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Income Taxes | 12 Months Ended
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Dec. 31, 2021
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The following table summarizes the U.S. and non-U.S. components of income before provision for income taxes:
| For the Year Ended December 31,
| 2021 |  | 2020 |  | 2019
| (Dollars in thousands)
U.S. | $ | (69,087) |  |  | $ | 51,672 |  |  | $ | 85,365 |
Non-U.S. | 525,493 |  |  | 458,373 |  |  | 757,462 |
Income before provision for income taxes | $ | 456,406 |  |  | $ | 510,045 |  |  | $ | 842,827 |
Provision for income taxes consists of the following:
| For the Year Ended December 31, |
| 2021 |  | 2020 |  | 2019
U.S. income taxes: |  |  |  |  |  |
Current | $ | 645 |  |  | $ | (7,660) |  |  | $ | 16,589 |  |
Deferred | 2,132 |  |  | 27,822 |  |  | 5,690 |  |
| 2,777 |  |  | 20,162 |  |  | 22,279 |  |
Non-U.S. income taxes: |  |  |  |  |  |
Current | 71,088 |  |  | 63,092 |  |  | 64,134 |  |
Deferred | (5,789) |  |  | (7,583) |  |  | 11,812 |  |
| 65,299 |  |  | 55,509 |  |  | 75,946 |  |
Provision for income taxes | $ | 68,076 |  |  | $ | 75,671 |  |  | $ | 98,225 |  |
Provision for income taxes in 2021 was $68.1 million on income before taxes of $456.4 million. In 2020, provision for income taxes was $75.7 million on income before taxes of $510.0 million, and in 2019, provision for income taxes was $98.2 million on income before taxes of $842.8 million. The change in tax expense from year to year is primarily due to the reduction in pre-tax income, the mix of worldwide earnings from various countries taxed at different rates and the U.S. taxation of GILTI. The years 2019 and 2021 also included the partial release of a valuation allowance recorded against the deferred tax asset related to certain foreign, U.S. federal and state tax attributes. Provision for income taxes differed from the amount computed by applying the U.S. federal income tax rate of 21% for the years ended December 31, 2021, 2020 and 2019 to income before the provision for income taxes as set forth in the following table:
| For the Year Ended December 31,
| 2021 |  | 2020 |  | 2019
| (Dollars in thousands)
Tax at statutory U.S. federal rate | $ | 95,845 |  |  | $ | 107,109 |  |  | $ | 176,994 |
Impact of U.S. Tax Cuts and Jobs Act of 2017 - GILTI | 51,016 |  |  | 45,539 |  |  | 65,531 |
Impact of Tax Receivable Agreement | 49 |  |  | (4,429) |  |  | 713 |
Valuation allowance | (2,208) |  |  | (980) |  |  | (14,548) |
State taxes, net of federal tax benefit | 1,414 |  |  | 3,591 |  |  | 4,231 |
U.S. tax impact of foreign earnings (net of foreign tax credits) | 537 |  |  | 2,113 |  |  | 2,181 |
Establishment/resolution of uncertain tax positions | (48) |  |  | (78) |  |  | (1,293) |
Adjustment for foreign income taxed at different rates | (38,530) |  |  | (38,464) |  |  | (76,922) |
Foreign tax credits | (43,821) |  |  | (37,280) |  |  | (56,171) |
Change-in-Control-related compensation | 10,626 |  |  | — |  |  | — |
Other | (6,804) |  |  | (1,450) |  |  | (2,491) |
Provision for income taxes | $ | 68,076 |  |  | $ | 75,671 |  |  | $ | 98,225 |
The tax effects of temporary differences that give rise to significant components of the deferred tax assets and deferred tax liabilities at December 31, 2021 and 2020 are set forth in the following table:
| As of December 31,
| 2021 |  | 2020
| (Dollars in thousands)
Deferred tax assets: |  |  |
Post-employment and other employee benefits | $ | 17,375 |  |  | $ | 18,202 |
Foreign tax credit and other carryforwards | 32,452 |  |  | 37,101 |
Capitalized research and experimental costs | 1,935 |  |  | 3,897 |
Environmental reserves | 1,133 |  |  | 1,111 |
Inventory adjustments | 10,545 |  |  | 7,381 |
Long-term contract option amortization | 982 |  |  | 1,031 |
Provision for rationalization charges | 71 |  |  | 96 |
Mark-to-market hedges | — |  |  | 3,552 |
Previously taxed income | 5,229 |  |  | 2,163 |
Other | 2,175 |  |  | 1,483 |
Total gross deferred tax assets | 71,897 |  |  | 76,017 |
Less: valuation allowance | (10,550) |  |  | (12,773) |
Total deferred tax assets | 61,347 |  |  | 63,244 |
Deferred tax liabilities: |  |  |
Fixed assets | $ | 51,595 |  |  | $ | 54,485 |
Inventory | 8,834 |  |  | 8,573 |
Goodwill and acquired intangibles | 9,502 |  |  | 7,552 |
Mark-to-market hedges | 2,824 |  |  | — |
Other | 3,079 |  |  | 3,254 |
Total deferred tax liabilities | 75,834 |  |  | 73,864 |
Net deferred tax (liability) | $ | (14,487) |  |  | $ | (10,620) |
Net deferred tax assets are separately stated as deferred income taxes in the amount of $61.3 million as of December 31, 2021 and $63.2 million as of December 31, 2020. Net deferred tax liabilities are separately stated as deferred income taxes in the amount of $75.8 million at December 31, 2021 and $73.9 million at December 31, 2020. At each reporting period, we assess the need for valuation allowances against deferred tax assets based on determinations of whether it is more likely than not that deferred tax benefits will be realized through the generation of future taxable income. Appropriate consideration is given to all available evidence, both positive and negative, in assessing the need for a valuation allowance. Examples of positive evidence would include a strong earnings history, an event or events that would increase our taxable income through a continued reduction of expenses, and tax planning strategies that would indicate an ability to realize deferred tax assets. Examples of negative evidence would include cumulative losses in recent years and history of tax attributes expiring unused. In circumstances where the significant positive evidence does not outweigh the negative evidence in our assessment, we have established and maintained valuation allowances on those net deferred tax assets. However, the recognition of the valuation allowance does not result in or limit the Company's ability to utilize these tax assets in the future. Valuation allowance activity for the years ended December 31, 2021, 2020 and 2019 is as follows:
| (Dollars in thousands)
Balance as of December 31, 2018 | $ | 58,446 |
Credited to income | (14,548) |
Changes attributable to write-off of underlying assets | (30,138) |
Translation adjustment | (24) |
Balance as of December 31, 2019 | $ | 13,736 |
Credited to income | (980) |
Translation adjustment | 17 |
Balance as of December 31, 2020 | $ | 12,773 |
Credited to income | (2,208) |
Translation adjustment | (15) |
Balance as of December 31, 2021 | $ | 10,550 |
During 2018, we determined that sufficient positive evidence existed that allowed us to conclude that a full valuation allowance was no longer required to be recorded against the deferred tax assets related the U.S. tax attributes. This positive evidence was primarily supplied by the Company exiting a cumulative loss period in the United States as well as sufficient U.S. current and forecasted taxable income that would utilize the U.S. tax attributes. As a result, a partial release (to reflect only the economic benefit of the attributes) of the valuation allowance against federal net operating losses and state losses was recorded in 2018, while a full release of the valuation allowance against the federal foreign tax credit carryforward, other federal deferred tax assets was also recorded. A valuation allowance of $35.8 million is included in the December 31, 2018 balance reflected above as there was not sufficient positive evidence that the deferred tax asset related to the U.S. federal net operating loss would generate more than its estimated economic benefit. This valuation allowance and the related deferred tax asset were subsequently released to the income statement in 2019. In 2020, the reduction in the valuation allowance resulted primarily from expirations of NOLs upon which a valuation allowance was previously recorded. In 2021, the decrease in valuation allowance was mainly attributable to changes in expected future utilization, state law changes and expiration of U.S. state NOL carryforward during the year. As of December 31, 2021, we have a total foreign tax credit carryforward of $13.1 million. These tax credit carryforwards begin to expire in 2027. In addition, we have state net operating loss carryforwards of $239.6 million (net of federal benefit), which can be carried forward from five to 20 years. These state net operating loss carryforwards result in a deferred tax asset of $14.3 million as of December 31, 2021. We also have U.S. state tax credits of $0.1 million as of December 31, 2021. Our foreign loss carryforwards on a gross basis are $6.8 million and may be carried forward indefinitely. As of December 31, 2021, we had unrecognized tax benefits of $0.1 million, which, if recognized, would have a favorable impact on our effective tax rate. No material amounts of accrued interest or penalties have been recorded as of December 31, 2021 or 2020. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| (Dollars in thousands)
Balance as of December 31, 2019 | $ | 184 |
Settlements | (75) |
Foreign currency impact | 16 |
Balance as of December 31, 2020 | $ | 125 |
Lapse of statutes of limitations | (45) |
Foreign currency impact | (7) |
Balance as of December 31, 2021 | $ | 73 |
It is reasonably possible that a reduction of unrecognized tax benefits of up to $0.1 million may occur within 12 months due to settlements and the expiration of statutes of limitation. We file income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. All U.S. federal tax years prior to 2018 are generally closed by statute or have been audited and settled with the applicable domestic tax authorities. Other jurisdictions are generally closed for years prior to 2016. As of December 31, 2021, the Company has accumulated undistributed earnings generated by our foreign subsidiaries of approximately $1.2 billion. Because $1.1 billion of such earnings have previously been subject to taxation by way of the transition tax on foreign earnings required by the Tax Cuts and Jobs Act of 2017, as well as the current and previous years’ GILTI inclusion, any additional taxes due with respect to such earnings or the excess of the amount for financial reporting over the tax basis of our foreign investments would generally be limited to foreign withholding and state taxes. We intend, however, to indefinitely reinvest these earnings and expect future U.S. cash generation to be sufficient to meet future U.S. cash needs. GrafTech has considered the tax impact of COVID-19 legislation, including the American Rescue Plan Act, and has concluded that there is no material tax impact. The Company continues to monitor the tax effects of any legislative changes.

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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=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 http://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 http://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 http://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 http://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 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 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 http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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