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Income Tax Matters | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income Tax Matters | Income Tax Matters Tax Provision. Income before income taxes by geographic area was as follows (in millions of dollars):
| Year Ended December 31,
| 2018 |  | 2017 |  | 2016
Domestic | $ | 114.6 |  |  | $ | 127.9 |  |  | $ | 143.6 |
Foreign | 5.4 |  |  | 5.1 |  |  | 3.6 |
Income before income taxes | $ | 120.0 |  |  | $ | 133.0 |  |  | $ | 147.2 |
Income taxes are classified as either domestic or foreign based on whether payment is made or due to the United States or a foreign country. Certain income classified as foreign is also subject to domestic income taxes. Income tax provision consisted of (in millions of dollars):
| Federal |  | Foreign |  | State |  | Total
2018 |  |  |  |  |  |  |  |  |  |  |
Current | $ | 11.9 |  |  | $ | (1.9 | ) |  | $ | (1.5 | ) |  | $ | 8.5 |
Deferred | (34.7 | ) |  | 0.1 |  |  | (1.4 | ) |  | (36.0 | )
Expense applied to increase Retained earnings/ Other comprehensive loss | (0.7 | ) |  | — |  |  | (0.1 | ) |  | (0.8 | )
Income tax provision | $ | (23.5 | ) |  | $ | (1.8 | ) |  | $ | (3.0 | ) |  | $ | (28.3 | )
2017 |  |  |  |  |  |  |
Current | $ | 3.1 |  |  | $ | (0.8 | ) |  | $ | (1.0 | ) |  | $ | 1.3 |
Deferred | (82.0 | ) |  | (1.0 | ) |  | (5.7 | ) |  | (88.7 | )
Expense applied to increase Retained earnings/ Other comprehensive loss | (0.1 | ) |  | (0.1 | ) |  | — |  |  | (0.2 | )
Income tax provision | $ | (79.0 | ) |  | $ | (1.9 | ) |  | $ | (6.7 | ) |  | $ | (87.6 | )
2016 |  |  |  |  |  |  |
Current | $ | 2.7 |  |  | $ | 0.6 |  |  | $ | (1.5 | ) |  | $ | 1.8 |
Deferred | (47.8 | ) |  | (1.2 | ) |  | (4.7 | ) |  | (53.7 | )
Expense applied to increase Additional paid in capital/Other comprehensive loss | (3.2 | ) |  | (0.1 | ) |  | (0.3 | ) |  | (3.6 | )
Income tax provision | $ | (48.3 | ) |  | $ | (0.7 | ) |  | $ | (6.5 | ) |  | $ | (55.5 | )
A reconciliation between the provision for income taxes and the amount computed by applying the federal statutory income tax rate to Income before income taxes is as follows (in millions of dollars):
| Year Ended December 31,
| 2018 |  | 2017 |  | 2016
Amount of federal income tax provision based on the statutory rate | $ | (25.2 | ) |  | $ | (46.5 | ) |  | $ | (51.5 | )
Decrease (increase) in federal valuation allowances | 1.7 |  |  | 0.5 |  |  | (0.3 | )
Non-deductible compensation (expense) benefit | (0.6 | ) |  | (2.3 | ) |  | 0.3 |
Non-deductible expense | (1.5 | ) |  | — |  |  | (0.3 | )
State income tax provision, net of federal benefit 1 | (2.5 | ) |  | (4.3 | ) |  | (4.2 | )
Foreign income tax (expense) benefit | (0.5 | ) |  | (0.1 | ) |  | 0.5 |
Foreign undistributed earnings | 0.4 |  |  | (5.9 | ) |  | — |
Tax rate change | (0.1 | ) |  | (29.0 | ) |  | — |
Income tax provision | $ | (28.3 | ) |  | $ | (87.6 | ) |  | $ | (55.5 | )
___________________________
1. | State income taxes were $4.5 million in 2018, increased by a $0.9 million due to higher tax rate true-ups in various states, offset by a $2.9 million decrease in the valuation allowance relating to certain state net operating losses. The state income taxes were $4.0 million in 2017, increased by a $2.5 million change in tax rates, offset by a $2.2 million decrease in the valuation allowance relating to certain state net operating losses. The state income taxes were $4.1 million in 2016, offset by a $0.2 million decrease due to lower tax rates in various states and a $0.3 million increase in the valuation allowance relating to certain state net operating losses.
