Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.20.4
Income Taxes
12 Months Ended
Dec. 31, 2020
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES
The following table presents loss from continuing operations before income taxes for U.S. and international operations based on the location of the entity to which such earnings are attributable:
Year Ended December 31,
2020 2019 2018
Domestic $ (65.5) $ (65.6) $ (28.1)
Foreign 1.1  (1.7) 3.0 
Total $ (64.4) $ (67.3) $ (25.1)

The following table presents the components of the income tax (benefit) expense:
Year Ended December 31,
2020 2019 2018
Current
Federal $ 0.2  $ 0.3  $ 0.3 
Foreign 0.7  0.4  0.6 
State and local 0.1  0.1  0.2 
Subtotal 1.0  0.8  1.1 
Deferred
Federal (2.5) 0.1  (4.6)
Foreign 1.1  0.6  (2.5)
State and local (0.4) 0.1  — 
Subtotal (1.8) 0.8  (7.1)
Total $ (0.8) $ 1.6  $ (6.0)

As of December 31, 2020, we reviewed our position with regard to foreign unremitted earnings and determined that unremitted earnings would continue to be permanently reinvested. Accordingly, we have not recorded foreign withholding taxes on approximately $15.3 million of undistributed earnings of foreign subsidiaries that could be subject to taxation if remitted to the U.S. because we currently plan to keep these amounts permanently invested overseas. It is not practicable to calculate the residual income tax that would result if these basis differences reversed due to the complexities of the tax law and the hypothetical nature of the calculations.
The following table presents the differences between our income tax benefit at the U.S. federal statutory income tax rate and our effective income tax rate:
Year Ended December 31,
2020 2019 2018
Continuing operations tax at statutory rate $ (13.5) $ (14.1) $ (5.3)
Increase in valuation allowances on deferred federal income tax assets 10.4  14.3  0.2 
Increase in valuation allowances on deferred state income tax assets 2.6  2.1  0.7 
State income tax benefit, net of federal benefit (2.7) (1.8) (0.6)
Tax on foreign and foreign-source income 0.5  1.2  1.1 
Permanent book/tax differences 0.6  1.1  1.7 
Increase (decrease) in valuation allowances on deferred foreign income tax assets 1.3  0.1  (3.4)
Impact of Tax Cuts and Jobs Act   —  0.1 
Other   (1.3) (0.5)
Total $ (0.8) $ 1.6  $ (6.0)

The tax effects of principal temporary differences between the carrying amounts of assets and liabilities and their tax bases are summarized in the following table. Management believes it is more likely than not that the results of future operations will generate sufficient taxable income in the appropriate jurisdiction and foreign source income to realize deferred tax assets, net of valuation allowances. In arriving at this conclusion, we considered the profit or loss before tax generated for the years 2018 through 2020, as well as future reversals of existing taxable temporary differences and projections of future profit before tax and foreign source income.
December 31, 2020 December 31, 2019
Deferred income tax assets (liabilities)
Postretirement and postemployment benefits $ 15.8  $ 17.5 
Net operating losses 38.1  25.1 
Accrued expenses 5.0  4.2 
Deferred compensation 3.2  2.6 
Customer claims reserves 4.3  4.2 
Goodwill 2.1  2.2 
Pension benefit liabilities 0.3  3.5 
Tax credit carryforwards 2.5  3.4 
Intangibles 3.8  2.8 
163(j) Disqualified Interest 2.3  0.6 
Other 2.4  2.0 
Total deferred income tax assets 79.8  68.1 
Valuation allowances (48.5) (35.8)
Net deferred income tax assets 31.3  32.3 
Accumulated depreciation (20.7) (20.6)
Inventories (6.1) (6.7)
Other (2.5) (2.1)
Total deferred income tax liabilities (29.3) (29.4)
Net deferred income tax assets $ 2.0  $ 2.9 
Deferred income taxes have been classified in the Consolidated Balance Sheet as:
Deferred income tax assets—noncurrent $ 4.4  $ 5.3 
Deferred income tax liabilities—noncurrent (2.4) (2.4)
Net deferred income tax assets $ 2.0  $ 2.9 

