021 |  | 2020
U.S. | $ | (193.6) |  |  | $ | (250.5) |  |  | $ | (76.7) |
Foreign | 227.0 |  |  | 52.9 |  |  | (49.6) |
Total | $ | 33.4 |  |  | $ | (197.6) |  |  | $ | (126.3) |
Significant components of income tax expense consist of the following:
| Year Ended December 31,
| 2022 |  | 2021 |  | 2020
Current: |  |  |  |  |
U.S. federal current expense (benefit) | $ | — |  |  | $ | — |  |  | $ | — |
State current expense (benefit) | 0.2 |  |  | — |  |  | — |
Foreign current expense (benefit) | 4.0 |  |  | 0.1 |  |  | 4.0 |
Total current expense (benefit) | 4.2 |  |  | 0.1 |  |  | 4.0
Deferred: |  |  |  |  |
U.S. federal deferred (benefit) | (0.3) |  |  | (0.2) |  |  | (1.2) |
State deferred benefit | — |  |  | — |  |  | — |
Foreign deferred tax expense (benefit) | 43.5 |  |  | (30.5) |  |  | (5.9) |
Total deferred expense (benefit) | 43.2 |  |  | (30.7) |  |  | (7.1) |
Total income tax expense (benefit) | $ | 47.4 |  |  | $ | (30.6) |  |  | $ | (3.1) |
A reconciliation of the statutory U.S. Federal income tax rate to the effective income tax rate on income (loss) is as follows:
| 2022 |  | 2021 |  | 2020
Federal Statutory Rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Permanent differences | (15.2) |  |  | (0.3) |  |  | (1.2) |
State taxes, net of Federal benefit | 0.1 |  |  | — |  |  | — |
Rate change | 0.4 |  |  | 2.5 |  |  | (0.2) |
Foreign earnings taxed at different rates than U.S. | (0.8) |  |  | (3.9) |  |  | (0.3) |
Valuation allowance | (4.2) |  |  | (15.9) |  |  | (4.3) |
Helguvik investment | — |  |  | 26.4 |  |  | — |
Foreign restructuring | — |  |  | — |  |  | (2.3) |
Foreign dividends and inclusions | 122.9 |  |  | (10.1) |  |  | (1.5) |
Net operating loss expiration and remeasurement | 43.1 |  |  | (5.2) |  |  | (10.8) |
Provision to return | (19.1) |  |  | (0.1) |  |  | (0.4) |
Changes in uncertain tax reserves | (5.3) |  |  | 1.3 |  |  | 1.4 |
Other | (0.9) |  |  | (0.2) |  |  | 1.0 |
Effective tax rate | 142.0 | % |  | 15.5 | % |  | 2.4 | %
The effective tax rate for the year ending December 31, 2022 was higher than the statutory US tax rate of 21% primarily as a result of the calculated foreign inclusions having a greater impact in comparison to the consolidated pre-tax income generated. The Company’s accounting policy with respect to releasing income tax effects from accumulated other comprehensive income is to apply a security by security approach whereby the tax effects are measured based on the change in the unrealized gains or losses reflected in other comprehensive loss. The Inflation Reduction Act of 2022 ("IRA") was signed into law on August 16, 2022, and the CHIPS and Science Act of 2022 was signed into law on August 9, 2022. These laws, effective January 1, 2023, implement new tax provisions, primarily a 15% corporate alternative minimum tax and a nondeductible 1% excise tax on the fair market value of stock repurchased by publicly traded corporations. As of December 31, 2022, we do not anticipate any material impact of these provisions. The IRA provides several tax incentives to promote clean energy and the production of critical minerals in the U.S., also effective January 1, 2023. Century will continue to evaluate potential tax benefits available under the acts as additional guidance is issued in future periods. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The significant components of our deferred tax assets and liabilities as of December 31 are as follows:
| 2022 |  | 2021
Deferred tax assets: |  |  |
Accrued postretirement benefit cost | $ | 25.7 |  |  | $ | 29.5 |
Net operating losses and tax credits | 395.8 |  |  | 453.1 |
Disallowed interest expense | 27.7 |  |  | 17.8 |
Derivative and hedging contracts | — |  |  | 18.6 |
Fixed asset tax over book basis | 17.0 |  |  | — |
Other | 26.1 |  |  | 20.7 |
Total deferred tax assets | 492.3 |  |  | 539.7 |
Valuation allowance | (487.9) |  |  | (485.8) |
Net deferred tax assets | $ | 4.4 |  |  | $ | 53.9 |
Deferred tax liabilities: |  |  |
Fixed asset book over tax basis | (60.5) |  |  | (86.2) |
Derivatives | (19.0) |  |  | — |
Foreign basis differences | (19.8) |  |  | (19.6) |
Other | (7.9) |  |  | (6.8) |
Total deferred tax liabilities | (107.2) |  |  | (112.6) |
Net deferred tax liability | $ | (102.8) |  |  | $ | (58.7) |
