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v3.22.4

Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes For financial reporting purposes, income before income taxes includes the following components (in millions):
| Years Ended December 31,
| 2022 |  | 2021 |  | 2020
U.S. | $ | (88.2) |  |  | $ | 28.5 |  |  | $ | 29.1 |
Foreign | 63.8 |  |  | 44.6 |  |  | 68.2 |
Total | $ | (24.4) |  |  | $ | 73.1 |  |  | $ | 97.3 |
An analysis of the expense (benefit) for income taxes from continuing operations follows (in millions):
| Years Ended December 31,
| 2022 |  | 2021 |  | 2020
Current income taxes: |  |  |  |  |
U.S. federal | $ | 0.5 |  |  | $ | 5.0 |  |  | $ | 7.3 |
U.S. state | 2.3 |  |  | 0.7 |  |  | 1.5 |
Foreign | 16.3 |  |  | 11.9 |  |  | 14.8 |
| $ | 19.1 |  |  | $ | 17.6 |  |  | $ | 23.6 |
Deferred income taxes: |  |  |  |  |
U.S. federal | $ | (18.4) |  |  | $ | 7.5 |  |  | $ | (5.3) |
U.S. state | (4.9) |  |  | (0.2) |  |  | 1.0 |
Foreign | (8.4) |  |  | (34.3) |  |  | (0.9) |
| $ | (31.7) |  |  | $ | (27.0) |  |  | $ | (5.2) |
Total | $ | (12.6) |  |  | $ | (9.4) |  |  | $ | 18.4 |
A reconciliation of income taxes computed at the U.S. Federal statutory income tax rate to the expense for income taxes is as follows (in millions):
| Years Ended December 31,
| 2022 |  | 2021 |  | 2020
| Amount |  | Percent |  | Amount |  | Percent |  | Amount |  | Percent
Tax provision at U.S. statutory rate | $ | (5.1) |  |  | 21.0 | % |  | $ | 15.4 |  |  | 21.0 | % |  | $ | 20.4 |  |  | 21.0 | %
Foreign income tax rate differential | (2.1) |  |  | 8.8 |  |  | 2.9 |  |  | 4.0 |  |  | 2.5 |  |  | 2.6 |
Income from passthrough entities | 3.3 |  |  | (13.3) |  |  | 4.2 |  |  | 5.7 |  |  | 2.3 |  |  | 2.3 |
Branch earnings | 0.2 |  |  | (1.0) |  |  | (0.9) |  |  | (1.2) |  |  | — |  |  | — |
Global intangible low tax inclusion | 0.5 |  |  | (2.1) |  |  | 4.7 |  |  | 6.4 |  |  | 4.8 |  |  | 4.8 |
Subpart F income | 0.7 |  |  | (2.7) |  |  | 1.0 |  |  | 1.3 |  |  | 0.6 |  |  | 0.6 |
Foreign derived intangible income | (0.7) |  |  | 2.9 |  |  | (0.8) |  |  | (1.0) |  |  | (0.3) |  |  | (0.3) |
State income tax, net of federal benefit | (2.3) |  |  | 9.5 |  |  | 0.5 |  |  | 0.7 |  |  | 1.8 |  |  | 1.8 |
Adjustments to valuation allowances | (8.4) |  |  | 34.5 |  |  | 57.0 |  |  | 78.0 |  |  | (3.9) |  |  | (3.9) |
Capital loss carryforward | — |  |  | — |  |  | (86.5) |  |  | (118.3) |  |  | — |  |  | — |
Other tax credits | (2.7) |  |  | 10.7 |  |  | (1.4) |  |  | (2.0) |  |  | (0.8) |  |  | (0.8) |
Foreign tax credits | (2.8) |  |  | 11.2 |  |  | (11.0) |  |  | (15.0) |  |  | (9.9) |  |  | (10.0) |
Other foreign operational taxes | 4.1 |  |  | (16.8) |  |  | 2.6 |  |  | 3.6 |  |  | 2.9 |  |  | 2.9 |
Base erosion minimum tax amount | (2.0) |  |  | 8.1 |  |  | 2.4 |  |  | 3.3 |  |  | — |  |  | — |
Remeasurement of deferred taxes due to tax law | (2.9) |  |  | 12.0 |  |  | 0.1 |  |  | 0.1 |  |  | 0.3 |  |  | 0.3 |
Non-deductible compensation expense | 1.4 |  |  | (5.6) |  |  | 0.6 |  |  | 0.8 |  |  | (0.3) |  |  | (0.3) |
Non-deductible acquisition expense | 5.4 |  |  | (21.9) |  |  | — |  |  | — |  |  | — |  |  | — |
Uncertain tax positions | 1.1 |  |  | (4.6) |  |  | 0.3 |  |  | 0.4 |  |  | 0.2 |  |  | 0.2 |
Other, net | (0.3) |  |  | 0.9 |  |  | (0.5) |  |  | (0.7) |  |  | (2.2) |  |  | (2.3) |
Provision for income taxes | $ | (12.6) |  |  | 51.6 | % |  | $ | (9.4) |  |  | (12.9) | % |  | $ | 18.4 |  |  | 18.9 | %
