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Income Taxes | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes (Loss) income before the (benefit) provision for income taxes was derived from the following sources:
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
| (Dollars in thousands)
U.S. | $ | (111,821) |  |  | $ | 55,107 |  |  | $ | (69,087) |
Foreign | (161,943) |  |  | 397,211 |  |  | 525,493 |
(Loss) income before (benefit) provision for income taxes | $ | (273,764) |  |  | $ | 452,318 |  |  | $ | 456,406 |
The (benefit) provision for income taxes consisted of the following:
| Year Ended December 31, |
| 2023 |  | 2022 |  | 2021
| (Dollars in thousands) |
U.S. income taxes: |  |  |  |  |  |
Current | $ | (129) |  |  | $ | 3,590 |  |  | $ | 645 |  |
Deferred | (12,643) |  |  | 13,302 |  |  | 2,132 |  |
| (12,772) |  |  | 16,892 |  |  | 2,777 |  |
Foreign income taxes: |  |  |  |  |  |
Current | 9,738 |  |  | 48,744 |  |  | 71,088 |  |
Deferred | (15,480) |  |  | 3,720 |  |  | (5,789) |  |
| (5,742) |  |  | 52,464 |  |  | 65,299 |  |
(Benefit) provision for income taxes | $ | (18,514) |  |  | $ | 69,356 |  |  | $ | 68,076 |  |
The provision for income taxes represented a benefit for the year ended December 31, 2023 compared to an expense for the year ended December 31, 2022. Total pre-tax earnings shifted from a profit position to a loss position and the Company recorded a goodwill impairment charge that is not tax deductible. A reconciliation of income taxes at the U.S. statutory rate to the (benefit) provision for income taxes follows:
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
| (Dollars in thousands)
Tax at statutory U.S. federal rate | $ | (57,490) |  |  | $ | 94,987 |  |  | $ | 95,845 |
Impact of U.S. Tax Cuts and Jobs Act of 2017 - GILTI | 1,041 |  |  | 38,153 |  |  | 51,016 |
Impact of Tax Receivable Agreement | 91 |  |  | (39) |  |  | 49 |
Valuation allowance | (282) |  |  | (1,259) |  |  | (2,208) |
State taxes, net of federal tax benefit | 818 |  |  | 2,182 |  |  | 1,414 |
U.S. tax impact of foreign earnings (net of foreign tax credits) | 311 |  |  | 348 |  |  | 537 |
Establishment/resolution of uncertain tax positions | (36) |  |  | (40) |  |  | (48) |
Adjustment for foreign income taxed at different rates | 16,666 |  |  | (25,656) |  |  | (38,530) |
Foreign tax credits | (2,534) |  |  | (34,264) |  |  | (43,821) |
Change-in-Control-related compensation | — |  |  | (1,432) |  |  | 10,626 |
Impact of non-deductible goodwill impairment | 24,570 |  |  | — |  |  | — |
Other | (1,669) |  |  | (3,624) |  |  | (6,804) |
(Benefit) provision for income taxes | $ | (18,514) |  |  | $ | 69,356 |  |  | $ | 68,076 |
The tax effects of temporary differences that give rise to significant components of the deferred tax assets and deferred tax liabilities at December 31, 2023 and 2022 are set forth in the following table:
| December 31,
| 2023 |  | 2022
| (Dollars in thousands)
Deferred tax assets: |  |  |
Post-employment and other employee benefits | $ | 18,088 |  |  | $ | 15,088 |
Foreign tax credit and other carryforwards | 40,172 |  |  | 25,856 |
Capitalized research and experimental costs | 212 |  |  | 736 |
Environmental reserves | 1,058 |  |  | 1,040 |
Inventory adjustments | 7,710 |  |  | 5,767 |
Long-term contract option amortization | 881 |  |  | 934 |
Previously taxed income | — |  |  | 8,304 |
Other | 1,198 |  |  | 2,695 |
Total gross deferred tax assets | 69,319 |  |  | 60,420 |
Less: valuation allowance | (8,956) |  |  | (9,269) |
Total deferred tax assets | 60,363 |  |  | 51,151 |
Deferred tax liabilities: |  |  |
Fixed assets | $ | 51,474 |  |  | $ | 51,410 |
Inventory | — |  |  | 14,649 |
Goodwill and acquired intangibles | 6,418 |  |  | 10,089 |
Mark-to-market hedges | 1,403 |  |  | 3,903 |
Other | 2,732 |  |  | 4,205 |
Total deferred tax liabilities | 62,027 |  |  | 84,256 |
Net deferred tax liability | $ | (1,664) |  |  | $ | (33,105) |
