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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of pre-tax book income (loss) consist of the following:
Year Ended December 31,
202420232022
U.S.$335.5 $78.0 $(193.6)
Foreign (11.7)(144.8)227.0 
Total $323.8 $(66.8)$33.4 
Significant components of income tax expense consist of the following:
Year Ended December 31,
202420232022
Current:   
U.S. federal current expense (benefit)$— $0.5 $— 
State current expense (benefit)— — 0.2 
Foreign current expense (benefit)4.9 15.8 4.0 
Total current expense (benefit)4.9 16.3 4.2
Deferred:   
U.S. federal deferred benefit— (0.3)(0.3)
State deferred benefit— (0.1)— 
Foreign deferred tax (benefit) expense(1.7)(30.5)43.5 
Total deferred (benefit) expense(1.7)(30.9)43.2 
Total income tax (benefit) expense$3.2 $(14.6)$47.4 
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,
 202420232022
Federal Statutory Rate21.0 %21.0 %21.0 %
Permanent differences1.0 1.1 (15.2)
State taxes, net of Federal benefit— (0.1)0.1 
Rate change(0.5)(0.3)0.4 
Foreign earnings taxed at different rates than U.S.— 2.0 (0.8)
Valuation allowance(11.3)3.6 (4.2)
Foreign dividends and inclusions0.5 (12.7)122.9 
Net operating loss expiration and remeasurement2.8 (8.0)43.1 
Filing differences8.7 0.6 (19.1)
Changes in uncertain tax reserves0.2 (1.3)(5.3)
Advanced Manufacturing Production Credit(5.9)18.6 — 
Bargain Purchase gain
(15.7)— — 
Other0.2 (2.7)(0.9)
Effective tax rate1.0 %21.8 %142.0 %
The effective tax rate for the year ending December 31, 2024 was 1.0% compared to the statutory US tax rate of 21%. This lower effective rate is primarily due to the bargain purchase gain recognized for US GAAP purposes but not for US tax purposes, as well as the non-taxable benefit of the Advanced Manufacturing Credit under Section 45X, which is discussed below.
In August 2022, the IRA became 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”). On October 24, 2024 the U.S. Department of the Treasury and the Internal Revenue Service released final regulations regarding the advanced manufacturing production credit established by the Inflation Reduction Act of 2022 to incentivize the production of eligible components within the United States (the “Final Regulations”).
The Final Regulations provide guidance on rules that taxpayers must satisfy to qualify for the Section 45X tax credit. One of the most significant changes from the Proposed Regulations is that the final regulations allow certain direct and indirect material costs to be included in the section 45X credit computation for the production of electrode active materials and critical minerals. Notably, with respect to all of the comments related to the definition of aluminum, the Treasury Department and the IRS have determined that additional consideration is necessary prior to finalizing proposed § 1.45X–4(b)(1), which the Treasury Department and the IRS intend to do at a later date. For that reason, § 1.45X–4(b)(1) is reserved in these Final Regulations. For the year ended December 31, 2024 and December 31, 2023, we recognized $89.7 million and $56.5 million as a reduction in Cost of goods sold, and $2.9 million and $2.8 million as a reduction in selling, general and administrative expenses, respectively, within the Consolidated Statements of Operations. As of December 31, 2024 and December 31, 2023, the Company recognized a current manufacturing credit receivable of $81.5 million and $59.3 million, respectively. As of December 31, 2024, the Company recognized a non-current manufacturing credit receivable of $70.4 million. There was no non-current manufacturing credit receivable recognized as of December 31, 2023 within the Consolidated Balance Sheets.
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:
20242023
Deferred tax assets:  
Accrued postretirement benefit cost$30.1 $30.7 
Net operating losses 473.3 467.6 
Disallowed interest expense37.1 29.2 
Derivative and hedging contracts0.1 1.2 
Fixed asset tax over book basis— 9.2 
Other29.4 28.3 
Total deferred tax assets570.0 566.2 
Valuation allowance(504.4)(537.6)
Net deferred tax assets$65.6 $28.6 
Deferred tax liabilities:  
Fixed asset book over tax basis(115.9)(62.0)
Derivatives— — 
Foreign basis differences0.6 (18.1)
Other(21.4)(20.6)
Total deferred tax liabilities(136.7)(100.7)
Net deferred tax liability$(71.1)$(72.1)
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 Statements 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 $504.4 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, 2024. 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 changes in the valuation allowance are as follows:
Year Ended December 31,
202420232022
Beginning balance, valuation allowance$537.6 $487.9 $485.8 
Remeasurement of deferred tax assets— — — 
Release of valuation allowance— — — 
Expiration of net operating losses(6.1)(7.2)(15.4)
Other change in valuation allowance(27.1)56.9 17.5 
Ending balance, valuation allowance$504.4 $537.6 $487.9 
The significant components of our NOLs are as follows:
20242023
Federal (1)
$1,571.2 $1,533.5 
State (2)
1,163.5 1,221.0 
Foreign (3)(4)
342.2 344.4 
(1)US federal NOLs begin to expire in 2028.
(2)US state NOLs begin to expire in 2027.
(3)NOLs in Iceland expire between 2025 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:
202420232022
Balance as of January 1,  $3.0 $2.2 $4.0 
Additions based on tax positions related to the current year0.6 1.3 0.3 
Decreases due to lapse of applicable statute of limitations(0.1)(0.5)(2.1)
Balance as of December 31,$3.5 $3.0 $2.2 
As of December 31, 2024, the Company’s gross unrecognized tax benefits totaled $3.5 million. After considering the deferred tax accounting impact, it is expected that about $1.4 million of the total as of December 31, 2024 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 2019.