A benefit for income taxes of $12.6 million, a benefit for income taxes of $9.4 million and an expense for income taxes of $18.4 million in the years ended December 31, 2022, 2021, and 2020, respectively, resulted in an effective tax rate of 51.6%, (12.9)%, and 18.9% in 2022, 2021, and 2020, respectively. The Company’s effective tax rates differ from the statutory federal income tax rate of 21% due primarily to varying tax rates in foreign jurisdictions, the relative amounts of income we earn in those jurisdictions, adjustments to valuation allowances, and acquisition related nondeductible expenses due to the Neenah merger. Prior to the passage of the Tax Cuts and Jobs Act of 2017 ("Tax Act"), the Company asserted that substantially all of the undistributed earnings of its foreign subsidiaries were considered indefinitely reinvested and accordingly, no deferred taxes were provided. Due to the Tax Act, the Company has significant previously taxed earnings and profits from its foreign subsidiaries, as a result of transition tax, that is generally able to be repatriated free of U. S. federal tax. In addition, future earnings of foreign subsidiaries are generally expected to be able to be repatriated free of U.S. federal income tax because these earnings were taxed in the U.S. under the GILTI regime or would be eligible for a 100% dividends received deduction. As a result of the Company’s treasury policy to simplify and expediate its intercompany cash flows, as evidenced by the use of cash pooling, and in light of the Company’s demonstrated goal of driving growth though inorganic/acquisitional means, the Company does not assert indefinite reinvestment to the extent of each controlled foreign corporation's earnings and profits and to the extent of any foreign partnership’s U.S. tax capital accounts. As a result, the Company has provided for non-U.S. withholding taxes, U.S. federal tax related to currency movement on previously taxed earnings and profits, and U.S. state taxes on unremitted earnings. Net deferred income tax assets (liabilities) were comprised of the following (in millions):
| December 31,
| 2022 |  | 2021
Deferred Tax Assets |  |  |
Receivable allowances | $ | 1.2 |  |  | $ | 0.9 |
Postretirement and other employee benefits | 17.8 |  |  | 17.1 |
Net operating loss and tax credit carryforwards | 163.4 |  |  | 129.6 |
Capital loss carryforward | 106.5 |  |  | 103.1 |
Accruals and other liabilities | 2.1 |  |  | 0.4 |
Investment in subsidiaries | 8.9 |  |  | — |
Capitalized research & development | 29.8 |  |  | — |
Other | 26.5 |  |  | 12.6 |
| $ | 356.2 |  |  | $ | 263.7 |
Less: Valuation allowance | (231.9) |  |  | (232.3) |
Net deferred income tax assets | $ | 124.3 |  |  | $ | 31.4 |
Deferred Tax Liabilities |  |  |
Net property, plant and equipment | $ | (131.4) |  |  | $ | (60.3) |
Intangibles | (104.1) |  |  | (31.3) |
Investment in subsidiaries | — |  |  | (0.6) |
Derivatives | (16.9) |  |  | (0.3) |
Other | (9.7) |  |  | (0.1) |
| $ | (262.1) |  |  | $ | (92.6) |
Less: Valuation allowance | — |  |  | — |
Net deferred income tax liabilities | $ | (262.1) |  |  | $ | (92.6) |
Total net deferred income tax liabilities | $ | (137.8) |  |  | $ | (61.2) |
As of December 31, 2022, the Company had approximately $116.5 million of tax-effected operating loss carryforwards available to further reduce future taxable income in various jurisdictions, with the following expiration dates:
2023-2042 | $ | 35.5 |
Indefinite | 81.0 |
Total | $ | 116.5 |
