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Income Taxes | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | Note 14—Income taxes:
| Years ended December 31, |
| 2018 |  |  | 2019 |  |  | 2020 |
| (In millions) |
Pre-tax income (loss): |  |  |  |  |  |  |  |  |  |  |
United States | $ | (22.5 | ) |  | $ | 23.5 |  |  | $ | 45.2 |
Non-U.S. subsidiaries |  | 258.7 |  |  |  | 81.2 |  |  |  | 55.4 |
Total | $ | 236.2 |  |  | $ | 104.7 |  |  | $ | 100.6 |
Expected tax expense at U.S. federal statutory income tax rate of 21% | $ | 49.6 |  |  | $ | 22.0 |  |  | $ | 21.1 |
Non-U.S. tax rates |  | 20.8 |  |  |  | 5.2 |  |  |  | .5 |
Incremental net tax benefit on earnings and losses of U.S. and non-U.S. tax group companies |  | (167.8 | ) |  |  | (4.5 | ) |  |  | (8.7 | )
Valuation allowance |  | - |  |  |  | 4.5 |  |  |  | 3.8 |
Transition tax |  | (2.1 | ) |  |  | - |  |  |  | - |
Global intangible low-tax income, net |  | 4.0 |  |  |  | 1.8 |  |  |  | 2.2 |
Tax rate changes |  | 58.8 |  |  |  | 4.7 |  |  |  | (.2 | )
U.S. state income taxes, net |  | .6 |  |  |  | (.3 | ) |  |  | .9 |
Adjustment to the reserve for uncertain tax positions, net |  | 4.1 |  |  |  | (5.1 | ) |  |  | (3.8 | )
Nondeductible expenses |  | 3.0 |  |  |  | 1.5 |  |  |  | 1.0 |
Canada - Germany APA |  | (1.4 | ) |  |  | - |  |  |  | - |
Refund of prior tax payments, net |  | - |  |  |  | (2.1 | ) |  |  | - |
Other, net |  | (.3 | ) |  |  | (1.2 | ) |  |  | (.9 | )
Income tax expense (benefit) | $ | (30.7 | ) |  | $ | 26.5 |  |  | $ | 15.9 |
Components of income tax expense (benefit): |  |  |  |  |  |  |  |  |  |  |
Currently payable: |  |  |  |  |  |  |  |  |  |  |
U.S. federal and state | $ | 34.1 |  |  | $ | 4.3 |  |  | $ | 13.3 |
Non-U.S. |  | 51.1 |  |  |  | 22.0 |  |  |  | 14.9 |
Total |  | 85.2 |  |  |  | 26.3 |  |  |  | 28.2 |
Deferred income taxes (benefit): |  |  |  |  |  |  |  |  |  |  |
U.S. federal and state |  | (145.5 | ) |  |  | (4.1 | ) |  |  | (10.3 | )
Non-U.S. |  | 29.6 |  |  |  | 4.3 |  |  |  | (2.0 | )
Total |  | (115.9 | ) |  |  | .2 |  |  |  | (12.3 | )
Income tax expense (benefit) | $ | (30.7 | ) |  | $ | 26.5 |  |  | $ | 15.9 |
Comprehensive provision for income taxes (benefit) allocable to: |  |  |  |  |  |  |  |  |  |  |
Income (loss) from continuing operations | $ | (30.7 | ) |  | $ | 26.5 |  |  | $ | 15.9 |
Discontinued operations |  | 23.7 |  |  |  | - |  |  |  | .6 |
Retained earnings-change in accounting principle |  | 1.1 |  |  |  | - |  |  |  | - |
Other comprehensive income (loss): |  |  |  |  |  |  |  |  |  |  |
Currency translation |  | (4.2 | ) |  |  | (.2 | ) |  |  | 1.6 |
Pension plans |  | (4.7 | ) |  |  | (15.6 | ) |  |  | (7.3 | )
Other |  | (.4 | ) |  |  | (.5 | ) |  |  | (.4 | )
Total | $ | (15.2 | ) |  | $ | 10.2 |  |  | $ | 10.4 |
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 on non-U.S. and non-tax group companies includes, as applicable, (i) deferred income taxes (or deferred income tax benefits) associated with the current year earnings of all our Chemicals Segment’s non-U.S. subsidiaries, (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 Kronos’ 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, (iii) deferred income taxes associated with our direct investment in Kronos and (iv) current and deferred income taxes associated with distributions and earnings from our investment in LandWell and BMI. The components of the net deferred income taxes at December 31, 2019 and 2020 are summarized in the following table.