We reduce the carrying amounts of deferred tax assets by a valuation allowance if, based on the available evidence, it is more likely than not that such assets will not be realized. The need to establish valuation allowances for deferred tax assets is assessed quarterly. In assessing the requirement for, and amount of, a valuation allowance in accordance with the more likely than not standard for all periods, we give appropriate consideration to all positive and negative evidence related to the realization of the deferred tax assets. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability and foreign source income, the duration of statutory carryforward periods and our experience with operating loss and tax credit carryforward expirations. A history of cumulative losses is a significant piece of negative evidence used in our assessment. If a history of cumulative losses is incurred for a tax jurisdiction, forecasts of future profitability are not used as positive evidence related to the realization of the deferred tax assets in the assessment.

The following table presents the components of our valuation allowance against deferred income tax assets:
Year Ended December 31,
2020 2019
Federal $ 33.1  $ 20.3 
State 8.0  5.4 
Foreign 7.4  10.1 
Total $ 48.5  $ 35.8 

The valuation allowances offset federal, state and foreign deferred tax assets, credits and operating loss carryforwards.
The following is a summary of our NOL carryforwards:
Year Ended December 31,
2020 2019
Federal $ 124.1  $ 54.7 
State 103.0  56.7 
Foreign 28.1  42.0 

As of December 31, 2020, $74.0 million of state NOL carryforwards expire between 2021 and 2040; and $28.1 million foreign NOL carryforwards expire between 2021 and 2025. The remainder are available for carryforward indefinitely.

We estimate we will need to generate future taxable income of approximately $209.0 million for state income tax purposes during the respective realization periods (ranging from 2021 to 2040) in order to fully realize the net deferred income tax assets discussed above.

We have $1.3 million of unrecognized tax benefits ("UTBs") as of December 31, 2020. Of this amount, $0.1 million, net of federal benefit, if recognized in future periods, would impact the reported effective tax rate.

It is reasonably possible that certain UTBs may increase or decrease within the next twelve months due to tax examination changes, settlement activities, expirations of statute of limitations, or the impact on recognition and measurement considerations related to the results of published tax cases or other similar activities. Over the next twelve months, we estimate UTB's may decrease by $0.1 million related to state statutes expiring.

The following table presents a reconciliation of the total amounts of UTBs, excluding interest and penalties:
2020 2019 2018
Unrecognized tax benefits as of January 1 $ 0.7  $ 1.6  $ 4.8 
Gross change for current year positions   —  0.2 
Increase for prior period positions 0.7  —  — 
(Decreases) for prior period positions   (0.9) (3.4)
Decrease due to statute expirations (0.1) —  — 
Unrecognized tax benefits balance as of December 31 $ 1.3  $ 0.7  $ 1.6 

The 2018 decrease related to prior period positions includes $3.1 million related to discontinued operations.

We conduct business globally, and as a result, we file income tax returns in the U.S., various states and international jurisdictions. In the normal course of business, we are subject to examination by taxing authorities throughout the world in such major jurisdictions as Australia, Canada, China and the U.S. Generally, we have open tax years subject to tax audit on average of between three years and six years. With few exceptions, the statute of limitations is no longer open for state or non-U.S. income tax examinations for the years before 2014. We have not significantly extended any open statutes of limitation for any major jurisdiction and have reviewed and accrued for, where necessary, tax liabilities for open periods. The tax years 2014 through 2019 are subject to future potential tax adjustments.

The following table details amounts related to certain other taxes:
Year Ended December 31,
2020 2019 2018
Payroll taxes $ 9.8  $ 10.0  $ 11.7 
Property and franchise taxes 3.0  3.2  2.5