In addition, the Company has $106.5 million of tax effected capital loss carryforwards, of which $98.9 million will expire between 2024-2026 and $7.5 million are indefinite lived. The Company also has $13.1 million and $9.9 million of foreign tax credits and state tax credits and that will expire between 2028 – 2032, and 2023 – 2037, respectively. The Company's deferred tax asset valuation allowances are primarily the result of uncertainties regarding the future realization of recorded tax benefits on tax loss, capital loss, and credit carryforwards. The valuation allowance on deferred tax assets as of December 31, 2022, is substantially in the United States and Luxembourg, of $111.3 million and $94.0 million, respectively. In addition, there is a valuation allowance on ICMS value added tax credits of $6.2 million in Brazil and certain state tax credits of $3.5 million. The Company's assumptions, judgments and estimates relative to the valuation of these net deferred tax assets take into account available positive and negative evidence of realizability, including recent financial performance, the ability to realize benefits of restructuring and other recent actions, projections of the amount and category of future taxable income and tax planning strategies. Actual future operating results and the underlying amount and category of income in future periods could differ from the Company's current assumptions, judgments and estimates. The Company believes that it will generate sufficient future taxable income to realize the tax benefits related to the remaining net deferred tax assets. The following table summarizes the activity related to the Company's unrecognized tax benefits related to income taxes (in millions):
| Years Ended December 31,
| 2022 |  | 2021 |  | 2020
Uncertain tax position balance at beginning of year | $ | 9.8 |  |  | $ | 2.0 |  |  | $ | 1.7 |
Increases in current year tax positions | 0.1 |  |  | 0.3 |  |  | 0.3 |
Increases in prior year tax positions | 1.4 |  |  | — |  |  | — |
Decreases due to lapse of statute of limitations | (0.4) |  |  | (0.7) |  |  | — |
Increases from business acquisitions | 9.0 |  |  | 8.2 |  |  | — |
Uncertain tax position balance at end of year | $ | 19.9 |  |  | $ | 9.8 |  |  | $ | 2.0 |
The liability for unrecognized tax benefits included $13.6 million as of December 31, 2022, that if recognized would impact the Company's effective tax rate. We do not anticipate a material decrease in unrecognized tax benefits by the end of 2022 as a result of a lapse of the statute of limitations and other regulatory filings. The Company's policy with respect to penalties and interest in connection with income tax assessments or related to unrecognized tax benefits is to classify penalties as provision for income taxes and interest as interest expense in its Consolidated Statements of Income (Loss). There were no material income tax penalties or interest accrued on current year uncertain tax positions during the years ended December 31, 2022, 2021 and 2020. The Company files income tax returns, including returns for its subsidiaries, with federal, state, local and foreign jurisdictions. The Company finalized an audit in France for tax years 2018-2020 during 2022. All expected impacts have been recorded in 2022 or earlier and are immaterial to the tax rate. We are no longer subject to U.S. federal examinations by the IRS for tax years before 2019. The 2015-2022 tax years remain subject to examination by other major tax jurisdictions.

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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://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI https://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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