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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes

Note 12 – Income taxes:

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​

​

​

​

​

​

​

​

​

​

​

​

Years ended December 31, 

​

    

2020

    

2021

    

2022

​

​

(In millions)

Pre-tax income:

 

​

  

 

​

  

 

​

  

U.S.

​

$

20.9

​

$

25.5

​

$

44.1

Non-U.S.

​

 

59.1

​

 

127.9

​

 

89.8

Total

​

$

80.0

​

$

153.4

​

$

133.9

​

​

​

​

​

​

​

​

​

​

Expected tax expense, at U.S. federal statutory
   income tax rate of 21%

​

$

16.8

​

$

32.2

​

$

28.1

Non-U.S. tax rates

​

 

.7

​

 

4.6

​

 

2.1

Incremental net tax benefit on earnings and losses of U.S.
   and non-U.S. companies

​

 

(5.5)

​

 

(3.9)

​

 

(.5)

Valuation allowance, net

​

 

.8

​

 

3.1

​

 

(3.6)

Global intangible low-tax income, net

​

 

2.7

​

 

2.8

​

 

2.1

Tax rate changes

​

​

(.3)

​

​

-

​

​

-

Assessment (refund) of prior tax payments, net

​

​

(.1)

​

​

.1

​

​

-

Adjustment to the reserve for uncertain tax positions, net

​

 

.1

​

 

-

​

 

(.4)

Nondeductible expenses

​

 

.9

​

 

1.0

​

 

.9

U.S. state income taxes and other, net

​

 

-

​

 

.6

​

 

.7

Income tax expense

​

$

16.1

​

$

40.5

​

$

29.4

​

​

​

​

​

​

​

​

​

​

Components of income tax expense:

​

 

  

​

 

  

​

 

  

Current payable:

​

 

  

​

 

  

​

 

  

U.S. federal and state

​

$

4.8

​

$

4.6

​

$

10.7

Non-U.S.

​

 

14.9

​

 

21.6

​

 

20.1

​

​

 

19.7

​

 

26.2

​

 

30.8

​

​

​

​

​

​

​

​

​

​

Deferred income taxes (benefit):

​

 

  

​

 

  

​

 

  

U.S. federal and state

​

 

(2.6)

​

 

3.3

​

 

(3.0)

Non-U.S.

​

 

(1.0)

​

 

11.0

​

 

1.6

​

​

 

(3.6)

​

 

14.3

​

 

(1.4)

Income tax expense

​

$

16.1

​

$

40.5

​

$

29.4

​

​

​

​

​

​

​

​

​

​

Comprehensive provision for income taxes allocable to:

​

 

  

​

 

  

​

 

  

Net income

​

$

16.1

​

$

40.5

​

$

29.4

Other comprehensive income (loss):

​

 

  

​

 

  

​

 

  

Pension plans

​

​

(6.0)

​

​

24.0

​

​

49.3

OPEB plans

​

​

(.2)

​

​

-

​

​

.4

Total

​

$

9.9

​

$

64.5

​

$

79.1

​

The amount shown in the preceding table of our income tax rate reconciliation for non-U.S. tax rates represents the result determined by multiplying the pre-tax earnings or losses of each of our non-U.S. subsidiaries by the difference between the applicable statutory income tax rate for each non-U.S. jurisdiction and the U.S. federal statutory tax rate. The amount shown on such table for incremental net tax benefit on earnings and losses of U.S. and non-U.S. companies includes, as applicable, (i) deferred income taxes (or deferred income tax benefits) associated with the current-year earnings of all of our non-U.S. subsidiaries and (ii) current U.S. income taxes (or current income tax benefit), including U.S. personal holding company tax, as applicable, attributable to current-year income (losses) of one of our non-U.S. subsidiaries, which subsidiary is treated as a dual resident for U.S. income tax purposes, to the extent the current-year income (losses) of such subsidiary is subject to U.S. income tax under the U.S. dual-resident provisions of the Internal Revenue Code.

The components of our net deferred income taxes at December 31, 2021 and 2022 are summarized in the following table.