Deferred Income Taxes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. The components of our net deferred income tax assets were as follows (in millions of dollars):
| Year Ended December 31,
| 2018 |  | 2017
Deferred income tax assets: |  |  |
Loss and credit carryforwards | $ | 48.7 |  |  | $ | 98.7 |
Salaried VEBA (see Note 4) | 8.0 |  |  | 11.6 |
Other assets | 27.2 |  |  | 21.0 |
Inventories | 20.0 |  |  | 9.3 |
Valuation allowances | (8.4 | ) |  | (13.0 | )
Total deferred income tax assets | 95.5 |  |  | 127.6 |
Deferred income tax liabilities: |  |  |
Property, plant and equipment | (62.0 | ) |  | (57.7 | )
Undistributed foreign earnings | (1.8 | ) |  | (2.2 | )
Total deferred income tax liabilities | (63.8 | ) |  | (59.9 | )
Net deferred income tax assets 1 | $ | 31.7 |  |  | $ | 67.7 |
__________________________
1. | Of the total net deferred income tax assets of $31.7 million, $35.9 million was presented as Deferred tax assets, net, and $4.2 million was presented as Deferred tax liabilities on the Consolidated Balance Sheet as of December 31, 2018. Of the total net deferred income tax assets of $67.7 million, $72.0 million was presented as Deferred tax assets, net, and $4.3 million was presented as Deferred tax liabilities on the Consolidated Balance Sheet as of December 31, 2017.
Tax Attributes. At December 31, 2018, we had $117.7 million of net operating loss ("NOL") carryforwards available to reduce future cash payments for federal income taxes in the United States. H.R.1, commonly referred to as the Tax Cut and Jobs Act ("Tax Act"), allows net operating losses generated prior to December 31, 2017 (including our NOL carryforwards) to be fully deducted against 100% of taxable income until fully utilized or expired (see "Tax Cuts and Jobs Act" below for further discussion of the Tax Act). Our NOL carryforwards expire periodically through 2030. We also had $11.4 million of alternative minimum tax ("AMT") credit carryforwards available to offset regular federal income tax requirements. Since the corporate AMT has been repealed in the Tax Act for tax years beginning after December 31, 2017, our AMT credit carryforwards that have not yet been used are refundable in future years. We will use AMT credits to offset any regular income tax liability in years 2018 through 2020, with 50% of remaining AMT credits refunded in each of the 2018, 2019 and 2020 tax years and all remaining credits refunded in tax year 2021 (see "Tax Cuts and Jobs Act" below for further discussion of the Tax Act). In assessing the realizability of deferred tax assets, management considers whether it is "more likely than not" that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers taxable income in carryback years, the scheduled reversal of deferred tax liabilities, tax planning strategies and projected future taxable income in making this assessment. Due to uncertainties surrounding the realization of some of our deferred tax assets, primarily including state NOL carryforwards sustained during the prior years and expiring tax benefits, we have a valuation allowance against our deferred tax assets. When recognized, the tax benefits relating to any reversal of this valuation allowance will be recorded as a reduction of income tax expense. The decrease in the valuation allowance was $4.6 million, $2.7 million and $5.5 million in 2018, 2017 and 2016, respectively. The decrease in the valuation allowance for 2018 was primarily due to the expiration of state NOL carryforwards and the related reversal of their valuation allowances and the expiration of a capital loss carryforward. The decrease in the valuation allowance for 2017 was primarily due to the expiration of state NOL carryforwards and the related reversal of their valuation allowances and the utilization of capital losses. The decrease in the valuation allowance for 2016 was primarily due to the expiration of state NOL carryforwards and the related reversal of their valuation allowances. Other. We and our subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. Our tax returns for certain past years are still subject to examination by taxing authorities and the use of NOL carryforwards in future periods could trigger a review of attributes and other tax matters in years that are not otherwise subject to examination. We have gross unrecognized benefits relating to uncertain tax positions. A reconciliation of changes in the gross unrecognized tax benefits is as follows (in millions of dollars):
|  | Year Ended December 31,
|  | 2018 |  | 2017 |  | 2016
Gross unrecognized tax benefits at beginning of period |  | $ | 1.5 |  |  | $ | 1.8 |  |  | $ | 1.7 |