We regularly assess the likelihood that deferred tax assets will be recovered from future taxable income. To the extent we believe that it is more likely than not that a deferred tax asset will not be realized, a valuation allowance is established. When a valuation allowance is established or increased, an income tax charge is included in the consolidated statement of operations and net deferred tax assets are adjusted accordingly. Future changes in tax laws, statutory tax rates and taxable income levels could result in actual realization of the deferred tax assets being materially different from the amounts provided for in the consolidated financial statements. If the actual recovery amount of the deferred tax asset is less than anticipated, we would be required to write-off the remaining deferred tax asset and increase the tax provision. We have a valuation allowance of $487.9 million recorded against our net U.S. deferred tax assets, and a portion of our Icelandic deferred tax assets as of December 31, 2022. The Company is subject to the provisions of ASC 740-10, Income Taxes, which requires that the effect on deferred tax assets and liabilities of a change in tax rates be recognized in the period the tax rate change was enacted. The increase in deferred tax assets, and the related valuation allowances, is primarily related to the impairment charge recognized to write down the Hawesville asset group to its estimated fair value following curtailment, which was offset by an increase in deferred tax liabilities primarily related to the Company's hedging derivatives. The changes in the valuation allowance are as follows:
| 2022 |  | 2021 |  | 2020
Beginning balance, valuation allowance | $ | 485.8 |  |  | $ | 499.4 |  |  | $ | 492.4 |
Remeasurement of deferred tax assets | — |  |  | — |  |  | — |
Release of valuation allowance | — |  |  | — |  |  | — |
Expiration of net operating losses | (15.4) |  |  | (13.2) |  |  | (11.7) |
Other change in valuation allowance | 17.5 |  |  | (0.4) |  |  | 18.7 |
Ending balance, valuation allowance | $ | 487.9 |  |  | $ | 485.8 |  |  | $ | 499.4 |
The significant components of our NOLs are as follows:
| 2022 |  | 2021
Federal (1) | $ | 1,487.8 |  |  | $ | 1,568.4 |
State (2) | 1,182.7 |  |  | 1,161.0 |
Foreign (3) | 106.0 |  |  | 321.7 |
(1)The federal NOL begins to expire in 2028. (2)The state NOLs begin to expire in 2027. (3)The Icelandic NOLs expire between 2023 and 2026. Our ability to utilize our deferred tax assets to offset future federal taxable income may be significantly limited if we experience an "ownership change" as defined in the Code. In general, an ownership change would occur if our "five-percent shareholders," as defined under the Code, collectively increase their ownership in us by more than 50 percentage points over a rolling three-year period. Future transactions in our stock that may not be in our control may cause us to experience such an ownership change and thus limit our ability to utilize net operating losses, tax credits and other tax assets to offset future taxable income. A reconciliation of the beginning and ending amounts of gross unrecognized tax benefits (excluding interest) is as follows:
| 2022 |  | 2021 |  | 2020
Balance as of January 1, | $ | 4.0 |  |  | $ | 6.5 |  |  | $ | 8.2 |
Additions based on tax positions related to the current year | 0.3 |  |  | — |  |  | — |
Decreases due to lapse of applicable statute of limitations | (2.1) |  |  | (2.5) |  |  | (1.7) |
Settlements | — |  |  | — |  |  | — |
Balance as of December 31, | $ | 2.2 |  |  | $ | 4.0 |  |  | $ | 6.5 |
As of December 31, 2022, the Company’s gross unrecognized tax benefits totaled $2.2 million. After considering the deferred tax accounting impact, it is expected that about $1.4 million of the total as of December 31, 2022 would favorably affect the effective tax rate if resolved in the Company’s favor. Included in the above balances are tax positions relating to temporary differences where there is uncertainty about the timing of tax return inclusion, but not that the amounts will ultimately be tax deductible. Because of the impact of deferred tax accounting, other than interest and penalties, the timing would not impact the annual effective tax rate but could accelerate the payment of cash to the taxing authority to an earlier period. We do not expect a significant change in the balance of unrecognized tax benefits within the next twelve months. It is our policy to recognize potential accrued interest and penalties related to unrecognized tax benefits in income tax expense. Century and its subsidiaries file income tax returns in the U.S. federal jurisdiction, various state and local jurisdictions, and several foreign jurisdictions. Our federal income tax returns have been reviewed by the IRS through 2010. However, we have NOLs beginning in 2008 that are available for carryforward to future years. Under U.S. tax law, NOLs may be adjusted by the IRS until the statute of limitations expires for the year in which the NOL is used. Accordingly, our 2008 and later NOLs may be reviewed until they are used or expire. Material state and local income tax matters have been concluded for years through 2016. Our Icelandic tax returns are subject to examination beginning with the 2017 tax year.

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