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Income Taxes | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Income tax provision (benefit) applicable to continuing operations consists of the following:
| Year ended December 31,
(in thousands) | 2020 |  | 2019 |  | 2018
Current: |  |  |  |  |
Federal | $ | (42,718) |  |  | $ | 1,079 |  |  | $ | (549) |
State and local | (748) |  |  | 1,215 |  |  | 323 |
Foreign | 7,133 |  |  | 4,361 |  |  | 1,138 |
| (36,333) |  |  | 6,655 |  |  | 912 |
Deferred: |  |  |  |  |
Federal | 29,158 |  |  | 4,409 |  |  | 10,073 |
State and local | 1,127 |  |  | 1,925 |  |  | 578 |
Foreign | (4,211) |  |  | 62 |  |  | 367 |
| 26,074 |  |  | 6,396 |  |  | 11,018 |
Total: |  |  |  |  |
Federal | (13,560) |  |  | 5,488 |  |  | 9,525 |
State and local | 379 |  |  | 3,140 |  |  | 901 |
Foreign | 2,922 |  |  | 4,423 |  |  | 1,505 |
| $ | (10,259) |  |  | $ | 13,051 |  |  | $ | 11,931 |
Income (loss) before income taxes from continuing operations consists of the following:
| Year ended December 31,
(in thousands) | 2020 |  | 2019 |  | 2018
U.S. | $ | (38,419) |  |  | $ | 18,982 |  |  | $ | 46,678 |
Foreign | 13,945 |  |  | 9,129 |  |  | 6,478 |
| $ | (24,474) |  |  | $ | 28,111 |  |  | $ | 53,156 |
A reconciliation from the statutory U.S. federal tax rate to the effective tax rate follows:
| Year ended December 31,
| 2020 |  | 2019 |  | 2018
Statutory U.S. federal tax rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Increase (decrease) in rate resulting from: |  |  |  |  |
State and local income taxes, net of related federal taxes | 4.6 |  |  | 7.3 |  |  | 3.4 |
U.S. tax rate change and other tax law impacts (a) | 60.2 |  |  | 2.1 |  |  | (1.5) |
Effect of noncontrolling interest | (18.8) |  |  | 2.4 |  |  | 0.1 |
Derivative instruments and hedging activities | (13.0) |  |  | — |  |  | — |
Income taxes on foreign earnings | (6.8) |  |  | (0.6) |  |  | (1.5) |
Nondeductible compensation | (6.1) |  |  | 4.6 |  |  | 1.5 |
Release (accrual) of unrecognized tax benefits | 2.7 |  |  | 3.9 |  |  | (0.1) |
Tax effect of GILTI | — |  |  | 0.4 |  |  | 1.4 |
Research and development and other tax credits | 1.4 |  |  | (23.2) |  |  | (3.4) |
Equity method investments | (0.1) |  |  | 5.7 |  |  | 1.1 |
Acquisition related permanent item | — |  |  | 24.0 |  |  | — |
Other, net | (3.2) |  |  | (1.2) |  |  | 0.5 |
Effective tax rate | 41.9 | % |  | 46.4 | % |  | 22.5 | %
(a) Reflects the impact of the CARES Act which provided a financial statement benefit of $14.8 million. Net income taxes of $2.4 million were paid in 2020, net income taxes of $2.0 million were paid in 2019, and net income taxes of $5.4 million were received in 2018. Significant components of the Company's deferred tax liabilities and assets are as follows:
| December 31,
(in thousands) | 2020 |  | 2019
Deferred tax liabilities: |  |  |
Property, plant and equipment and Rail assets leased to others | $ | (203,432) |  |  | $ | (149,317) |
Identifiable intangibles | (9,677) |  |  | (13,736) |
Investments | (50,244) |  |  | (41,354) |
Other | (7,878) |  |  | (10,228) |
| (271,231) |  |  | (214,635) |
Deferred tax assets: |  |  |
Employee benefits | 20,910 |  |  | 20,583 |
Accounts and notes receivable | 4,207 |  |  | 3,577 |
Inventory | 1,905 |  |  | 2,437 |
Federal income tax credits | 25,163 |  |  | 12,005 |
Deferred interest (b) | 359 |  |  | 2,385 |
Net operating loss carryforwards | 25,427 |  |  | 5,259 |
Derivatives instruments | 5,949 |  |  | 3,123 |
Lease liability | 9,068 |  |  | 11,072 |
Other | 9,548 |  |  | 8,970 |
Total deferred tax assets | 102,536 |  |  | 69,411 |
less: Valuation allowance | 1,452 |  |  | 931 |
| 101,084 |  |  | 68,480 |
Net deferred tax liabilities | $ | (170,147) |  |  | $ | (146,155) |
(b) The deferred interest tax asset represents disallowed interest deductions under IRC Section 163(j) (Limitation on Deduction for interest on Certain Indebtedness) for the current year. The disallowed interest is able to be carried forward indefinitely and utilized in future years pursuant to IRC Section 163(j)). On December 31, 2020, the Company had $74.8 million, $204.0 million and $1.9 million of U.S. Federal, state and non-U.S. net operating loss carryforwards that begin to expire in 2035, 2021 and 2034, respectively. The Company also has $16.1 million of general business credits that expire after 2032 and $7.9 million of foreign tax credits that begin to expire after 2034. Additionally, the company has elected to treat Global Intangible Low Tax Income (“GILTI”), as a period cost and, therefore, has not recognized deferred taxes for basis differences that may reverse as GILTI tax in future years. As of December 31, 2020, there was no financial statement impact related to GILTI. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. If it is more-likely-than-not that the deferred tax asset will be realized, no valuation allowance is recorded. Management's judgment is required in determining the provision for income taxes, deferred tax assets and liabilities and the valuation allowance recorded against the net deferred tax assets. The valuation allowance would need to be adjusted in the event future taxable income is materially different than amounts estimated. Significant judgments, estimates and factors considered by management in its determination of the probability of the realization of deferred tax assets include: •Historical operating results •Expectations of future earnings •Tax planning strategies; and •The extended period of time over which retirement, medical, and pension liabilities will be paid. Our unrecognized tax benefits represent tax positions for which reserves have been established. As of December 31, 2020, 2019 and 2018, if our unrecognized tax benefits were recognized in future periods, they would favorably impact our effective tax rate. A reconciliation of theses unrecognized tax benefits is as follows:
(in thousands) |
Balance at January 1, 2018 | $ | 787 |
Reductions as a result of a lapse in statute of limitations | (169) |
Balance at December 31, 2018 | 618 |
Additions based on tax positions related to the current year | 1,766 |
Additions based on tax positions related to prior years | 20,649 |
Reductions based on tax positions related to prior years | (155) |
Reductions as a result of a lapse in statute of limitations | (463) |
Balance at December 31, 2019 | 22,415 |
Additions based on tax positions related to the current year | 11,598 |
Additions based on tax positions related to prior years | 12,013 |
Reductions based on tax positions related to prior years | (1,566) |
Reductions as a result of a lapse in statute of limitations | (59) |
Balance at December 31, 2020 | $ | 44,401 |
As of December 31, 2020, 2019 and 2018, the total amount of unrecognized tax benefits was $44.4 million, $22.4 million and $0.6 million, respectively, of which in 2020 and 2019 the unrecognized tax benefits were primarily associated with R&D Credits. For the years ended December 31, 2020 and 2019, the Company has not recognized deferred tax liabilities for temporary differences related to investments in foreign subsidiaries that were deemed permanently reinvested. Determination of the amount of unrecognized deferred income tax liabilities on these earnings is not practicable because such liability, if any, depends on certain circumstances existing and if/when remittance occurs. A deferred tax liability will be recognized if and when the Company no longer plans to permanently reinvest these undistributed earnings. The Company’s practice is to recognize interest and penalties on uncertain tax positions in the provision for income taxes in the Consolidated Statement of Operations. At December 31, 2020 and 2019, the company recorded reserves of $1.8 million and $2.1 million, respectively, of interest and penalties on uncertain tax positions in the Consolidated Balance Sheets. The Company files tax returns in multiple jurisdictions and is subject to examination by taxing authorities in the U.S., multiple foreign, state and local jurisdictions. The Company’s Mexican federal income tax return for tax year 2015 is currently under audit along with The Andersons Inc. for 2018. Four of the company’s subsidiary partnership returns are under audit by the IRS for 2015. It is reasonably possible that audit settlements, the conclusion of current examinations or the expiration of the statute of limitations could change the Company’s unrecognized tax benefits during the next twelve months. It is not possible to reasonably estimate the expected change to the total amount of unrecognized tax benefit in the next twelve months. In addition to the audits listed above, the company has open tax years primarily from 2013 to 2018 with various taxing jurisdictions, including the U.S., Canada, Mexico and the U.K. These open years contain matters that could be subject to differing interpretations of applicable tax laws and regulations as they relate to the amount, timing or inclusion of revenue and expenses or the sustainability of income tax credits for a given audit cycle. The Company has recorded a tax benefit only for those positions that meet the more-likely-than-not standard.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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