Gross increases for tax positions of prior years |  | — |  |  | — |  |  | 0.1 |
Gross decreases for tax positions of prior years |  |  |  |  | (0.3 | ) |  | — |
Gross unrecognized tax benefits at end of period |  | $ | 1.5 |  |  | $ | 1.5 |  |  | $ | 1.8 |
If and when the $1.5 million of gross unrecognized tax benefits at December 31, 2018 are recognized, $0.4 million will be reflected in our income tax provision and thus affect the effective tax rate in future periods. In addition, we recognize interest and penalties related to unrecognized tax benefits in the income tax provision. We had $0.2 million and $0.1 million accrued for interest and penalties at December 31, 2018 and December 31, 2017, respectively. Of these amounts, none were considered current and, as such, were included in Long-term liabilities on the Consolidated Balance Sheets at December 31, 2018 and December 31, 2017. We recognized an increase in interest and penalty of $0.1 million in our tax provision in 2018. We recognized a decrease in interest and penalty of $0.1 million in our tax provision in 2017. There was no change to interest and penalty in 2016. We do not expect our gross unrecognized tax benefits to significantly change within the next 12 months. Tax Cuts and Jobs Act. On December 22, 2017, the U.S. government enacted the Tax Act, which makes broad and complex changes to the Code, including, but not limited to: (i) reducing the U.S. federal corporate tax rate from 35% to 21%; (ii) requiring companies to pay a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries; (iii) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (iv) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (v) eliminating the corporate AMT and changing how existing AMT credits can be realized; (vi) creating a new limitation on deductible interest expense; and (vii) changing rules related to uses and limitations of NOL carryforwards created in tax years beginning after December 31, 2017. The SEC staff issued Staff Accounting Bulletin No. 118 ("SAB 118"), which provided guidance on accounting for the tax effects of the Tax Act. SAB 118 provided a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC No. 740, Income Taxes ("ASC 740"). In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 was complete. To the extent that a company's accounting for certain income tax effects of the Tax Act was incomplete, but it was able to determine a reasonable estimate, it recorded a provisional estimate in the financial statements at December 31, 2017. The completion of the accounting for the Tax Act in accordance with SAB 118 at December 31, 2018 did not result in a significant change to the provisional amounts booked at December 31, 2017. Reduction of US Federal Corporate Tax Rate. The Tax Act reduced the corporate tax rate to 21%, effective January 1, 2018. For certain of our deferred tax assets, we recorded a decrease of $29.0 million, with a corresponding net increase to deferred income tax expense for the year ended December 31, 2017. Deemed Repatriation Transition Tax. The Deemed Repatriation Transition Tax ("Transition Tax") is a tax on previously untaxed accumulated and current earnings and profits ("E&P") of certain of our foreign subsidiaries. To determine the amount of the Transition Tax, we determined, in addition to other factors, the amount of post-1986 E&P of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. We recorded a Transition Tax obligation of $3.5 million. In addition, we have accrued $1.6 million for withholding tax since our earnings in Canada are no longer permanently reinvested. Internal Revenue Code Section 162(m). The Tax Act modified Section 162(m) of the Code ("Section 162(m)") by: (i) expanding the scope of covered employees to include the chief financial officer; (ii) providing that any individual that becomes a covered employee for a taxable year beginning after December 31, 2016 would remain a covered employee for all future years; and (iii) eliminating the exceptions for commissions and performance-based compensation from the $1.0 million deduction limit. These changes did not apply to compensation stemming from contracts entered into on or before November 2, 2017, unless such contracts were materially modified on or after that date. Compensation agreements entered into and share-based payment awards granted after this date were subject to the revised terms of Section 162(m). We recorded a Section 162(m) obligation of $2.3 million.

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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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