| December 31, |
| 2019 |  |  | 2020 |
| Assets |  |  | Liabilities |  |  | Assets |  |  | Liabilities |
| (In millions) |
Tax effect of temporary differences related to: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Inventories | $ | 3.7 |  |  | $ | - |  |  | $ | 1.9 |  |  | $ | - |
Property and equipment |  | - |  |  |  | (61.8 | ) |  |  | - |  |  |  | (67.2 | )
Lease assets (liabilities) |  | 5.9 |  |  |  | (6.1 | ) |  |  | 6.3 |  |  |  | (6.5 | )
Accrued OPEB costs |  | 2.8 |  |  |  | - |  |  |  | 3.0 |  |  |  | - |
Accrued pension costs |  | 80.6 |  |  |  | - |  |  |  | 100.5 |  |  |  | - |
Accrued environmental liabilities |  | 33.8 |  |  |  | - |  |  |  | 31.0 |  |  |  | - |
Other deductible differences |  | 8.3 |  |  |  | - |  |  |  | 9.2 |  |  |  | - |
Other taxable differences |  | - |  |  |  | (13.7 | ) |  |  | - |  |  |  | (13.1 | )
Investments in subsidiaries and affiliates |  | 2.6 |  |  |  | (54.4 | ) |  |  | 2.7 |  |  |  | (48.1 | )
Tax on unremitted earnings of non-U.S. subsidiaries |  | - |  |  |  | (10.8 | ) |  |  | - |  |  |  | (12.0 | )
Tax loss and tax credit carryforwards |  | 91.2 |  |  |  | - |  |  |  | 100.4 |  |  |  | - |
Valuation allowance |  | (14.2 | ) |  |  | - |  |  |  | (17.5 | ) |  |  | - |
Adjusted gross deferred tax assets (liabilities) |  | 214.7 |  |  |  | (146.8 | ) |  |  | 237.5 |  |  |  | (146.9 | )
Netting of items by tax jurisdiction |  | (108.7 | ) |  |  | 108.7 |  |  |  | (117.3 | ) |  |  | 117.3 |
Net noncurrent deferred tax asset (liability) | $ | 106.0 |  |  | $ | (38.1 | ) |  | $ | 120.2 |  |  | $ | (29.6 | )
Tax authorities are examining certain of our U.S. and non-U.S. tax returns and have or 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. Our Chemicals Segment has substantial net operating loss (NOL) carryforwards in Germany (the equivalent of $531 million for German corporate purposes at December 31, 2020) and in Belgium (the equivalent of $20 million for Belgian corporate tax purposes at December 31, 2020). At December 31, 2020, 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 Chemicals Segment’s European subsidiaries were deemed to be permanently reinvested (we had not made a similar determination with respect to the undistributed earnings of our Chemicals Segment’s 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 a provisional current income tax expense of $76.2 million in the fourth quarter of 2017 based on information available at that date. During the third quarter of 2018, in conjunction with finalizing our federal income tax return and based on additional information that became available (including proposed regulations issued by the IRS in August 2018 with respect to the Transition Tax), we recognized a provisional income tax benefit of $2.1 million which amount is recorded as a measurement-period adjustment, reducing the provisional income tax expense recognized in the fourth quarter of 2017. We elected to pay such tax over an eight year period beginning in 2018. At December 31, 2020, the balance of our unpaid Transition Tax is $56.3 million, which will be paid in annual installments over the remainder of the eight year period. Of such $56.3 million, $50.4 million is recorded as a noncurrent payable to affiliate (income taxes payable to Contran) classified as a noncurrent liability in our Consolidated Balance Sheet, and $5.9 million is included with our current payable to affiliate (income taxes payable to Contran) 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 2020 Transition Tax installment due within the next twelve months). The 2017 Tax Act amended the rules limiting the deduction for business interest expense beginning in 2018. The limitation applies to all taxpayers and our annual deduction for business interest expense is limited to the sum of our business interest income and 30% of our adjusted taxable income as defined under the 2017 Tax Act. Any business interest expense not allowed as a deduction as a result of the limitation may be carried forward indefinitely and is treated as interest paid in the carryforward year subject to the respective year’s limitation. We determined that our interest expense for 2018, 2019 and 2020 was limited under these provisions. The limitation in 2018 resulted in part because of the loss we recognized on the sale of WCS for income tax purposes and the limitation in 2019 and 2020 are primarily attributable to lower earnings. We have concluded we are required to recognize a non-cash deferred income tax asset valuation allowance under the more-likely-than-not recognition criteria with respect to a portion of our deferred tax asset attributable to the nondeductible amount of business interest expense carryforward. Consequently, our