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Income Taxes | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The components of pre-tax book income (loss) consist of the following:
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
U.S. | $ | 78.0 |  |  | $ | (193.6) |  |  | $ | (250.5) |
Foreign | (144.8) |  |  | 227.0 |  |  | 52.9 |
Total | $ | (66.8) |  |  | $ | 33.4 |  |  | $ | (197.6) |
Significant components of income tax expense consist of the following:
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
Current: |  |  |  |  |
U.S. federal current expense (benefit) | $ | 0.5 |  |  | $ | — |  |  | $ | — |
State current expense (benefit) | — |  |  | 0.2 |  |  | — |
Foreign current expense (benefit) | 15.8 |  |  | 4.0 |  |  | 0.1 |
Total current expense (benefit) | 16.3 |  |  | 4.2 |  |  | 0.1
Deferred: |  |  |  |  |
U.S. federal deferred benefit | (0.3) |  |  | (0.3) |  |  | (0.2) |
State deferred benefit | (0.1) |  |  | — |  |  | — |
Foreign deferred tax (benefit) expense | (30.5) |  |  | 43.5 |  |  | (30.5) |
Total deferred (benefit) expense | (30.9) |  |  | 43.2 |  |  | (30.7) |
Total income tax (benefit) expense | $ | (14.6) |  |  | $ | 47.4 |  |  | $ | (30.6) |
A reconciliation of the statutory U.S. Federal income tax rate to the effective income tax rate on income (loss) is as follows:
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
Federal Statutory Rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Permanent differences | 1.1 |  |  | (15.2) |  |  | (0.3) |
State taxes, net of Federal benefit | (0.1) |  |  | 0.1 |  |  | — |
Rate change | (0.3) |  |  | 0.4 |  |  | 2.5 |
Foreign earnings taxed at different rates than U.S. | 2.0 |  |  | (0.8) |  |  | (3.9) |
Valuation allowance | 3.6 |  |  | (4.2) |  |  | (15.9) |
Helguvik investment | — |  |  | — |  |  | 26.4 |
Foreign dividends and inclusions | (12.7) |  |  | 122.9 |  |  | (10.1) |
Net operating loss expiration and remeasurement | (8.0) |  |  | 43.1 |  |  | (5.2) |
Filing differences | 0.6 |  |  | (19.1) |  |  | (0.1) |
Changes in uncertain tax reserves | (1.3) |  |  | (5.3) |  |  | 1.3 |
Advanced Manufacturing Production Credit | 18.6 |  |  | — |  |  | — |
Other | (2.7) |  |  | (0.9) |  |  | (0.2) |
Effective tax rate | 21.8 | % |  | 142.0 | % |  | 15.5 | %
The effective tax rate for the year ending December 31, 2023 was 21.8% compared to the statutory US tax rate of 21%. The increase is primarily a result of the calculated foreign inclusions, partially offset by the non-taxable benefit of the Advanced Manufacturing Credit under Section 45X discussed below. In August 2022, President Biden signed the IRA into law. The IRA provides several tax incentives to promote clean energy and the production of critical minerals in the U.S., including a refundable tax credit, pursuant to Section 45X of the Internal Revenue Code. Tax credits, such as refundable credits whose realization does not depend on the entity’s generation of taxable income like the refundable tax credit provided by the IRA are not considered an element of income tax accounting under ASC 740. After considering US GAAP, the Company has concluded it is appropriate to apply IAS 20, Accounting for Government Grants and Disclosure of Government Assistance, to account for the refundable tax credit as an income grant. Section 45X of the IRA contains a production tax credit equal to 10% of certain eligible production costs, including, without limitation, labor, energy, depreciation and amortization and overhead expenses. On December 14, 2023, the U.S. Department of the Treasury and the Internal Revenue Service released proposed rules to provide guidance on the production tax credit requirements under Internal Revenue Code Section 45X (the “Proposed Regulations”). The Proposed Regulations provide guidance on rules that taxpayers must satisfy to qualify for the Section 45X tax credit. For the year ended December 31, 2023, we recognized $56.5 million as a reduction in Cost of goods sold and $2.8 million as a reduction in Selling, general and administrative expenses on the Consolidated Statements of Operations and recorded an equal amount as a Manufacturing credit receivable on the Consolidated Balance Sheets. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"). ASU 2023-09 enhanced annual disclosures regarding the rate reconciliation and income taxes paid information. For public business entities, ASU 2023-09 is effective for annual periods beginning after December 15, 2024. The Company is evaluating the impact of this guidance on its consolidated financial statements and related disclosures. 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. 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:
| 2023 |  | 2022
Deferred tax assets: |  |  |
Accrued postretirement benefit cost | $ | 30.7 |  |  | $ | 25.7 |
Net operating losses | 467.6 |  |  | 395.8 |
Disallowed interest expense | 29.2 |  |  | 27.7 |
Derivative and hedging contracts | 1.2 |  |  | — |
Fixed asset tax over book basis | 9.2 |  |  | 17.0 |
Other | 28.3 |  |  | 26.1 |
Total deferred tax assets | 566.2 |  |  | 492.3 |
Valuation allowance | (537.6) |  |  | (487.9) |
Net deferred tax assets | $ | 28.6 |  |  | $ | 4.4 |
Deferred tax liabilities: |  |  |
Fixed asset book over tax basis | (62.0) |  |  | (60.5) |
Derivatives | — |  |  | (19.0) |
Foreign basis differences | (18.1) |  |  | (19.8) |
Other | (20.6) |  |  | (7.9) |
Total deferred tax liabilities | (100.7) |  |  | (107.2) |
Net deferred tax liability | $ | (72.1) |  |  | $ | (102.8) |
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 $537.6 million recorded against our net U.S. and Jamaican deferred tax assets, and a portion of our Icelandic deferred tax assets as of December 31, 2023. 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 change in net operating losses, fixed asset book over tax basis, and the related valuation allowances, were the result of purchase accounting adjustments related to the acquisition of Jamalco, which was offset by a decrease in deferred tax liabilities primarily related to the Company's hedging derivatives. The changes in the valuation allowance are as follows:
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
Beginning balance, valuation allowance | $ | 487.9 |  |  | $ | 485.8 |  |  | $ | 499.4 |
Remeasurement of deferred tax assets | — |  |  | — |  |  | — |
Release of valuation allowance | — |  |  | — |  |  | — |
Expiration of net operating losses | (7.2) |  |  | (15.4) |  |  | (13.2) |
Other change in valuation allowance | 56.9 |  |  | 17.5 |  |  | (0.4) |
Ending balance, valuation allowance | $ | 537.6 |  |  | $ | 487.9 |  |  | $ | 485.8 |
The significant components of our NOLs are as follows:
| 2023 |  | 2022
Federal (1) | $ | 1,533.5 |  |  | $ | 1,487.8 |
State (2) | 1,221.0 |  |  | 1,182.7 |
Foreign (3)(4) | 344.4 |  |  | 106.0 |
(1)US federal NOLs begin to expire in 2028. (2)US state NOLs begin to expire in 2027. (3)NOLs in Iceland expire between 2024 and 2026. (4)NOLs in Jamaica do not expire. 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:
| 2023 |  | 2022 |  | 2021
Balance as of January 1, | $ | 2.2 |  |  | $ | 4.0 |  |  | $ | 6.5 |
Additions based on tax positions related to the current year | 1.3 |  |  | 0.3 |  |  | — |
Decreases due to lapse of applicable statute of limitations | (0.5) |  |  | (2.1) |  |  | (2.5) |
Settlements | — |  |  | — |  |  | — |
Balance as of December 31, | $ | 3.0 |  |  | $ | 2.2 |  |  | $ | 4.0 |
As of December 31, 2023, the Company’s gross unrecognized tax benefits totaled $3.0 million. After considering the deferred tax accounting impact, it is expected that about $1.4 million of the total as of December 31, 2023 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. We are subject to examination by tax authorities according to statutory periods defined in each jurisdiction. The earliest statutory period open is beginning in 2018.

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