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​

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December 31, 

​

​

2021

​

2022

​

    

Assets

    

Liabilities

    

Assets

    

Liabilities

​

​

(In millions)

Tax effect of temporary differences related to:

 

​

  

 

​

  

 

​

  

 

​

  

Inventories

​

$

-

​

$

(2.9)

​

$

-

​

$

(5.5)

Property and equipment

​

 

-

​

 

(62.5)

​

 

-

​

 

(59.1)

Lease assets (liabilities)

​

 

5.0

​

 

(5.1)

​

 

5.3

​

 

(5.4)

Accrued OPEB costs

​

 

2.3

​

 

-

​

 

1.7

​

 

-

Accrued pension costs

​

 

73.6

​

 

-

​

 

21.6

​

 

-

Other accrued liabilities and deductible differences

​

 

12.1

​

 

-

​

 

15.3

​

 

-

Other taxable differences

​

 

-

​

 

(3.3)

​

 

-

​

 

(3.9)

Tax on unremitted earnings of non-U.S. subsidiaries

​

 

-

​

 

(11.2)

​

 

-

​

 

(11.3)

Tax loss and tax credit carryforwards

​

 

78.1

​

 

-

​

 

70.7

​

 

-

Valuation allowance

​

 

(7.4)

​

 

-

​

 

(3.8)

​

 

-

Adjusted gross deferred tax assets (liabilities)

​

 

163.7

​

 

(85.0)

​

 

110.8

​

 

(85.2)

Netting by tax jurisdiction

​

 

(56.9)

​

 

56.9

​

 

(58.8)

​

 

58.8

Net noncurrent deferred tax asset (liability)

​

$

106.8

​

$

(28.1)

​

$

52.0

​

$

(26.4)

​

We have substantial net operating loss (NOL) carryforwards in Germany (the equivalent of $414 million for German corporate tax purposes at December 31, 2022) and in Belgium (the equivalent of $13 million for Belgian corporate tax purposes at December 31, 2022). At December 31, 2022, we have concluded that no deferred income tax asset valuation allowance is required to be recognized with respect to such carryforwards, principally because (i) such carryforwards have an indefinite carryforward period, (ii) we have utilized a portion of such carryforwards during the most recent three-year period and (iii) we currently expect to utilize the remainder of such carryforwards over the long term. However, prior to the complete utilization of such carryforwards, if we were to generate additional losses in our German or Belgian operations for an extended period of time, or if applicable law were to change such that the carryforward period was no longer indefinite, it is possible that we might conclude the benefit of such carryforwards would no longer meet the more-likely-than-not recognition criteria, at which point we would be required to recognize a valuation allowance against some or all of the then-remaining tax benefit associated with the carryforwards.

Prior to the enactment of the 2017 Tax Act, the undistributed earnings of our European subsidiaries were deemed to be permanently reinvested (we had not made a similar determination with respect to the undistributed earnings of our Canadian subsidiary). Pursuant to the one-time repatriation tax (Transition Tax) provisions of the 2017 Tax Act which imposed a one-time repatriation tax on post-1986 undistributed earnings, we recognized current income tax expense of $74.5 million and elected to pay such tax over an eight year period beginning in 2018. At December 31, 2022, the balance of our unpaid Transition Tax is $44.7 million, which will be paid in annual installments over the remainder of the eight-year period, which ends in 2025. Of such $44.7 million, $33.5 million is recorded as a noncurrent payable to affiliate (income taxes payable to Valhi) classified as a noncurrent liability on our Consolidated Balance Sheet at December 31, 2022, and $11.2 million is included with our current payable to affiliate (income taxes payable to Valhi) classified as a current liability (a portion of our noncurrent income tax payable to affiliate was reclassified to our current payable to affiliate for the portion of our 2022 Transition Tax installment due within the next twelve months).