provision for income taxes includes a non-cash deferred income tax expense of $6.8 million in 2018, $4.5 million in 2019 and $3.3 million in 2020 for the amount of deferred income tax asset that does not meet the more-likely-than-not recognition criteria. In accordance with the ASC 740 guidance regarding intra-period allocation of income taxes, the full amount of non-cash deferred income tax expense in 2018 is classified as part of the income taxes associated with the pre-tax gain we recognized for financial reporting purposes on the sale of WCS which is classified as part of discontinued operations (see Note 3 to our Consolidated Financial Statements and Discontinued Operations —Waste Control Specialists LLC). In the fourth quarter of 2019, we recognized an income tax benefit of $3.0 million primarily related to the favorable settlement of a prior year tax matter in Germany, with $1.5 million recognized as a current cash tax benefit and $1.5 million recognized as a non-cash deferred income tax benefit related to an increase to our German net operating loss carryforward. In addition, we recognized a non-cash deferred income tax expense of $4.7 million primarily related to the revaluation of our net deferred income tax asset in Germany resulting from a decrease in the German trade tax rate. As a result of prior audits in certain jurisdictions, which are now settled, in 2008 we filed Advance Pricing Agreement Requests with the tax authorities in the U.S., Canada and Germany. These requests had been under review with the respective tax authorities since 2008 and prior to 2016, it was uncertain whether an agreement would be reached between the tax authorities and whether we would agree to execute and finalize such agreements. During the first quarter of 2018, our German subsidiary executed and finalized the related Advance Pricing Agreement with the Competent Authority for Germany effective for tax years 2005 - 2017. In the first quarter of 2018, we recognized a net $1.4 million non-cash income tax benefit related to an APA tax settlement payment between our German and Canadian subsidiaries. We recognized a non-cash deferred income tax benefit of $1.8 million in 2018 related to a decrease in our effective state income tax rate; this decrease is a direct result of the sale of our interest in the Amalgamated Sugar Company LLC which reduced the number of state jurisdictions in which we are required to file. We recognize deferred income taxes with respect to the excess of the financial reporting carrying amount over the income tax basis of our direct investment in Kronos common stock because the exemption under GAAP to avoid such recognition of deferred income taxes is not available to us. At December 31, 2020, we have recognized a deferred income tax liability with respect to our direct investment in Kronos of $35.5 million. There is a maximum amount (or cap) of such deferred income taxes we are required to recognize with respect to our direct investment in Kronos. The maximum amount of such deferred income tax liability we would be required to have recognized (the cap) is $155.4 million. During 2020, we recognized a non-cash deferred income tax benefit with respect to our direct investment in Kronos of $2.4 million for the decrease in the deferred income taxes required to be recognized with respect to the excess of the financial reporting carrying amount over the income tax basis of our direct investment in Kronos common stock, to the extent such decrease related to our equity in Kronos’ net income during such period. We recognized a similar non-cash deferred income tax expense of $.1 million in 2019 and $4.9 million in 2018. A portion of the net change with respect to the excess of the financial reporting carrying amount over the income tax basis of our direct investment in Kronos common stock during such periods related to our equity in Kronos’ other comprehensive income (loss) items, and the amounts shown in the table above for income tax expense (benefit) allocated to other comprehensive income (loss) items includes amounts related to our equity in Kronos’ other comprehensive income (loss) items. Due to uncertainties and complexities of the 2017 Tax Act, we were still evaluating the impact of the one-time deemed repatriation of the post-1986 undistributed earnings of our non-U.S. subsidiaries up through December 31, 2017 as it relates to the income tax basis of our direct investment in Kronos at December 31, 2017. During the third quarter of 2018, in conjunction with finalizing our federal income tax return and based on additional information that became available (including proposed regulations issued by the IRS in August 2018 with respect