At each reporting period, the Company assesses the need for valuation allowances against deferred tax assets and whether it is more likely than not that deferred tax benefits will be realized in each jurisdiction. Consideration is given to all available evidence, both positive and negative, in assessing the need for a valuation allowance. Examples of positive evidence include a strong earnings history, an event or events that would increase the Company's taxable income or reduce expenses, or tax planning strategies that would create the ability to realize deferred tax assets. Examples of negative evidence include cumulative losses in recent years or a history of tax attributes expiring unused. In circumstances where the negative evidence outweighs the positive evidence, the Company has established or maintained valuation allowances on the jurisdiction’s net deferred tax assets. However, the recognition of the valuation allowance does not limit the Company's ability to utilize these tax assets on a tax return in the future should taxable income be realized in sufficient amount to realize the assets. Valuation allowance activity for the years ended December 31, 2023, 2022 and 2021 is as follows:
| (Dollars in thousands)
Balance as of December 31, 2020 | $ | 12,773 |
Credited to income | (2,208) |
Translation adjustment | (15) |
Balance as of December 31, 2021 | $ | 10,550 |
Credited to income | (1,259) |
Translation adjustment | (22) |
Balance as of December 31, 2022 | $ | 9,269 |
Credited to income | (268) |
Translation adjustment | (45) |
Balance as of December 31, 2023 | $ | 8,956 |
The decrease in the valuation allowance in 2023 was primarily attributable to changes in expected future utilization, state law changes and expiration of U.S. state NOL carryforwards during the year. The reduction in the valuation allowance in 2022 resulted primarily from changes in expected future utilization, state law changes and expiration of U.S. state NOL carryforwards during the year. As of December 31, 2023, the Company had a total foreign tax credit carryforward of $4.5 million. These tax credit carryforwards begin to expire in 2027. In addition, the Company had state NOL carryforwards of $148.2 million (net of federal benefit), which can be carried forward from five to 20 years. These state NOL carryforwards resulted in a deferred tax asset of $10.6 million as of December 31, 2023. The Company also has U.S. state tax credits of $0.2 million as of December 31, 2023. The Company's U.S. interest limitations and foreign loss carryforwards on a gross basis were $40.0 million and $7.5 million, respectively, as of December 31, 2023. These carryforwards do not expire. As of December 31, 2023, the Company had no unrecognized tax benefits. No material amounts of accrued interest or penalties have been recorded as of December 31, 2023 or 2022. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| (Dollars in thousands)
Balance as of December 31, 2021 | $ | 73 |
Lapse of statute of limitations | (40) |
Foreign currency impact | 3 |
Balance as of December 31, 2022 | $ | 36 |
Lapse of statute of limitations | (36) |
Foreign currency impact | — |
Balance as of December 31, 2023 | $ | — |
We do not expect there will be new unrecognized tax benefits within 12 months. The Company files income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. All U.S. federal tax years prior to 2019 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 2018. As of December 31, 2023, the Company has accumulated undistributed earnings generated by its foreign subsidiaries of approximately $1.0 billion. Because $1.0 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 GrafTech's foreign investments would generally be limited to foreign withholding and state taxes. The Company intends, however, to indefinitely reinvest these earnings and expect future U.S. cash generation to be sufficient to meet future U.S. cash needs.

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