On March 27, 2020, the “Coronavirus Aid, Relief and Economic Security (CARES) Act” was signed into law in response to the COVID-19 pandemic. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, modifications to the limitation of business interest for tax years beginning in 2019 and 2020 and technical corrections to tax depreciation methods for qualified improvement property. The 2017 Tax Act limited our business interest expense to the sum of our business interest income and 30% of our adjusted taxable income as defined in the Tax Act. Any business interest expense disallowed as a deduction as a result of the limitation may be carried forward indefinitely. We determined our interest expense was limited under these provisions and we recorded deferred tax assets for the carryforwards associated with the nondeductible portion of our interest expense. We also concluded we were required to recognize a valuation allowance for such deferred tax asset under the more-likely-than-not recognition criteria. The CARES Act modification to the business interest provisions increased the business interest limitation from 30% of adjusted taxable income to 50% of adjusted taxable income which increased our allowable interest expense deduction for 2019 and 2020. Consequently, in the first quarter of 2020 we recognized a cash tax benefit of $.5 million related to the reversal of the valuation allowance recognized in 2019 for the portion of the disallowed interest expense we did not expect to fully utilize at December 31, 2019 and we considered such modifications in our 2020 provision for income taxes. These CARES Act provisions expired at the end of 2020, and in 2021 we recognized additional disallowed interest expense and increased the valuation allowance by $2.8 million for the portion of the carryforward we believed did not meet the more-likely-than-not measurement criteria. During 2022, we determined we were able to utilize a portion of the business interest expense carryforward and accordingly we recognized an aggregate non-cash income tax benefit of $3.5 million as a reduction of the valuation allowance.

On August 16, 2022, the Inflation Reduction Act was signed into law. Among other things, this legislation provides for a 15% corporate alternative minimum tax on certain large corporations, imposes a 1% excise tax on qualifying stock buybacks occurring after December 31, 2022, and provides for certain energy-related tax credits. We have evaluated the relevant provisions of the Act and do not expect them to have a material impact on our tax provision.

Tax authorities may in the future examine certain of our U.S. and non-U.S. tax returns and may propose tax deficiencies, including penalties and interest. Because of the inherent uncertainties involved in settlement initiatives and court and tax proceedings, we cannot guarantee that these tax matters, if any, will be resolved in our favor, and therefore our potential exposure, if any, is also uncertain. We believe we have adequate accruals for additional taxes and related interest expense which could ultimately result from tax examinations. We believe the ultimate disposition of tax examinations should not have a material adverse effect on our consolidated financial position, results of operations or liquidity.

We accrue interest and penalties on our uncertain tax positions as a component of our provision for income taxes. The amount of interest and penalties we accrued during 2020, 2021 and 2022 was not material.

The following table shows the changes in the amount of our uncertain tax positions (exclusive of the effect of interest and penalties discussed above) during 2020, 2021 and 2022:

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​

​

​

​

​

​

​

​

​

​

​

Years ended December 31, 

​

    

2020

    

2021

    

2022

​

​

(In millions)

Changes in unrecognized tax benefits:

 

​

  

 

​

  

 

​

  

Unrecognized tax benefits at beginning of year

​

$

3.9

​

$

4.1

​

$

3.8

Net increase (decrease):

​

 

  

​

 

  

​

 

  

Tax positions taken in prior periods

​

 

(.3)

​

 

-

​

 

-

Tax positions taken in current period

​

 

.6

​

 

.6

​

 

.7

Lapse due to applicable statute of limitations

​

 

(.5)

​

 

(.7)

​

 

(1.1)

Change in currency exchange rates

​

 

.4

​

 

(.2)

​

 

(.2)

Unrecognized tax benefits at end of year

​

$

4.1

​

$

3.8

​

$

3.2

​

At December 31, 2022, all of our uncertain tax benefits are classified as a component of our noncurrent deferred tax asset. If our uncertain tax position at December 31, 2022 was recognized, a benefit of $3.2 million would affect our effective income tax rate. We currently estimate that our unrecognized tax benefits will decrease by approximately $1.0 million during the next twelve months due to the expiration of certain statutes of limitations.

We and Contran file income tax returns in U.S. federal and various state and local jurisdictions. We also file income tax returns in various non-U.S. jurisdictions, principally in Germany, Canada, Belgium and Norway. Our U.S. income tax returns prior to 2019 are generally considered closed to examination by applicable tax authorities. Our non-U.S. income tax returns are generally considered closed to examination for years prior to 2018 for Germany, 2019 for Belgium, 2017 for Canada and 2017 for Norway.