to the Transition Tax), we recognized an adjustment, which was treated as a measurement period adjustment, to the deferred income taxes we recognized at December 31, 2017 associated with our direct investment in Kronos common stock (before revaluation of our deferred tax liability related to the decrease in the corporate income tax rate). Such adjustment resulted in an investment basis adjustment under the income tax regulations which increased the income tax basis of our direct investment in Kronos attributable to the income recognition related to the deemed repatriation of the post-1986 undistributed earnings of our non-U.S. subsidiaries in 2017. Such adjustment resulted in a non-cash deferred tax measurement period adjustment decreasing the deferred income taxes we recognize with respect to the excess of the financial reporting carrying amount over the income tax basis of our direct investment in Kronos common stock. Including the impact of the non-cash deferred tax revaluation adjustment discussed above, we recognized a net non-cash deferred income tax benefit of $112 million in the third quarter of 2018 related to the incremental tax on Kronos. We completed our analysis related to the impact of the 2017 Tax Act as it related to the income tax basis of our direct investment in Kronos as of September 30, 2018. 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. 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 modification to the business interest provisions increases the business interest limitation from 30% of adjusted taxable income to 50% of adjusted taxable income which increases our allowable interest expense deduction for 2019 and 2020. Consequently, in the first quarter of 2020 we recognized a cash tax benefit of $1.0 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 have considered such modifications in our 2020 provision for income taxes. Other provisions of the CARES Act did not have a material impact on our provision for income taxes in 2020. The following table shows the changes in the amount of our uncertain tax positions (exclusive of the effect of interest and penalties) during 2018, 2019 and 2020:
| Years ended December 31, |
| 2018 |  |  | 2019 |  |  | 2020 |
| (In millions) |
Unrecognized tax benefits: |  |  |  |  |  |  |  |  |  |  |
Amount at beginning of year | $ | 17.1 |  |  | $ | 21.0 |  |  | $ | 13.8 |
Net increase (decrease): |  |  |  |  |  |  |  |  |  |  |
Tax positions taken in prior periods |  | 1.3 |  |  |  | (5.6 | ) |  |  | (.3 | )
Tax positions taken in current period |  | 4.5 |  |  |  | .7 |  |  |  | .6 |
Lapse due to applicable statute of limitations |  | (1.8 | ) |  |  | - |  |  |  | (4.8 | )
Settlement with taxing authorities |  | - |  |  |  | (2.2 | ) |  |  | - |
Changes in currency exchange rates |  | (.1 | ) |  |  | (.1 | ) |  |  | .3 |
Amount at end of year | $ | 21.0 |  |  | $ | 13.8 |  |  | $ | 9.6 |
If our uncertain tax positions were recognized, a benefit of $9.4 million at December 31, 2020, would affect our effective income tax rate. We currently estimate that our unrecognized tax benefits will decrease by approximately $3.6 million, excluding interest, during the next twelve months related 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 foreign jurisdictions, principally in Germany, Canada, Belgium and Norway. Our U.S. income tax returns prior to 2017 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: 2011 for Norway; 2015 for Canada; 2016 for Germany; and 2017 for Belgium. We accrue interest and penalties on our uncertain tax positions as a component of our provision for income taxes. We accrued interest and penalties of $1.3 million during each of 2018 and 2019 and $.8 million during 2020, and at December 31, 2019 and 2020 we had $1.9 million and $1.3 million, respectively, accrued for interest and an immaterial amount accrued for penalties for our uncertain tax positions.

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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 http://asc.fasb.org/extlink&oid=84230637&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 http://asc.fasb.org/extlink&oid=116825942&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 http://asc.fasb.org/extlink&oid=84230637&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 http://asc.fasb.org/extlink&oid=116825942&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 http://asc.fasb.org/extlink&oid=84230637&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 http://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 http://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 http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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